(MENAFN) Japan's automobile production is projected to decline by 4.3 percent on a yearly basis, driven by anticipated slumps in U.S. sales following the implementation of expanded tariffs, according to a report released by the Japan Research Institute. The broader industrial production in Japan could see a 0.6 percent reduction as a result of the U.S. trade measures.

Shumpei Goto, a researcher at the institute, highlighted that the increased tariffs are expected to inflate car prices in the United States, leading to a subsequent drop in sales of Japanese-made automobiles. This decline is poised to significantly impact vehicle production and create a cascading effect on the network of auto parts manufacturers, as reported by media source.

The U.S. government is scheduled to begin enforcing the new tariff regime the following week, which includes critical automotive components such as engines within its scope. This expansion of tariff application to key components is expected to exacerbate the negative impact on Japanese automotive production.

Goto's initial analysis did not factor in the added tax burden on automotive parts. Consequently, the combined taxation on both finished vehicles and components is now predicted to further curtail production volumes, according to the institute's updated assessment.

Last year, Japan's automotive exports to the United States reached 6.0261 trillion yen, equivalent to approximately 40 billion U.S. dollars, representing 28.3 percent of Japan's total exports to the nation. This significant export volume underscores the vulnerability of Japan's automotive sector to the newly imposed U.S. tariffs.

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