Japan Adopts Scrappage Program in Its Economic Stimulus Plan

By Michelle Krebs April 9, 2009

Following the lead of European countries, Japan is including a scrappage program -- known in Japanese Flag - 180.GIF the U.S. as a cash for clunker plan -- in its massive just-announced economic stimulus package.

Car buyers in Japan would be paid up to 250,000 Yen (roughly $2,500) to trade in vehicles 13 years old or more for new, more modern ones. The government has budgeted $3.7 billion for the program. On April 1, the Japanese government announced a tax break on gasoline-electric hybrids and other ultra-low emission vehicles.

Combined, the scrappage program and tax incentives, could lift Japan's sagging vehicle sales by about 20 percent or 900,000 units this year, the Japan Automobile Manufacturers' Association estimates. Japan vehicle sales were estimated at 4.3 million vehicles this year. The association estimates that 10 million of the 80 million cars on Japan's roads are at least 13 years old.

The scrappage program is similar to one that has been successful in raising car sales in Germany, though the German government pays a higher premium -- roughly $3,200 -- for old trade-ins.

Japan's scrappage plan is part of a $150-billion economic stimulus package announced on Monday and detailed on Friday to address the country's worst recession since World War II. The economic stimulus is aimed at easing the credit crunch, providing a safety net for the unemployed and stimulating consumer demand. It includes aid to cash-strapped companies as corporate bankruptcies are running at a six-year high. The government is also instituting a voucher system that encourages Japanese consumers to trade old electronics for newer more environmentally friendly ones.

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