Japan's Car Makers Set Rosy Targets Despite Economic Weakness

Japan's top five car makers, including Toyota, Nissan, and Honda, have predicted increased domestic sales in 1997, mainly due to the introduction of new models. However, industry analysts believe these targets are overly ambitious, given the country's weak economic recovery and expected curb in exports. As the sales battle intensifies, car makers will need to offer incentives to dealers and rely on domestic demand, amidst a projected hike in consumption tax and general economic concerns.

Key Takeaways:

• Japan's top five car makers (Toyota, Nissan, Honda, Mitsubishi, and Mazda) predicted increased domestic sales in 1997, with targets ranging from 3.7 to 7.8 percent.
• Analysts consider these targets too optimistic, given the country's weak economic recovery and expected curb in exports.
• The sales battle is expected to be more intense than usual due to tight consumer spending, with car makers relying on domestic demand and offering incentives to dealers.
• Car makers will face challenges from a planned rise in Japan's consumption tax to 5 percent from 3 percent on April 1 and general economic concerns, including a forecasted 1.9 percent gross domestic product growth.
• The cheaper yen, with a current rate of around 115 to the U.S. dollar, makes Japanese products more competitive in overseas markets, but may lead to a curb in exports to avoid trade friction with the United States.
• Analysts predict that car makers who can offer more incentives to dealers will win the sales war, amidst a projected decline in sales due to economic concerns.

Statistics:

• 3.7 to 7.8 percent: predicted increase in domestic sales for Japan's top five car makers in 1997.
• 115: current exchange rate of the yen to the U.S. dollar.
• 100: exchange rate of the yen to the U.S. dollar a year ago.
• 1.9 percent: forecasted gross domestic product growth for Japan's fiscal year beginning April 1.
• 5 percent: planned rise in Japan's consumption tax from 3 percent on April 1.

Sources:

• Reuters News Agency
• Nikko Research (Noriyuki Matsushima, senior analyst)
• American Automobile Manufacturers Association