AUTOMOTIVE PROFILE - JAPAN

Section 1: Motor Vehicle Industry/Market Snapshot

1. Overview

The automotive industry is one of the Japanese economy’s core industrial sectors. In
2004 automotive shipments accounted for 16.1% of the total value of Japan’s
manufacturing shipments, and 34.3% of the value of the machinery industries’
combines shipments. Automotive shipments (both domestic and export shipments,
including motorcycles, auto parts, etc) in value terms totalled over 45 trillion yen in
2004, down 0.4% from the previous year.

Japan’s domestic sales of new vehicles in 2005 totalled 5.85 million vehicles,
registering no change from the previous year. Looking at the breakdown by vehicle
type, passenger cars account for about 80% of sales, while commercial vehicles
account for 20%. In other words, passenger cars are the core of the Japanese market.
Another important characteristic is that the minicar segment—cars of 660cc engine
capacity or less—accounts for more than 20% of the Japanese market.

Vehicle production in Japan increased steadily from the 1960s through the 1980s
owing both to domestic market growth and the development of export markets. It also

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peaked in 1990, at 13.5 million units. Domestic vehicle production has basically been
falling since then due to declining sales in Japan and increasing overseas production
by Japanese automakers. Domestic production of cars, trucks and buses in 2005
totalled almost 10.8 million units, an increase of 2.7% over the previous year.

Exports of motor vehicles in 2005 rose for the fourth consecutive year, posting a 1.9%
increase over the previous year to total 5.05 million units. The total value of
automotive exports expanded 7.0% to US$116.4 billion, with the value of automobile
exports growing 6.8% to US$ 88.2 billion and the value of auto parts exports rising
7.6% to US$ 28.2 billion.

2. Right hand drive market

Japan is right hand drive market.

3. Principal vehicle manufacturers

DAIHATSU MOTOR CO., LTD, FUJI HEAVY INDUSTRIES LTD., HINO MOTORS,
LTD., HONDA MOTOR CO., LTD., ISUZU MOTORS LIMITED, KAWASAKI HEAVY
INDUSTRIES, LTD., MAZDA MOTOR CORPORATION, MITSUBISHI MOTORS
CORPORATION, MITSUBISHI FUSO TRUCK AND BUS CORPORATION, NISSAN
DIESEL MOTOR CO., LTD., NISSAN MOTOR CO., LTD., SUZUKI MOTOR
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 CORPORATION, TOYOTA MOTOR CORPRATION, YAMAHA MOTOR CO., LTD.

4. Principal components manufacturers

AISAN INDUSTRY CO., LTD., AISIN AW CO., LTD., AISIN SEIKI CO., LTD.,
AKEBONO BRAKE INDUSTRY CO., LTD., ASTEER CO., LTD., BOSCH
CORPORATION, CALSONICKANSEI CORPORATION, DAIDO METAL CO., LTD.,
DAITO PRESS MFG., LTD., DENSO CORPORATION, DIAMOND ELECTRIC MFG.
CO., LTD., GKN DRIVELINE TORQUE TECHNOLOGY KK, HI-LEX
CORPORATION, HIRUTA KOGYO CO., LTD., HITACHI LTD., ISHIKAWA GASKET
CO., LTD., JATCO LTD., KEYLEX CORPORATION, KOITO MANUFACTURING CO,
LTD., KOJIMA PRESS INDUSTRY CO., LTD., KYB CORPORATION, MARUYASU
INDUSTRIES CO., LTD., MINORI INDUSTRY CO., LTD., MITSUBA
CORPORATION, NGK SPARK PLUG CO., LTD., NHK SPRING CO., LTD., NIKKEI
KAKOU CO., LTD., NISHIKAWA KASEI CO., LTD., NOK CORORATION, NSK LTD.
PACIFIC INDUSTRIAL CO., LTD., PRESS KOGYO CO., LTD., RIKEN
CORPORATION, SHIGERU CO., LTD., SHOWA CORPORATION, SIGMA
CORPORATION, SUMITOMO ELECTRIC INDUSTRIES LTD., TOKAI RIKA CO.,
LTD., TOKAI RUBBER INDUSTRIES, LTD., TOPY INDUSTRIES, LTD., TOYODA
GOSEI CO., LTD., TOYOTA BOSHOKU CORPORATION, YAZAKI CORPORATION
（Board of JAPIA）

5. Vehicle production and sales overview (thousand units)

Vehicle type 2000 2001 2002

Production Sales Production Sales Production Sales
Passenger Cars 8,359 4,259 8,117 4,289 8,618 4,441
Trucks 1,726 1,686 1,601 1,600 1,572 1334
Buses 54 16 58 15 66 16
Total 10,140 5,963 9,777 5,906 10,257 5,792
Vehicle type 2003 2004 2005
Production Sales Production Sales Production Sales
Passenger Cars 8,478 4,715 8,720 4,768 9,016 4,748
Trucks 1,746 1,091 1,730 1,067 1,706 1,085
Buses 61 21 60 18 76 17
Total 10,286 5,828 10,511 5,853 10,799 5,852

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6. Motor Vehicles in use and average age by type

2000 2001 2002

Vehicle type Units Age Units Age Units Age
Passenger Cars 52,437,375 5.84 53,540,516 6.04 54,539,839 6.23
Trucks 18,225,508 7.14 17,866,218 7.48 17,480,424 7.77
Buses 235,483 8.28 234,816 8.64 233,405 8.97
SPV* 1,750733 - 1,766,212 - 1,735,682 -
Total 72,652,926 - 68,805,073 - 70,007,049 -
2003 2004 2005
Vehicle type Units Age Units Age Units Age
Passenger Cars 55,212,590 6.39 55,994,050 6.58 57,090,789 6.77
Trucks 17,080,374 8.10 16,780,848 8.17 16,733,871 8.36
Buses 231,818 9.24 230,934 9.33 231,733 9.53
SPV* 1,689,629 - 1,649,686 - 1,630,062 -
Total 70,818,364 - 71,857,480 - 72,652,926 -
*SPV (Special-purpose Vehicles): emerging vehicles, special vehicles equipped with beds,
refrigerated trucks, tank trucks, tractors, bulldozers, snowmobiles, etc.

7. Employment for automobile production

Automobile Manufacturing 161,000

including motorcycles
Auto parts and accessories manufacturing 543,000
Auto body and trailer manufacturing 42,000
Total 746,000

8. Trade summary
<Value>
- Trade value of motor vehicles including motorcycles and parts (x 100 million yen)
2002 2003 2004 2005
Exports in value (FOB) 115,675 118,363 124,773 135,132
Imports in value (CIF) 11,234 11,799 12,842 13,353

<Vehicle Units>
- Exports (in units)
2002 2003 2004 2005
Motor vehicle exports 4,698,728 4,756,343 4,957,663 5,053,061
Passenger Cars 4,012373 4080,498 4,214,027 4,363,168
Trucks 637,593 630,254 687,795 611,956
Buses 48,762 45,591 55,841 77,937
Motorcycle exports 1,418,682 1,280,955 1,327,144 1,332,223

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- Imports (in units)
2002 2003 2004 2005
Motor vehicle imports 290,514 283,664 289,261 284,734
Passenger Cars 288,657 281,526 286,798 282,654
Commercial Vehicles 1,288 1,405 1,715 1,420
Other 569 733 748 660
Motorcycle exports 629,193 562,415 485,572 444,635

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Sction2: Trade and industry policy environment

1. Overview

Japanese all tariff rate of motor vehicle that PMV, Truck, Buses are 0%.

Japan has no requirements about customs procedures, import restrictions, investment

requirements, export incentives/trade balancing requirements, manufacturing free
trade zones, duty drawback arrangements.

2. Tariffs
Tariff rate
applied
PMV(87.03) 0%
Truck(87.04) 0%
Buses(87.02) 0%
Engines(84.07,87.08) 0%
Body stampings(87.0829) 0%
Transaxles/transmissions(87.0850) 0%
Other(87.08) 0%

3. Customs procedures
Japan has no special procedures.

4. Import restrictions
Japan has no import restrictions.

5. Investment requirements
Japan has no investment requirements.

6. Export incentives/trade balancing requirements

Japan has no export incentives/trade balancing requirements.

7. Regional trade arrangements

Japan is not a member of any regional economic integration.

8. Manufacturing free trade zones

Japan has no manufacturing free trade zones.

9. Duty drawback arrangements

Japan has no special arrangements.

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Section3: Domestic taxation of vehicles

1. Overview

Japan has various taxes related to vehicles. These taxes are levied on different types
of tax base such as acquisition and possession of vehicles, or fuel consumption. To
promote the more widespread use of fuel-efficient and low-emission vehicles, new tax
incentives have been implemented since April 2005.

<Taxes on motor vehicles>

Tax Items Summary Tax Rate/Amount
On Acquisition Assessed on the acquisition of an [For private use]
Acquisition Tax automobile, whether new or used, - 5% of purchase price
based on the purchase price (3% for commercial and mini-
vehicles)
- Exempted for vehicles
purchased for 500,000 year or
less
Consumption Assessed on the purchase price 5%
Tax of the automobile
During Tonnage Tax Assessed according to vehicle [Example]
Ownership weight at each vehicle inspection. - Passenger cars for private use
The term of required inspection is which are required inspection
different by vehicle types. every two years:
6,300 yen/year per 0.5t
Automobile Fixed amount assessed each [Example]
Tax year on vehicles as of April 1, - Passenger cars of 2,001cc-
except mini-vehicles and 2,500cc for private use:
motorcycles (see Mini-vehicle tax) 45,000 yen/year
Mini-vehicle Fixed amount assessed each [For private use]
Tax year on mini-vehicles and - Mini-vehicles:
motorcycles 7,200 yen/year for passenger cars
and 4,000 yen/year for trucks
- Motorcycles:
1,000 yen - 4,000 yen/year based
on engine displacement

<Taxes on fuels>
Tax Items Summary Tax Rate
*Gasoline Tax Assessed on gasoline and designated 48.6 yen/liter of gasoline
national road revenue source
*Regional Road Tax Assessed on gasoline and designated 5.2 yen/liter of gasoline
regional road revenue source
*Diesel Handling Tax Assessed on light oil 32.1 yen/liter of light oil
*LPG Tax Assessed on LPG 17.5 yen/kg of LPG
Consumption Tax Assessed on the purchase price of fuels 5% of the purchase price
of fuels
(Note) *Those taxes are included in the fuel price.

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<Incentive Measures for Low-Emission Vehicles>
Tax Items Scheme Tax Rate/Amount
Automobile Green Tax Vehicles meeting 2010 fuel 50% reduction of automobile
Tax Scheme economy target values +20% and tax(*2)
(FY2006-2007) new “low-emission vehicles” (*1)
Vehicles meeting 2010 fuel 25% reduction of automobile
economy target values +10% and tax
new “low-emission vehicles” (*1)
Acquisition Special Vehicles meeting 2010 fuel 300,000 yen deductible from
Tax Scheme for economy target values +20% and purchase price
Fuel-Efficient new “low-emission vehicles” (*1)
Vehicles Vehicles meeting 2010 fuel 150,000 deductible from
economy target values +10% and purchase price
new “low-emission vehicles” (*1)
Clean-Energy Electric (including fuel-cell), CNG, 2.7% reduction of acquisition
Vehicles methanol, and hybrid vehicles tax
(FY2006) (trucks and buses)
Hybrid vehicles (passenger cars)
2.2% reduction of acquisition
tax
Note (*1)”Low-emission vehicles”: Motor vehicles whose emission values represent at least 75%
reduction from 2005 regulatory levels for emissions. (*2) Also applies to electric (including fuel-cell),
CNG, and methanol vehicles.

<Incentive Measures for Diesel Commercial Vehicles>

Tax Items Scheme Tax Rate/Amount
Acquisition Applies in Trucks and buses complying with 2005 2.0% reduction of
Tax FY2006-2007 emissions regulations +10% (NOx or acquisition tax
to trucks and PM) and meeting 2015 fuel economy
buses target values
Trucks and buses complying with 2005 1.0% reduction of
emissions regulations and meeting acquisition tax
2015 fuel economy target values
In case where trucks and buses not meeting the -1.5% reduction during
standards that stipulated in the Motor Vehicle NOx and FY2005-2006
PM Emission Act have been deregistered and replace
with vehicles that comply with all relevant standards, the -1.2% reduction during
Acquisition Tax assessed on those replacement vehicles FY2007-2008
will be reduced in conformity with the following schedule:

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Session4: Standard and technical regulations

1. Overview

In Japan, with a view to securing the safety of motor vehicles, the prevention of
environmental pollution, the saving of energy, regulating the traffic, helping victims
caused by traffic accidents and the construction and improvement of road, the laws
and regulations related to motor vehicle traffic have been stipulated as below. They
have been classified, respectively, into those related to (1) the construction and
devices of motor vehicles, (2) humans (drivers and pedestrians) and (3) roads.

2. Laws and Regulations related to the construction and devices of motor vehicles

2-1. Road Vehicles Act

Road Vehicles Act (Law No. 185 of 1951) has been stipulated for the purpose of
assuring the safety of construction and devices thereof preventing environmental
pollution. Moreover the Act has been stipulated aiming at stimulating to further
improvement in maintenance and contributing to the healthy development of motor
vehicle maintenance and repair business. To achieve its intended purposes, the Act
has prescribed the requirements with which the construction and devices of motor
vehicles should comply. It has also introduced “Type Designation System” to assure
the conformity of motor vehicles to the regulations, and systems, such as registration,
inspection, and maintenance business, to expect the appropriate usage of cars.

2-1-1. Safety Regulations for Road Vehicles

The Safety Regulations for Road Vehicles refer to those technical standards
pertaining to the safety or the prevention of environmental pollution to be pursued.

2-1-2. Motor Vehicle Type Approval System

Motor Vehicle Type Approval System has been introduced for the purpose to have
prior examination whether the motor vehicles conform to various applicable
standards related to the safety and the prevention of environmental pollution. It has
three systems; “Motor Vehicle Type Designation System”, “Motor Vehicle Type
Notification System” and “Preferential Handling Procedure for imported Motor
Vehicles”.

Motor Vehicle Type Designation System

This is a system to designate certain type of mass-production motor vehicles with
identical construction, devices and performance. Examination of the designation are
conducted mainly as to the conformity of motor vehicle with regard to Safety
Regulations, uniformity of motor vehicles, and completion inspection system for motor
vehicles etc. This type designation system has been utilized fully for those types of

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 domestic motor vehicles as well as of foreign motor vehicles which are sold in great
quantities in the Japanese market. Furthermore, in the case of import motor vehicles,
they are entitled to receive a preliminary examination overseas.
Motor Vehicle Type Notification System
This is a system that tests whether the conformity of the common construction and
devices with regard to the Safety Regulations as a type is confirmed on not are
carried out in connection with the basic motor vehicle (sample vehicle) prior to the
initial inspection for individual motor vehicles with purpose to provide to rationalize the
initial inspection. This type notification system has been utilized widely for large-sized
trucks and buses in which versatility in use are required.
Preferential Handling Procedure for Imported Motor Vehicles
This is a system that can be applied to types of imported motor vehicles that are sold
in a small quantity in the Japanese market. Under the arrangement of this system,
the examination of application documents alone is conducted in advance so as to
determine the conformity with regard to provisions of the Safety Regulations for Road
Vehicles. This system has been applied for up to 2000 units per year for each type.

2-1-3. Equipment Type Approval

This is a system that the examination of the equipment to confirm the conformity to
the Safety Regulations is omitted at the examination for type designation of motor
vehicle in which equipment is used in common by receiving the type approval with
regard to equipment of motor vehicle in Japan. This system is also expected to
reduce the time and cost for the examination of type approval.

2-1-4. Motor Vehicle Registration System

Motor vehicle has to be registered.

2-1-5. Motor Vehicle Inspection System

Motor Vehicle Inspection System is conducted to determine the conformity of motor
vehicles to the Safety Regulations for Road Vehicles. A valid motor vehicle
inspection certificate can be obtained with the passage of motor vehicle inspection.
Motor Vehicle Inspection System is consisted of the Initial Inspection, the Renewal
Inspection, and Modification Inspection etc.

2-1-6. Motor Vehicle Check and Maintenance System

Motor Vehicle Users are obliged to check at regular intervals, with a view to
assuring the safety and prevention of environmental pollution of in-use motor
vehicles. Motor Vehicle Check and Maintenance System is consisted of “daily
check and maintenance” and “periodical check and maintenance”.

2-1-7. Motor Vehicle Maintenance Business System

The Road Vehicles Act stipulates the requirements to which motor vehicle
maintenance and repair business operators should meet, and also stipulates the
provision by which operators are to be designated or qualified.

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3. Regulations related to safety

The Safety Regulations for Road Vehicles stipulate requirements necessary for
assuring the safety of motor vehicle construction and devices as mentioned above.

4. Regulations related to the prevention of environmental pollution

Regarding the regulations related to the prevention of environmental pollution, the

Safety Regulations for Road Vehicles stipulate the motor vehicle emission control
standards and the motor vehicle noise control standards so that the permissible limits
stipulated under the provisions of the Air Pollution Control Law and the Noise Control
Act may be assured.

5. Measures to control Environmental Pollution

5-1. Measures saving energy and measures against the global warming
With a view to contributing to assurance of efficient use of fuel resources, the
Rationalization of Energy Consumption Act calling for appropriate measures to
promote the rationalization of energy consumption of factories, buildings and
machinery such as motor vehicles has been put into effect. The Act stipulates the
standards for fuel consumption rate of motor vehicle taking into consideration of the
preventing the global warming.

5-2. Re-use of resources

Motor vehicle has indicated as on of the designation goods in the Act regarding
stimulating the use of re-use resources. The Act has stipulated the guideline to
stimulate the use of re-use resources for the motor vehicle manufacturer and repair
business operator.

6. Traffic Congestion Problem

To ease the traffic congestion, many measures, such as enlargement of capacity of

traffic and management of demands for traffic, have been taken.

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