Petrol Tax

Here's an interesting demonstration of how things in Japan often follow a different logic from elsewhere.

In the oil shock years of the 70's, Japan imposed a temporary petrol tax to discourage excess consumption.

Subsequently, throughout the (almost) uninterrupted rule of the LDP, the ruling governments forgot to repeal the "temporary" tax despite the fall in oil prices. Not such a serious problem as not many people use their cars for work here. The daily commute is usually by train or bicycle for most people.

Suddenly, though, this month, the government, facing a situation similar to the oil shock- oil $100 a barrel, has decided to repeal the "temporary" tax. The stated reason is to ease the burden on consumers. Discouraging petrol consumption is, apparently, no longer a priority. And the Kyoto protocol?

For most people the tax reduction won't really make that much difference and it comes against the background of rumblings about the need to increase consumption tax, which will affect a broad swathe of consumers. Puzzling.

The real thrust of the reduction is to break up the "Road Gang". A group of politicians spend the tax on useless projects designed only to enrich themselves and their cronies.

Of course, there might be other motivations. There is a worrying decline in car ownership among younger people in Japan. Without going into the reasons for this, suffice it to say that the decline is real.

To some degree, the Japanese car industy's export strength stems from low-profit domestic sales which cover overhead. The profits are made outside Japan. If the domestic base decreases, this can only have a negative effect on export competitiveness. Perhaps the needs of Toyota and Honda are part of the reason for this initiative, rather than the the desire to ease the burden on the long-suffering consumer...

The next post will look at why car ownership is decreasing.