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Japanese Car Sales Slump

In spite of some signs the recession in Japan could be easing, the important export market is down nearly 46 percent, compared to a year ago. At the center of the downturn, are Japan's car manufacturers - heavily dependent on foreign markets. It is not only a lack of demand from abroad that has hurt these companies, but growing disinterest in car ownership at home, too.

The Japan Automotive Manufacturers Association forecasts that, for the first time in almost three decades, less than five million automobiles will be sold domestically, this year.

This is not only because of the recession, but a change in the way Japanese consumers regard owning a vehicle.

A generation ago, car ownership in Japan was seen as a sign of wealth and affluence.

But Martin Schultz, senior economist at the Fujitzu Research Institute in Tokyo, says that mindset is a thing of the past.

"For younger people in Japan, the car is simply not a status symbol anymore. It is a tool," Schultz said. "Japan has wonderful infrastructure beyond roads. For younger people, having a car is basically a costly and cumbersome affair."

New mindset

Surging gas prices and parking lot fees that put drivers back hundreds of dollars a month are just some of the reasons why young Japanese would rather spend their money elsewhere.

Japanese automakers have seen this trend coming for a while. And, in part, that is why they focus so much attention on foreign markets.

But, as Schultz points out, dried up demand from overseas during the global downturn, has created a perfect storm.

If there is one positive outcome from this lull in sales, it is that Japanese automakers have emerged at the forefront of new environmental technologies.

"They tried to improve the image of the automobile to a younger generation as well," Schultz explained. "This is why Toyota is rather early in their hybrid car strategy and their eco-car strategy, Honda as well. So they are quite ahead of many of their competitors internationally, but its not enough however."

To offset the slump in sales, manufacturers have laid off hundreds of thousands of short-term contract workers. There is concern here that, if the production does not pick back up soon, companies may have to resort to letting go of full-time salaried employees.