Japan's "kuruma banare" dramatically decreasing new car sales

Although the U.S. auto market is in the midst of one of the largest slumps in recent history, America's love affair with the car should ensure that the market will eventually rebound. On the other side of the world, the Japanese auto market is also in a state of decline. However, "kuruma banare" may prevent the market from ever rebounding there.

Simply translated, kuruma banare means "demotorization" -- a trend that has been affecting the Japanese auto market since 1990. While many factors have contributed to the demotorization of Japan, the biggest reason for the decline is that the youth have fallen out of love with the automobile.

Instead of saving up for a car, more and more young buyers are spending their money on the latest mobile phones and home computers. Between 2000 and 2005, spending on cars per household per year fell by 14 percent to $600, while internet spending and mobile phone subscriptions increased by 39 percent to $1,500, according to Newsweek.

And the younger the demographic, the more skewed the results. As Kimiyuki Suda -- a 34 year old executive at an Internet-services company -- put it, "having a car is so 20th century."

"Automobiles used to represent a symbol of our status, a Western, modern lifestyle that we aspired for," Ryuichi Kitamura, a transport expert and professor at Kyoto University, told Newsweek. For today's young people, he argues, "such thinking is completely gone."

Also taking away from the popularity of the car is the high price of ownership. When you calculate in the price of parking, insurance and other various fees, just owning a car will run you $500 a month. Moreover, taxes on buying a new car are far greater than here in the States -- taxes on a $17,000 car in Japan are 4.1 times greater than here in the U.S.

Another factor of the demotorization of Japan is the surge in urban living -- since 1990, Japan's urban population has grown by nearly 20 percent. Japan has one of the best mass-transit systems in the world, so many car owners are trading in their keys for a subway pass.

These market conditions combined have caused new car sales in Japan to drop 6.7 percent since last year. Take a wider view of the market and you will see that the trend has been in motion for 18 years. In 1990, Japan tallied 7.8 million new car sales. In 2007, that number dwindled to just 5.4 million units.

Despite the drop in sales, Japanese automakers haven't taken the full brunt of the decline... yet. Thanks to strong demand from emerging markets -- such as India and China -- Japanese automakers have largely been able to offset the declines. But analysts fear the decline will soon catch up with the automakers, and a similar kuruma banare could soon affect Europe.

One industry that doesn't mind the trend in Japan? Car rental companies. Young suburbanites wanting to get away for the weekend have fueled a 30 percent growth in the industry over the last 8 years.