Japan eyes tax breaks for car buyers to offset impact of sales tax hike

TOKYO: Japan will consider tax breaks for car buyers and other measures to cushion the economic impact from an increase in the national sales tax next year, a senior ruling party lawmaker said on Thursday.

"There will be a rush of demand ahead of the Oct. 1 tax hike and there will be a pullback thereafter. We must consider how to level these off," Yoichi Miyazawa, head of the tax commission of Prime Minister Shinzo Abe's Liberal Democratic Party (LDP), told reporters.

"Japan imposes slightly higher tax on acquisition and possession of cars than other countries."

Miyazawa made the remarks as the panel, which has influence over the government's tax policy, will begin debate on tax code revisions for the next fiscal year starting in April 2019.

Abe has vowed to proceed with the sales tax increase as planned, raising it to 10 percent from 8 percent in October 2019.

He has twice postponed the tax hike after the last increase from 5 percent in 2014 dealt a blow to private consumption that accounts for about 60 percent of the economy.

Some analysts warn the tax hike could hit consumers hard, causing sales of big-ticket items such as cars and homes to slump. To prevent such a downturn, Abe plans stimulus steps when compiling an annual budget for the next fiscal year.

Tax breaks for car buyers could ease the pain for the country's automakers, already under stress from US President Donald Trump's tariff threats.

Japan's biggest automakers and components suppliers have so far seen limited impact from US tariffs on steel and aluminium adopted in June.

But they fear they could take a significant hit if Washington delivers on proposals to hike tariffs on autos and auto parts to 25 percent.