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October 02, 1995 02:00 AM

JAPAN'S TIRE MARKET TO SLOW IN SECOND HALF

Bryan Kokish
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    AKRON-Japan's automobile and tire markets, which started out the year strong, are expected to slow down in the second half. In the early part of 1995, Japanese car production finished ahead of 1994 figures, signifying that the original equipment tire market may grow this year.

    Data released by the Japan Automobile Manufacturers Association indicate that Japan's domestic production of vehicles rose 3 percent to 4.4 million units in the first five months of 1995, compared to the same period in 1994. Of this number, 3.3 million are cars and 1.1 million are commercial vehicles.

    However, the association predicted that Japan's numbers won't be as strong in the second half of 1995.

    Despite a strong first half, Bridgestone Corp. is pessimistic about the second half.

    Domestic sales have fallen each month since April and the tire maker is contemplating a shortening in its work hours to compensate for the market deterioration.

    It said drastic appreciation of the yen and higher raw material costs have created a difficult economic environment in Japan.

    The predicted slowing in '95 of Japan's domestic market reflects a trend first started in 1994.

    Total tire production in Japan dropped 3 percent to 145 million in 1994 from 1993.

    Original equipment sales and exports also fell 3 percent each, while replacement sales remained flat, according to a 1994 report compiled by Lehman Brothers Inc.

    The weakness of the Japanese economy is hampering tire production more than originally expected.

    The spiraling value of the yen also is making it difficult for Japanese tire makers to make money from exports.

    OE sales accounted for about 40 percent of total Japanese tire production in 1994.

    All these factors indicate that the Japanese tire industry is maturing and becoming more like the U.S. market, Lehman Brothers said.

    ``I think the Japanese market has matured enough to where it's gotten into a cyclical pattern,'' said Marvin Behm, an analyst with Duff & Phelps Inc. ``The yen's rise has dampened the attractiveness of exports to purchasers.''

    Some analysts believe manufacturers may be able to take advantage of the exchange rate by importing more tires made by their overseas affiliates. Imports were forecast to increase to 16 million units in 1994, according to the Lehman report.

    But not everyone thinks tire demand will go south in 1995's second half. Data released by the International Rubber Study Group predict that demand for tires and tubes should grow in '94 and '95.

    Use of rubber for tires will increase 2.9 percent in '95 to 962,000 tons, according to the Japan Automobile Tire Manufacturers Association. Although total vehicle production numbers will remain flat, demand for OE will grow 1.2 percent.

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