The outlook is positive for the world’s third largest economy. Japan has been wrestling with a host of challenges in recent years, starting with an aging and shrinking working age population and high government debt, which has negatively impacted fleets. Despite these headwinds, the IMF and others report that Japan saw 1% GDP growth in 2018, with low unemployment and inflation.
Japan’s chief challenge is a historically tight labor market. More than 26% of the population is over 65 years of age, and this segment is expected to rise to 40% by 2050. Japan’s working age population has shrunk by 4.7 million since 2012, according to the Wall Street Journal. Business and government have adapted, managing an increase of 4.4 million workers in the country since that time, bringing more older citizens, women into the labor force, and opening the market to more foreign workers.
Japan’s workforce challenge impacts fleet owners. The country is in the midst of a significant shortage of fleet drivers – Transport Topics reported in June 2018 that there were 2.86 openings for every application. This affects industries from trucking and distribution to buses and taxis. Distribution and e-commerce continue to drive fleet needs in a country where there is near-universal internet connectivity and 74% of the population buys online.
Businesses are squeezed between the need to pay more to attract drivers in a tight labor market on one side and staying competitive on cost to customers on the other. Japan’s inflation rate has remained what some call "stubbornly low" – about 1% over the past year.
These same challenges are spurring innovation. OEMs like Volvo’s UD Trucks, Isuzu, Hino and Mitsubishi Fuso are adding telematics and vehicle monitoring services to their truck lines, Nikkei reports. The goal is to improve driver productivity and logistics through monitoring and route optimization, and to reduce maintenance and fuel costs. Meanwhile, there will be more than 500,000 connected trucks on Japan’s roads by 2020 – a 150% leap.
Steady Sales in Japan
Overall new vehicle registrations in Japan rose by 5.3% in fiscal year 2017 (ending March 2018) over 2016, with passenger cars growing by 5.8%, trucks by 3.0% and buses by 0.6%, according to the Japanese Auto Manufacturers Association (JAMA). JAMA forecasts more modest results in 2018, with an overall decline of 0.3%, driven by reduced demand for trucks and buses
JAMA predicted declines in each of these areas for FY-2018 following significant 2017 gains, though year-to-date 2018 sales figures show a 1.5% increase, including a 4.1% increase in truck sales. In the trucking segment, the market reflects "the continued impact of stricter emissions regulation enforcement." Japan sales fleets use small sedans and even mini ‘kei-cars’ for their low cost and fuel efficiency, though Global Fleet reports that large fleets "are paying more attention to safety features to protect drives and company brand."
Fuel efficiency and emissions affect purchase decisions – hybrids make up nearly 20% of the cars in Japan, while electric vehicle sales are small but growing quickly. The industry and government have set a goal of 90% emissions reduction by 2050.
Leasing is a popular financing method for fleet vehicles. The Japan Leasing Association (JLA) reports steady growth in car and truck leasing – both for financing vehicle purchases, and "maintenance leases" to manage preventive maintenance and repair. The JLA’s November 2018 survey report showed more than 2.6 million leased vehicles – including cars, trucks and buses – with modest but steady growth.
Japan’s Mini-Vehicle Market
The Kei car is a unique aspect of Japan’s automobile market. These "mini" cars and trucks, marked by distinctive yellow license plates, are designed to be lighter, more fuel efficient and obtainable at a lower cost for consumers and businesses. While the government has significantly reduced tax incentives for these vehicles in recent years, mini models remain among the top sellers in the country with new models driving an 8.6% growth in mini car sales and 5.4% growth in mini truck sales in FY-2017.