The Japanese government will revise financial support for clean energy vehicles, in a move to expand market access for US electric vehicle (EV) producers as part of its trade agreement with Washington.
Japan will adjust current public funding framework for clean energy vehicles, primarily narrowing the subsidy gap between EVs and fuel cell vehicles (FCVs), the country's trade and industry ministry (Meti) said on 25 July. The timeline for this revision remains unclear, but current subsidies stand at up to ¥900,000 ($6,121) for an EV, compared with as much as around ¥2.6mn for a FCV depending on the vehicle model, according to Meti data.
The move follows the agreement reached between Washington and Tokyo, which includes commitments to reduce Japan's non-tariff barriers and improve market access for US automakers, according to Meti and the White House.
The US Trade Representative (USTR) in a March report identified Tokyo's FCV-heavy auto subsidy as a non-tariff barrier, noting that FCVs are primarily produced by Japanese car manufacturers and receive "a much higher subsidy" than EVs. The US government has criticised the measure as unfair, a Meti official involved in the trade talks told Argus.
Domestic sales of FCVs increased sharply to 697 units in 2024, up by 65pc from a year earlier, according to Japan Automobile Dealers Association (Jada) data. The country's largest car producer Toyota is dominant in the Japanese FCV market, with its sales accounting for around 95pc of the total sales in 2024.
US president Donald Trump has long expressed dissatisfaction against the trade imbalance in US-Japan car trade. Japan exported around 1.3mn automobile units to the US market in 2024, and only purchased 14,724 units of US vehicles during the same period, according to Japanese customs and industry group the Japan Automobile Manufacturers Association.
"A variety of non-tariff barriers impede access to Japan's automotive market, and overall sales of US-made vehicles and automotive parts in Japan remain low", the USTR reiterated.
But it remains unclear if the subsidy overhaul will help to boost US EV sales in the Japanese market. FCVs appear to be far from threatening the EV market so far. Despite recent sales growth in 2024, its market share remains marginal, just 2pc of passenger EV sales.
Foreign brand EVs including US vehicles are already gaining popularity in the Japanese market despite the lower subsidy than that for FCVs.
Deliveries of foreign-brand EVs to the Japanese market in June jumped by over 50pc on the year to 3,653 units, marking the highest foreign EV sales in a single month, according to the Japan Automobile Importers Association (JAIA). Foreign auto manufacturers are expanding their offerings in Japan by introducing a wider variety of new EV models to the Japanese market, JAIA said.
