Japan to Raise Subsidy Cap for EVs by ¥400,000, Looking to Align with U.S. Trade Deal

The Yomiuri Shimbun

16:58 JST, December 17, 2025

The government is planning to raise the subsidy cap for electric vehicle purchases by ¥400,000, for a maximum of ¥1.3 million, as part of its plan to revise subsidies for eco-friendly cars from January.

On the other hand, the maximum subsidy for fuel-cell vehicles (FCVs) will be lowered by ¥1.05 million to ¥1.5 million. As a result, both types of car will have maximum subsidies that are about 20% of their average price.

The plan is aimed at equalizing subsidy rates for eco-friendly cars, which reflects the tariff agreement reached with the U.S. government.

The new subsidies will apply to cars registered from Jan. 1, 2026. They will be applied to FCVs from April 1, given the breadth of the reduction.

Under the new system, plug-in hybrids will also see their maximum subsidy raised by ¥250,000, to ¥850,000. The upper limit for electric kei cars will stay at ¥580,000.

Subsidies will be decided based on such factors as the vehicle price and its environmental performance. Models that receive high remarks will see changes in January to March. For example, the subsidy cap for a bZ4X EV from Toyota Motor Corp. or an EV Lexus is now set at ¥900,000, but this will be raised to ¥1.3 million during this period. Subsidies for other models will be revised from April, with the evaluation criteria to be decided later.

In March, the Office of the U.S. Trade Representative issued a report claiming that Japan’s subsidies for purchases of eco-friendly cars serve as a non-tariff trade barrier. It criticized the fact that subsidies were lower for EVs — for which companies like Tesla Inc. have an edge — while subsidies were high for FCVs, which Japanese carmakers excel at making.