May 1, 2014 / 8:11 AM / in 4 years

Japan April auto sales down 5.5 pct as tax hike saps demand

TOKYO, May 1 (Reuters) - Japanese auto sales in April dropped 5.5 percent year-on-year after a sales tax hike that took place last month sapped demand, industry data showed on Thursday.

A swift recovery in demand is unlikely because in April carmakers still had orders they had to meet from previous months, but the effects of such backorders are likely to wane, said Yoshitaka Hayashi, a director of the Japan Automobile Dealers Association.

“We are likely to face a very tough situation in May and June in terms of new orders,” Hayashi told reporters.

April total auto sales fell 5.5 percent from the same period a year ago to 345,226 vehicles, data from the Japan Automobile Dealers Association and Japan Light Motor Vehicle and Motorcycle Association showed. The decline marks the lowest level of sales since December 2012 when 338,503 vehicles were sold.

The last time Japan raised its sale tax in 1997 by 2 percentage points to 5 percent, vehicle sales dropped 15 percent in April of that year.

While April sales of 660 cc minicars rose 2.9 percent to 156,362 vehicles, helped by solid demand for redesigned and new models that were launched in recent months, sales of other vehicles dropped 11.4 percent to 188,864 vehicles.

Sales for Japan’s biggest automaker Toyota Motor Corp , including its Lexus brand and minicars, dropped 18.2 percent.

Honda Motor Co Ltd sales, including minicars, rose 11.7 percent due to strong sales of the remodelled Fit subcompact, while Nissan Motor Co Ltd sales, including minicars, declined 5.2 percent.

Research firm IHS Automotive forecasts Japanese auto sales to drop 18 percent in April-June from the same period a year ago. The April result was somewhat better than expected, said senior analyst Satomi Hamada.

“It is difficult to tell at this stage whether the economy is doing better than we had expected, or whether the remaining orders had played a big role,” she said.

Japanese sales taxes rose by 3 percentage points to 8 percent in April. Auto sales in the year to end-March 2015 are expected to drop 15.6 percent from a year earlier to 4.75 million vehicles, according to the Japanese auto lobby. (Reporting by Yoko Kubota; Editing by Matt Driskill)

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