Japan's Carmakers Hit Hard As Exports to U.S. Plummet

By Blaine Harden
Washington Post Foreign Service
Thursday, October 2, 2008

TOKYO, Oct. 1 -- Sales of Japanese cars in the United States have increased like clockwork, rising every month for more than two years.

That is, until they sputtered in the spring and then fell off a cliff.

Thanks to skittish American consumers and a U.S. credit crunch that is drying up financing for car loans, Japanese car exports to the United States plunged in August as car production in Japan recorded its steepest decline in a decade.

The swoon in North American car sales -- which account for more than half of the operating profits of Toyota, Honda and Nissan -- is a major reason why Japan's export-driven economy began shrinking in the second quarter and why many economists here are predicting a long recession.

The sudden and painful fizzle of the U.S. car market, the world's largest, comes on top of a longer fadeout in Japan's car market, the second-largest. Sales of new cars in Japan have been falling steadily for 18 years.

"People, especially young people in big cities, feel they don't need a car," said Shigeru Kashima, professor of transportation planning at Chuo University in Tokyo. "They don't have the desire or admiration for owning a car, like people of my generation did. Cars are a hassle for them."

Many Japanese are hanging on to old cars, buying smaller ones or simply giving up on driving, according to a 2006 survey by the Japan Automobile Manufacturers Association.

Excellent public transportation in Tokyo and other major Japanese cities allows commuters to get to work without having to pay some of the world's highest car taxes, tolls, and insurance and parking costs.

Carmakers are also being punished by an emerging demographic catastrophe: Japan has the world's largest proportion of people older than 65 and smallest proportion of children. Toyota, Honda, Nissan and Japan's nine other carmakers are going to have to build their future on something other than cars, analysts say.

"I think we are at a crossroads," Kashima said. "The Japanese economy is not going to expand, and it does not make sense for these companies to make the same thing over and over again."

Special correspondent Akiko Yamamoto contributed to this report.

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