The Japan Automobile Manufacturers Association (JAMA) has welcomed the government's plan to extend incentives on the purchase of greener cars but repeated its demand to abolish two vehicle-specific taxes that it said are hurting demand.

In addition to the universal 5% consumption tax on all goods and services, Japan imposes a vehicle weight tax and acquisition tax that make car ownership disproportionately costly there compared with the rest of the world, Reuters noted.

The auto industry has been calling for the abolition of those taxes, increasing lobbying efforts a few years ago after the government began to use revenues from those levies for purposes other than road maintenance for which they were created.

According to the report, JAMA had been hoping to end the debate this year as the industry reels from the yen's strength. Japanese automakers are keen to reduce loss-making car exports but also want to keep a minimum level of production at home to prevent the hollowing out of the manufacturing sector - an important driver of Japan's economy.

To protect domestic production and jobs, automakers have been seeking Tokyo's help to stimulate dwindling car sales at home, citing the government's own projection that abolishing the two taxes could push annual vehicle sales up by 920,000 units.

But the government this month proposed a partial reduction in the vehicle weight tax, an extension of tax incentives on purchases of fuel-efficient cars for three years under stricter standards, and a fresh scheme to subsidise the purchase of clean vehicles. Details are yet to be decided, and the proposed changes are subject to approval next year in parliament.

"We're grateful to the government for these steps," JAMA chairman Toshiyuki Shiga told a news conference.

"But there's no basis for the acquisition and vehicle weight taxes any moreand we will continue to insist that they be abandoned," he said, noting that the group had collected 4.3m signatures from consumers in a petition demanding their abolition.

Reuters noted that JAMA had said in September it expects domestic sales this year of 4.25m vehicles, down 14% year on year due to supply problems after the 11 March earthquake/tsunami disasters. That was before the Thai floods disrupted output at Toyota, Honda Motor and other carmakers.

Japanese vehicle sales grew 7.5% in 2010 to 4,956,136 thanks to tax incentives on fuel-efficient vehicles and subsidies to replace older cars. The tax incentives were due to run until next March while the subsidies expired in early September 2010.

Shiga, who is also chief operating officer of Nissan Motor, said the industry group would come up with an updated domestic sales forecast for the fiscal year to 31 March when details of the proposed tax incentives are set.

Japanese vehicle sales peaked at 7.78m vehicles in 1990.