Japan’s Cash-for-Clunkers: De Facto Protectionism

Administrator — Tue, 29 Dec 2009 17:17:56 +0000

Japan is running a Cash-for-Clunkers-type program through September 2010, which pays $2,778 to buyers who replace cars that are at least 13 years old with cars that meet Japan’s 2010 emissions standards. Buyers with no trade-in will get $1,111 if their purchase beats those 2010 standards by at least 15 percent. Japan allows foreign car companies to sell in Japan as long as those cars meet the fuel-standards of their home countries. However, only cars that are tested to Japan’s domestic standards are eligible for the rebates. Since U.S. car exports to Japan are tested only under U.S. rules, not Japan’s, none will be eligible for the rebate. (Automotive News, 12/21/09)

While Japanese automakers sold 319,342 vehicles – more than one-third of them imported – under the U.S. cash-for-clunkers program this year, U.S. brand vehicles will not qualify for the Japanese program. Protests by the Office of the U.S. Trade Representative have been met by Japanese government declarations that the program is fair. In the context of “There’s a Lot Resting on Growth,” which we have discussed in recent client meetings, protectionism is one of the potential global economic destabilizers we have described. Are the rules of the Japanese car rebate program a way of sneaking in de facto protectionism in response to their rising currency?

Risa Hess

The IF Blog » Automotive

Japan’s Cash-for-Clunkers: De Facto Protectionism