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Japanese government issues warning over U.S. electric vehicle tax credit

TOKYO (Reuters) – Japan’s government warned on Saturday that a new U.S. electric vehicle tax credit could eventually deter further Japanese investment in the United States and hit jobs in the world’s largest economy.

In comments submitted to the U.S. Treasury Department, the administration raised some concerns about tax credits in the Inflation Reduction Act (IRA), which aims to create a more resilient supply chain as the U.S. aims to reduce exposure to China.

The statement follows months of concerns from the Japanese government and the country’s auto lobby that the IRA has made Japanese automakers disadvantaged in its key North American market.

The Japanese government said the requirement to qualify for the tax credit is “inconsistent” with the shared policy between the Japanese and U.S. governments to build resilient supply chains through cooperation with allies and partners.

“Japanese automakers may hesitate to invest further in vehicle electrification,” the government said. “This may have a negative impact on the expansion of investment and employment in the United States”

Japan joins South Korea and European countries that have expressed concerns about the legislation. South Korea’s foreign ministry said Friday that it is seeking a three-year legal grace period to allow its automakers to continue to receive incentives for electric vehicles in the U.S.

Under the law, it currently applies to $7 The 500 EV tax credit designed to convince consumers to buy cars will be replaced by incentives designed to bring more battery and EV manufacturing into the U.S. In the next six years, domestic content requirements will gradually increase.

New restrictions on battery purchases and critical minerals, as well as price caps and revenue caps to take effect on January 1, could make all current EVs ineligible for the full $7 credit , 500.

The U.S. Treasury Department and IRS began soliciting public comment on the new law last month.

U.S. consumers disadvantaged

Japanese government says restrictions on the range of vehicles that benefit from EV tax credits will narrow U.S. consumers to affordable Cost gains options and could interfere with the Biden administration’s efforts to meet climate goals.

Japanese Industry Minister Yasunori Nishimura raised concerns about the law to U.S. Commerce Secretary Gina Raimondo at a meeting in Los Angeles in September. The Nikkei newspaper reported that Nishimura told his American counterparts at the meeting that the legislation could violate international law.

The Japan Automobile Manufacturers Association, Japan’s main car lobby, said in August that it was concerned about the law and would closely monitor developments.

Even some U.S. automakers are concerned about some aspects

Ford Motor Company (NYSE: F) said Thursday that the U.S. Treasury Department should limit “foreign entity concern” to ensure more electric vehicles are eligible for up to $7 500 Consumer tax credit.



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