Japan's gasoline consumption will continue falling because of its decarbonisation drive, but the country's gasoline consumption is unlikely to reach zero as gasoline-powered cars and hybrid gasoline-electric vehicles (HEVs) account for a vast majority of newly registered passenger cars.
Japan's gasoline sales declined at least over 2016-24, with the exception of a slight year-on-year increase of 0.03pc in 2022, data from the Petroleum Association of Japan (PAJ) show. The country's gasoline sales totalled 330mn bl (904,100 b/d) in 2016, falling to below 280mn bl (767,100 b/d) in 2024.
The country's transport sector accounted for 19.2pc of total CO2 emissions in the April 2023-March 2024 fiscal year, according to Japan's environment ministry. Half of the transport sector's CO2 emissions came from gasoline in the 2023-24 fiscal year.
Tokyo renewed its global warming countermeasures plan in February 2025, which reiterated its target of having all new car sales be "electrified vehicles" by 2035 and to achieve net-zero CO2 emissions through the vehicle lifecycle by 2050, in efforts to abate emissions. But these "electrified vehicles" do not only refer to fully electric-powered EVs nor fuel cell vehicles (FCVs) but also include gasoline-consuming HEVs and plug-in hybrid electric vehicles (PHEVs).
This means that Japanese passenger car owners will likely remain dependent on gasoline, even as gasoline consumption declines, given that Japan's preference for hybrids is likely to sustain its momentum for the foreseeable future.
The country's gasoline requirement will fall by 2.4pc to 260mn bl (712,300 b/d) in the April 2026-March 2027 fiscal year, compared with the 2025-26 level, based on Japan's trade and industry ministry Meti's outlook. This downtrend is expected to continue by declines of 2.1-2.5 pc/yr at least until 2029-30, largely because of higher fuel efficiency and wider use of HEVs, Meti said.
The number of newly registered passenger cars, including imported cars, totalled slightly below 2.4mn units over January-November 2025, data from the Japan Automobile Dealers Association (JADA) show. Out of this total, gasoline-consuming HEVs accounted for 60pc, and gasoline cars hold a 32pc share. Gasoline-powered cars and HEVs have jointly accounted for around 90pc at least since 2020.
The share of HEVs in newly registered cars has also grown consistently every year, from 37.1pc in 2020 to 61.1pc in 2024, mostly replacing the share of gasoline cars, while the share of EVs has stalled at 0.6-1.7pc of the total of registered units every year over the same period, data from the JADA show.
"The hybrid trend is likely to remain strong going forward. Compared with the time when it seemed the global shift to EVs would happen decisively and rapidly, the momentum now appears to have slowed somewhat," Japan's trade and industry minister Ryosei Akazawa said at an interview with reporters, including Argus, in October.
The shift towards EVs has not been as strong as expected, which could have benefited gasoline car makers. But US tariffs on Japanese automobiles likely eroded the profitability of Japanese automakers, with 15pc of their domestic car output exported to the US in 2024, according to Meti. The US tariff rate was lowered to 15pc from 27.5pc in September, but is still far higher than 2.5pc, the rate before US president Donald Trump's additional 25pc automobile tariff took effect in April.
To support Japanese automakers given the challenging tariff environment, Tokyo could freeze its environmental performance tax — a levy of 0-3pc — imposed on car owners at the point of acquisition depending on automobile features, such as fuel efficiency. This move could pave the way for gasoline-powered vehicles to regain momentum or pose obstacles to the expansion of EV cars' market share in the coming years.
