Size Matters

Finally, an article in the vernacular press explaining, at least partially, how Japan's vehicle markets can be so resistant to imports.

Are Japan's Minicars a Trade Barrier?
Nation's Preference for Ultrasmall Autos Poses Hurdle for Foreign Auto Makers

TOKYO—Japan's auto market, once a global trend setter, has become one of the most disconnected from markets elsewhere, putting it at risk of becoming irrelevant, say executives here.

More than 90% of cars sold in Japan are Japanese brands. A third of them—ultralight minicars—are sold nowhere else. Originally developed to fill Japan's need for cheap cars after World War II, they are too small or too expensive for other markets.

The country's singularly strong appetite for fuel-efficient cars means car makers have developed a series of advanced technologies, such as hybrid cars, that don't necessary translate easily elsewhere.

Japan has no tariffs on auto imports. Japanese auto executives say the country's unique tastes are a big reason for global auto makers' failure to thrive in the world's third largest auto-buying country, after China and the U.S. Foreign auto executives say the country's preferential tax treatment for minicars and its unique safety and environmental regulations are nontariff barriers that protect the country from foreign competition...

(Link)

Had the author added brand loyalty based on regional and keiretsu ties to his reasons why Japanese consumers and business customers buy what they buy, he would have covered all the bases.

The ruling coalition is set to try leveling the playing field in terms of the tax advantages of minicars. The Liberal Democratic Party's tax committee has recommended lowering the acquisition tax for full-size vehicles and raising the annual taxes minicar owners pay by 50%. (Link). Minicar manufacturers and their suppliers screamed in protest when the proposals came before the committee.

Minicar makers, particularly minicar-motorcycle manufacturers like Suzuki and Yamaha, seem to have little traction or connection with Abe Shinzo and his allies, however. Daihatsu in theory might have been able to bend the ear of the LDP tax committee, corporate parent Toyota Motors being seen as a vital member of Team Abe thanks to President Toyoda Akio's obsequious praise of Abenomics.

Daihatsu, is, however, the outcast problem child of the Toyota family. Toyota Motors would really want to have Daihatsu customers buying the group's more profitable full-sized cars. That Daihatsu did not take a lead in fighting the tax changes, leveraging the Abe-Toyoda relationship into influence upon the committee's deliberations, is not surprising.

Raising the taxes on minicars goes partway into answering the charges of U.S. automakers that regulations plays a role in closing Japan's auto markets to foreign manufacturers. The tax changes can therefore be seen as one facet of the political show Japan has to put on in order to consolidate its position inside Trans Pacific Partnership negotiations on vehicle tariffs -- where the white whale of Japanese trade policy, the U.S. 25% tariff on light trucks (a.k.a., minivans), lurks.

The still far off tax rise (the tax changes would only affect vehicles purchased after March 2015) on minicars does carry a political price. Minicars are seen as "people's cars" (Ja, ist Japonishes Volkswagen!) and everyday life vehicles (seikatsu no ashi - literally, "livelihood legs"). They are particularly important for rural households, which generally have lower than national average incomes yet which need a vehicle for each adult family member for both personal transportation and ferrying goods. Raising the costs of owning a minicar, or two or three or four as is often the case, is a rude slap in the face to rural voters. Coupled with the recently announced plan to phase out the gentan rice subsidy program over the next five years (Link), it looks as though the LDP is double-crossing the rural voters who remained loyal to the LDP even during the party's years of decline and banishment to the political wilderness.

Thinking that the demographic trends in agriculture and the rural areas make the minicar tax rise a safe bet for the LDP -- a "So long and thanks for the votes, you losers" -- ignores the reality that younger consumers are also big fans of minicars. Ticking off youth, folks who will voting for a long time to come, seems dumb, strategically. The young, however, are s numerically small proportion of the current electorate who do themselves no favors by furthermore not showing up at the polls on election day. (Link - J)

So minicars go to it, despite their extreme popularity.