Toyota Motor Corp. (7203), Japan’s biggest carmaker, expects the nation’s economic recovery boosted by the buildup to the 2020 Tokyo Olympics will help domestic vehicle demand weather a planned sales tax increase in April.
The business environment should be “sunny after cloudy,” Akio Toyoda, president of Asia’s biggest carmaker, said yesterday in Tokyo. “Along with the three arrows, there is now a fourth arrow, which is the Tokyo Olympics. There will be some impact from the sales tax increase, but it should be limited, and at most, last about three months.”
Toyoda’s outlook is shared by executives at other Japanese automakers who project the economic recovery, led by Prime Minister Shinzo Abe’s efforts to end deflation, will continue through this year. In Japan, the levy will be raised to 8 percent from the current 5 percent, and is set to be increased to 10 percent in 2015.
“What’s important is to put the economy on a virtuous path,” Abe said at a gathering of Japan’s biggest business lobbies yesterday. Japan will push through deregulation to make the nation the easiest place to do business in the world, he said.
Last month, Abe, 59, urged companies to increase wages faster than gains in the cost of living to break the legacy of 15 years of deflation, and pledged to forge ahead with structural reforms designed to open business opportunities in industries from health care to agriculture. The Abe administration’s reflation efforts, underpinned by monetary and fiscal measures, helped propel Japan’s Topix (TPX) index of shares 51 percent last year, its best performance since 1999.
Demand to Return
“There may be some impact from the sales tax, but by around July, demand should be back to about what it is now,” Yasuyuki Yoshinaga, president of Fuji Heavy Industries Ltd. (7270), said. “For the foreign exchange rate, we hope that it will stay at a stable level above 100 yen.”
Toyota is forecasting net income to climb 74 percent to 1.67 trillion yen ($16 billion) in the year ending March 31 as the weaker yen helps boost profits. Every one-yen drop against the dollar will boost Toyota’s annual operating profit by about 40 billion yen, according to the carmaker.