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Hybrid Electric Eco Cars

Japan Government Plans Extend Tax Cut for Hybrid Electric Eco Cars

TOKYO — The government plans to extend a tax reduction for environmentally friendly vehicles by one year through fiscal 2016 but apply it to a narrower scope of cars, sources close to the matter said.

The government and ruling coalition will compile annual tax reform plans toward the end of December, and will discuss extending a tax cut on purchases of hybrid, electric and other vehicles that meet government-set fuel efficiency standards, the sources said.

Purchasers of such vehicles, excluding minivehicles, currently qualify for a tax break of 50% or 75%, depending on fuel efficiency.

But in fiscal 2016 beginning next April, the government and ruling camp are considering applying only the stricter of the two standards.

In the three months through June, 45.5% of the new vehicles sold in Japan, excluding minivehicles, failed to meet the stricter standard, according to data compiled by the transport ministry.

The move comes as Japan scrambles to fight climate change by reducing carbon dioxide emissions as part of international efforts.

But limiting the types of vehicles eligible for the tax cut could lead to a drop in sales, and any such proposal is likely to be opposed by carmakers.