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Weak Economy Hurts Japan Car Sales

March 2, 1998

TOKYO (AP) _ Automobile sales in Japan fell for the 11th straight month in February, dropping by a fifth from a year earlier, the Japan Automobile Dealers’ Association said Monday.

The drop has resulted from a national sales tax increase last April that has made new cars more expensive, a spokesman for the automobile association said. The decline was especially sharp because many consumers rushed to buy cars before the tax increased to 5 percent from 3 percent, giving an extra boost to sales last February, he said.

The report, which covered only sales in Japan, followed one last week showing that Japanese auto exports rose for the 20th consecutive month in January. The contrast highlights efforts by car makers, such as Toyota and Honda, to sell more cars abroad to compensate for weak demand at home.

Overall sales of new cars, trucks and buses in Japan sank 22.4 percent in February from the same month last year to 396,907 vehicles.

Sales of passenger cars fell 23.2 percent to 280,645, truck sales dipped 20.4 percent to 115,192 and bus sales sank 10.8 percent to 1,070.

The association measures sales by tracking new vehicle registrations.

All of Japan’s major manufacturers saw sales fall in February, but Honda suffered most, posting a 29.5 percent decline.

Sales of imported vehicles fell even more, dropping 39.8 percent in February to 22,133 vehicles. By contrast, car exports from Japan rose 7 percent in January to 380,117, the Japan Automobile Manufacturers Association reported Friday

Analysts said auto sales in Japan will increase next year but that the recovery will be weak because of expected slow economic growth.

``People are still reluctant to replace cars,″ said Kaoru Kurata, an analyst at Goldman Sachs Japan.

Enda Clarke, an auto analyst at Dresdner Kleinwort Benson, predicted vehicle sales will remain slow until new models go on sale in June and July. For the fiscal year ending March 1999, vehicle sales will rise 5 percent, he predicted.

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