Japan Eyeing 2-Year Freeze of Auto Environmental Performance Tax

Newsfrom Japan

Politics

Dec 4, 2025 09:50 (JST)

Tokyo, Dec. 4 (Jiji Press)–Japan’s government and ruling coalition are considering suspending the environmental performance tax on automobiles for two years, it has been learned.

The measure is intended to push up vehicle demand in the domestic market at a time when the Japanese automobile industry has been impacted by the high tariff policy of U.S. President Donald Trump’s administration, informed sources said Wednesday.

The government and the ruling pair of the Liberal Democratic Party and the Japan Innovation Party, also known as Nippon Ishin no Kai, hope to include the tax freeze in the upcoming tax system reform program for fiscal 2026 after holding discussions toward the end of this year, according to the sources.

The environmental performance tax is imposed on automobile buyers. The tax rate varies depending on the vehicle’s fuel efficiency, with the maximum rate set at 3 pct of the purchase price. The automobile industry is demanding the abolition of the levy.

During the ruling LDP’s leadership election earlier this year, Prime Minister Sanae Takaichi, who won the race, pledged to suspend the tax, a local levy, for two years in light of the high U.S. tariffs.

[Copyright The Jiji Press, Ltd.]

Jiji Press