UPDATE 1-Japan auto lobby cuts 2011 sales outlook by 10 pct

Tue Sep 27, 2011 3:25am EDT

* 2011 sales seen at 4,250,200 vehicles, down 14.2 pct

* Disruption from March 11 disasters hit sales - association

* Lower auto-related taxes needed to spur demand - association (Adds chairman comments, details)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Sept 27 (Reuters) - Japan's auto lobby cut its forecast for this year's domestic vehicle sales by 10 percent and repeated its calls for a weaker yen and lower automobile taxes to help the industry and, by extension, the country's fragile economy.

Japanese automakers have been hit by a triple whammy of shrinking domestic sales, a historically strong yen and a once-in-a-century earthquake and tsunami that caused unprecedented production and sales disruptions this year.

Citing the months-long reduction in vehicle output, the Japan Automobile Manufacturers Association (JAMA) said on Tuesday that it now expects sales to fall 14.2 percent in 2011 to 4,250,200 vehicles, or 210,000 fewer than its forecast in December.

"That's about the level from 35 years ago, when I joined Nissan Motor in 1976," said JAMA Chairman Toshiyuki Shiga, who is also chief operating officer at Japan's No.2 automaker.

For the business year to March 2012, JAMA expects sales to fall 3.3 percent to 4,450,300 vehicles, as automakers crank up production in the latter half to make up the losses.

Car sales in the world's third-biggest market have been sliding for years due to urbanisation, a shrinking population and declining interest among young people to own a car or drive.

Automakers also blame the disproportionate tax burden placed on car buyers in Japan compared with the rest of the world. The auto lobby said a consumer purchasing a 1.80 million yen ($23,600), 1.8-litre car, for instance, would pay the equivalent of that in various taxes over the average duration of ownership of 11 years -- far more than in any major market including the United States, Germany and Britain.

STRONG YEN 'HARD TO TAKE'

Shiga also called on the government to take steps to rein in the yen or risk weakening an industry that has long been one of the biggest drivers of Japan's economy and jobs.

"I was asked in March about the yen's level when it hit a post-1995 high, and I remember being at a loss for words," Shiga said.

"Yet, even now, we're suffering from the same strong yen. The auto industry has worked so hard since the disasters in the hope of also helping the country recover. The fact that we're still in the same situation is quite honestly hard to take."

The dollar was trading around 76.40 yen on Tuesday, not far from the record low of 75.94 set last month. Automakers say a yen even at 90 to the dollar is still too strong to make exports competitive and keep the current level of production at home. About half of the vehicles made in Japan are exported.

The government said on Tuesday it would bring forward steps to ease companies' pain from a strong yen and enact the measures before it completes an extra budget expected next month. The decision is a sign of increasing haste among policymakers, but economists and major exporters warned that the proposed measures are similar to what previous governments had enacted.

Automakers such as Nissan and Toyota Motor have pledged to keep a certain level of production in Japan to protect jobs and the tradition of manufacturing, but have warned that assumed the yen's weakening to acceptable levels.

Nissan CEO Carlos Ghosn said last week the automaker may need to rethink its stance if the yen had not budged in six months. He told Reuters on Monday that the government and industry needed to share a vision on where exchange rates needed to be, noting that all efforts to fight the yen's rise had failed so far. ($1 = 76.380 Japanese Yen) (Editing by Chris Gallagher)

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