Everybody in the Japanese auto biz (and who’s not in the auto biz in Japan, except my friends who, but that’s for another day), everybody in the Japanese auto biz has their eye on the sky. Why? Because the sky is soon to drop. On September 30, government subsidies for purchases of “environmentally friendly vehicles” (read pretty much any new vehicle that passes Japanese rules) will expire. Everybody expects a mad dash in August and September, and in October: Whammo. Down comes the sky.

This is a real one for the pull-forward theorists. In Japan, you can trade in your clunker (MY 1996 or older) for a $2,800 bounty. But as no self-respecting Nipponese owns a clunker (according to lore, all used cars get shipped to North Korea), the government gives you $1,132  merely for buying a car. All this will end on October 1, and blood will be in the streets. Anybody who possibly could be thinking of buying a car in Japan does that before October 1.

Japanese automakers are busy scaling back their output in anticipation of the big skydrop. Honda will scale back production 10 percent at one of its main Japanese factories from October, says The Nikkei [sub].

Honda thinks monthly domestic vehicle sales will crater by 30-40 percent once the government largesse dries up. Their will most certainly be further production cuts, at Honda and elsewhere. Honda is the only one taking about it so far.