The government plans to extend a tax break for purchases of environmentally safer vehicles by a year through fiscal 2016, but apply it to a narrower scope of cars, according to sources close to the matter.
The government and ruling coalition will compile annual tax reform plans toward the end of December and discuss extending the tax break on purchases of hybrid, electric and other vehicles that meet government-set fuel efficiency standards, the sources said.
Purchasers of such "green" vehicles, excluding minivehicles, currently qualify for a tax break of 50 percent or 75 percent, depending on the vehicle's fuel efficiency.
But in fiscal 2016 starting in April, they are considering applying a stricter fuel-efficiency standard.
But in the quarter ended in June, 45.5 percent of all new vehicles sold in Japan excluding minivehicles failed to meet the stricter standard, according to transport ministry data.
The move comes as Japan scrambles to fight climate change by reducing carbon dioxide emissions as part of international efforts.
But limiting the types of vehicles eligible for the tax break could damage the major automakers, who are likely to oppose any such proposal.