After two lost decades, Japanese flock to pricey imports

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The Nikkei [sub] has news of something unheard of since the onset of the Lost Decade: Imported luxury cars suddenly are all the rage According to the Nikkei, “the priciest foreign luxury cars are selling briskly as investors spend the money they made in the stock market rally.” The Tokyo wire has stories of a woman who can’t decide whether she should buy two Rolls-Royces, or economize and buy just one. That prompted us to have a look.

Moving from anecdotal evidence to hard statistics, we indeed note a 31 percent sales jump of the true luxury brands (Rolls, Bentley, Ferrari, et al) in the January through July period. (Complete table as supplied by the Japan Automobile Importers Association is here.)  If we also consider what often frivolously is called “luxury” (Audi, BMW, Mercedes, Cadillac, et al), we see a 16 percent rise in the pricier segments.

Considering that the Japanese auto market as a whole was down 8 percent in the first seven months, the sudden urge to splurge indeed looks like a solid trend.

The financially focused Nikkei thinks the trend to tonier transportation is due to the wealth effect caused by the recent rise of the stock market. “Affluent people holding a great deal of assets in stocks are moving to make the purchases they have been considering,” an official at a Ferrari dealership in Tokyo told the wire.

Performing likewise anecdotal research among a small sample of the better-off Japanese, the looming sales tax rise emerges as an even more compellingreason: Japanese who have the money prefer to do their car shopping now instead of later at a higher tax rate. “Sales of luxury imports are usually concentrated at the end of the calendar and fiscal years,” the Nikkei knows. Not this year, when the anticipation of a higher sales tax prods people to buy early.

A lot of the Abenomics boom is powered by this effect. If and when the tax rises, the new boomlet could come to a sudden halt. This is not lost on the Abe administration. It noisily thinks about a tax rise, but has not committed to one – so far.  The suspense triggers further sales.

Also, and quite importantly in Japan, with the economy waking up, it  begins to become socially acceptable again to show that one is not poor.

His and hers Rolls Royces may make headlines, but their effect on the economy is negligible. According to data released by the Japan Automobile Importers Association, BMW sold 59 Rollers in Japan from January through July, 11 more for a 23 percent gain. BMW’s Wolfsburg competition sold 20 more Bugattis than in the same period of the previous year.

What is more remarkable is the performance of the import segment as a whole. Affirmations from Detroit that the Japanese market is closed notwithstanding, the import of cars to the island nation is a growth industry.

Sales of imported cars were up 12 percent between January and July, while sales of domestic cars were down 14 percent. All the while, the yen famously depreciated, which should make imported goods more expensive. For the importer maybe, but not for the buyer. Prices did not go down as the yen went up, so there is nothing to adjust on the rebound.

Largest importer is the Volkswagen Group, which could sell more than 100,000 units this year in Japan. Japanese OEMs, led by Nissan, have been active in the field also. However, their imports slow, mirroring the cheaper yen.  January through July, 10 percent of all regular car registered in Japan were imports. Counting kei cars, where foreign makers have no offer, the number was  six percent. In the U.S., the share of automobiles not made in Northern America stood at  21.8 percent in  the first seven months, Automotive News says.