Yen Depreciation Backfires on Domestic Market: Japan's Used Car Exports Boom While Affordable Good-Quality Cars Keep Shrinking

Persistent Yen Weakness Creates Sharp Divide in Japan's Used Car Market

Japan's used car market is experiencing a pronounced "two-speed" reality amid the ongoing depreciation of the yen. On one hand, leveraging the exchange rate advantage and well-maintained vehicle conditions, Japan's used car exports have risen for consecutive years, hitting a new all-time record in 2025. On the other hand, aggressive stockpiling by overseas buyers is squeezing domestic supply, causing used car prices in Japan to soar. Vehicles in the mainstream, affordable price range of 1 million to 2 million yen (approximately $6,300to$to12,600 USD) are becoming scarce, small and medium-sized dealerships are under pressure, and the barrier to car ownership for ordinary consumers is rising.

Exchange Rate Dividend Fuels Exports, High-Quality Domestic Supply Drains Abroad

The exchange rate dividend is the core driver behind the surge in used car exports. A weaker yen makes Japanese used vehicles more cost-competitive in global trade. Coupled with a reputation for well-maintained, reliable vehicles, export demand continues to rise strongly.

Data from the Japan Used Motor Vehicle Exporters Association shows that Japan's used car exports grew 9% year-on-year in 2025, reaching 1.7086 million units, marking the third consecutive year of record-breaking annual sales.

Overseas purchasing demand shows clear divergence: Russia, facing new car import restrictions, continues to buy Japanese used cars in bulk, while Sri Lanka lifted its five-year ban on used car imports, further amplifying purchasing volumes.

Although conflict in the Middle East has reduced demand from the UAE, Japan's largest used car export destination, the overall high level of global demand remains unchanged. Driven by the price advantage from the weak yen, overseas markets continue to show strong preference for Japanese used vehicles.

The large-scale outflow of high-quality vehicles has directly disrupted the supply-demand balance within Japan. For Japanese households, the 1 to 2 million yen range represents essential car-buying needs, and there is now a severe shortage of high-value vehicles in this price bracket.

A procurement executive from Nextage, a major used car dealer, admits that used car prices have risen sharply in the past three years, with the purchase price for some models increasing by over 1 million yen.

One dealer say that (states frankly): "While you can still find used cars in the 1 million yen range, truly high-value, good-condition cars are few and far between." The core trigger for this sharp price increase is precisely the used car export boom driven by the weak yen.

Currently, the inventory structure at local dealers is severely unbalanced. Supply of mid-to-high-end vehicles priced above 2 million yen is ample. For example, a four-year-old used Toyota Prius sells for 2.85 million yen, a price gap that has narrowed significantly compared to the new car MSRP of 3.21 million yen. Affordable, high-quality cars are extremely hard to find.

Within Japan's automotive consumption system, used cars have long served a crucial role in providing essential mobility, especially for working-class families, new drivers, and residents of remote areas. Affordable, high-value used cars are an essential transportation necessity.

The mature and well-established used car auction system was originally the cornerstone for ensuring vehicle circulation and stabilizing retail prices. However, the export boom triggered by the yen's depreciation has completely disrupted this domestic circulation rhythm.

Unlike the managed capacity adjustments possible for the new car market, used cars are non-renewable stock assets. The number of trade-in vehicles is relatively fixed. Bulk overseas buying continuously consumes the limited stock of high-quality vehicles. With no new replenishment channels domestically, the supply-demand mismatch is becoming entrenched, making it difficult to reverse the trends of scarce affordable models and continuously rising prices in the near term.

Auction Prices Surge Across the Board, Industry Reshuffling Worsens Consumer Struggles

The used car auction market is the core transmission hub for these price increases and the main battleground where domestic and overseas buyers compete. Most vehicles traded in by Japanese automakers and owners enter the auction channel. Small and medium-sized local dealers heavily rely on auction markets for their inventory, while well-capitalized overseas exporters bid aggressively, continuously driving up transaction prices, putting local dealers at a competitive disadvantage.

Data from USS, a used car auction house, shows that the average auction price in fiscal year 2025 was 1.25 million yen, a 60% increase from fiscal year 2020 and nearly 90% higher than fiscal year 2015. In February 2025, the average auction price hit a record high of 1.38 million yen. Even impacted by the Middle East situation, the average price in April remained at 1.22 million yen, a 15% increase year-on-year.

Auction prices serve as the benchmark for used car retail prices, directly determining dealer selling prices. According to statistics from Car Sensor, a used car data platform, the overall average auction price for used cars in Japan reached 2.25 million yen in December 2025, with a cumulative increase of over 400,000 yen in three years, and the annual average price consistently stabilized above 2.2 million yen.

Price increases are evident across specific vehicle segments, with mainstream categories showing varying degrees of increase: MPV auction prices rose 16% to 2.59 million yen, SUVs rose 13% to 3.69 million yen, and the formerly affordable K-car (microcar) saw its average price exceed 1 million yen from May 2024 onward, gradually moving away from the budget commuter segment.

Prices for mainstream family vehicles have also risen across the board. As of the end of April, the average price for a used Toyota Corolla was 1.93 million yen. For a three-year-old vehicle in excellent condition, the average price reached 2.09 million yen.

Even for five-year-old used models, the average price generally remains between 1.6 and 1.8 million yen, close to 70% of the approximate new car MSRP of 2.79 million yen. The average price for a used Toyota compact Aqua also reached 1.93 million yen.

The starting price for a new Honda Fit is under 2 million yen, but the average price for a used Fit is 1.72 million yen. To find a used Fit under 1 million yen, buyers mostly have to settle for models eight years old or older.

The massive outflow of used cars is placing immense operational pressure on Japan's domestic used car industry.

Data from Teikoku Databank shows that the number of bankruptcies among used car dealers in Japan increased by 8 in 2025, reaching a total of 99, the highest level in 13 years.

Faced with persistently high auction prices, large top-tier dealers are beginning to prioritize direct sales from their own inventory. Meanwhile, numerous smaller dealers with weaker financial positions cannot match the bids of overseas buyers nor afford the rising inventory costs, leading to closures. It is feared that more dealers may fall into crisis.

Despite continuously rising prices, Japanese consumers' essential demand for affordable used cars remains strong. Against the backdrop of a weak yen and robust overseas demand, if used car exports continue to expand, domestic vehicle prices may rise even further. Industry insiders predict that the availability of used cars in the affordable 1 to 2 million yen range could shrink further or even disappear entirely, exacerbating the structural imbalance problem in Japan's used car market