"1.8 Trillion Won Scale... Concerns Over Impact on Local Finances"
The Japanese government is reportedly considering abolishing part of the taxes imposed on automobile purchases.
According to the Nihon Keizai Shimbun (Nikkei) on the 26th, the Ministry of Economy, Trade and Industry of Japan plans to specify in the 2026 fiscal year (April 2026 to March 2027) tax reform proposal that it will 'implement measures such as abolishing or reducing the burden at the time of acquisition' for the environmental performance tax, which currently requires buyers to pay 0 to 3 percent of the purchase price depending on the vehicle's fuel efficiency.
This move aims to stimulate automobile purchases by eliminating the environmental performance tax, which is levied separately from the consumption tax, and to support the auto industry, which was hit by tariff measures imposed by the Donald Trump administration in the United States.
Currently, both the House of Representatives and the House of Councillors in Japan are controlled by opposition parties, so cooperation from opposition parties will be necessary to abolish the environmental performance tax. The Democratic Party for the People, the third largest opposition party, has been advocating for the abolition of the tax to boost automobile demand.
Nikkei analyzed, "The expected revenue from the environmental performance tax for fiscal year 2025 is about 190 billion yen (approximately 1.8 trillion won), all of which goes to local governments," and added, "If the tax is abolished, there are concerns about the impact on local finances, and securing alternative sources of revenue will become a challenge."
Separately, the Japanese government had previously agreed to abolish part of the tax on gasoline within this year.
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