Car sales in Japan are heading for further decline according to the Japanese carmakers’ trade association JAMA.

It says that auto sales in Japan are expected to drop by more than 5% in the next fiscal year starting in April.

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Demand for vehicles excluding 660cc minicars is not expected to pick up from this year’s estimated sales around 3.1m vehicles, while minicars will likely drop 12% to 1.9m units, JAMA said.

Minicar sales in Japan were boosted this year ahead of tax increases, but the tax increases will apply in the next fiscal year.

JAMA’s sales forecast follows larger pay rises for carmakers’ employees, encouraged as part of the government’s efforts to stimulate domestic consumer spending.

Despite sluggish demand at home, Japanese automakers are enjoying record profits boosted by the impact of the weaker yen on overseas earnings.

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