Japan Income Tax Cut May Spur Consumer Spending

JETRO’s president, Genhachiro Suzuki, will be able to give his son a compact car this year thanks to a new income tax cut in Japan, Mr. Suzuki told members of the Japan-America Society of Georgia this week.  And if the cut remains in effect his wife may be getting a Chrysler Neon not too long afterwards.

The worldwide head of the Japan External Trade Organization (JETRO) cited these personal examples to emphasize the result of Japanese policy to stimulate domestic demand at home through new fiscal policies to reduce the country’s trade imbalances.

“In my own case, the tax cut will translate into an amount far exceeding $10,000, so I am planning to buy a compact car for my son,” he said.  “We think it highly likely that the cuts will continue into the next year and beyond.  If they do — and if Chrysler starts selling its Neon at a reasonable price — I should be able to buy a Neon for my wife to replace her old car.”

JETRO is a nonprofit government-related organization that supports trade between Japan and other countries, including the promotion of imports to Japan.

But tax cuts at home won’t equalize the trade imbalance by themselves, Mr. Suzuki said.  He hopes that a new round of deregulatory measures scheduled to be instituted at the end of the month should increase opportunities for new businesses, “not only for domestic sellers, but for foreign sellers as well, making greater options for more services and products available to the consumer.”

Mr. Suzuki praised the U.S. government’s National Export Strategy announced last fall, but said that its success would depend “mostly on the efforts made by individual firms.”

He cited the reductions in price of U.S. cars sold in Japan — particularly mentioning the lowered cost of a Chrysler Cherokee from $52,000 two years ago to $29,000 now, and the new price of $21,000 for a Ford Mustang.  He also mentioned that the Chrysler Cherokee has been fitted with a right-hand steering wheel for the Japanese market.

Although these prices may seem high to Americans used to lower car prices at home, he said that they marked aggressive pricing strategies by American companies interested in competing with their Japanese competitors affected by the rising yen.  Other U.S. companies are taking “similarly aggressive approaches,” he said.

For more information about exporting to Japan, call JETRO Atlanta at (404) 681-0600 or send a fax to (404) 681-0713.