Japan Extends Tax Breaks on Low-Polluting Vehicles

Japan is extending tax breaks for low-polluting vehicles by another three years to help support the nation's mainstay auto industry.

The tax breaks, initially set to end in April, will continue until April 2015, according to a plan approved by the Cabinet on Saturday.

Japan's auto market has been stagnant for years, but demand for hybrids and other "green" cars, prompted by tax breaks and interest in fuel efficiency, has been the solitary bright spot.

Under the government program, hybrids and electric vehicles are tax-free, delivering savings of about 150,000 yen ($1,500) for buyers of the Toyota Prius or the Nissan Motor Co. Leaf. Other fuel-efficient models qualify for lower savings.

In addition to the tax breaks, "green" cars have also received government subsidies to encourage sales but whether those will be extended is still undecided.

Japan has a massive public debt and has been trying to raise taxes. But the effort is a delicate balancing act because a heavy tax burden is likely to crimp spending as the nation struggles to rebound from the devastation of the March 11 earthquake and tsunami.

The auto industry is a pillar of Japan's economy. Concerns have been growing about lagging auto demand as top manufacturers such as Toyota Motor Corp. fight supply disruptions from the March 11 disaster, as well as from flooding in Thailand, where many Japanese automakers have factories and suppliers.