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Friday, 2nd March 2012
In Business In Japan,

Japan green vehicles subsidy boosts car sales

Car manufacturers in Japan received a boost in Feburary after the government's subsidy for green vehicles helped drive up sales.

Sales of passenger cars rose a third compared to the year before while sales of small vehicles with 660cc engines increased by a quarter, figures reported by the BBC revealed.

The Japanese government recently reintroduced a subsidy that offers drivers a discount of as much as 100,000 yen (£786) on environmentally-friendly vehicles.

It has proved particularly successful and analysts have revealed that consumers are flocking to showrooms so that they do not miss the opportunity.

The scheme is capped at 300 billion yen (£2.3 billion) and when funds run out it will come to a close and this has helped encourage people to take advantage of it.

Speaking to the BBC, Deutsche Bank's Kurt Sanger said: "In order to maintain production utilisation they need more domestic demand to absorb the output.

"This subsidy programme helps do that."

Despite the fact that Toyota sold more vehicles than any other carmaker in the world last year, Japanese vehicle manufacturers such as Nissan have been struggling of late.

Last year's tsunami and earthquake significantly disrupted production and floods in Thailand added to their woes.

In addition to this, a very strong yen further dented the industry's competitivity as it climbed as high as 11 per cent against the US dollar.

However, recent moves by the Japan central bank to ease the strength of the yen as well as the government's green vehicle subsidy scheme have helped restore optimism.

"The cap on the subsidies should get us to September, so people know they have to avail it sooner rather than later," Mr Sanger added.

"We expect very strong growth till September followed by a correction."

Toyota Motor Sales in the US announced yesterday (March 1st) that in February it sold 159,423 vehicles, an increase of 7.9 per cent compared to February 2011.

Written by Mark Smith