Demand for passenger cars in Japan, the world's third-biggest market, has fallen for the past three years largely because of a population shift to cities, which are well-served by public transportation, but has been exacerbated further by the global economic crisis with the Japanese now waiting longer to replace their aging vehicles.
"With the Japanese economy weakening and the outlook for employment looking very uncertain, consumers are in no mood to buy a car," JAMA Chairman Satoshi Aoki said.
JAMA is counting on a bill, expected to pass in the coming week with the government's broader budget plan, that would put incentives on the purchase of low-emission cars to help boost slowing sales by an estimated 310,000 additional vehicles over the 2009-10 business year.
But Aoki added that more stimulus was needed and referenced Germany's successful car-scrapping incentive program as an example of something that could be implemented in Japan.
"We need to prop up demand further on a broader basis," Mr Aoki said. "Germany's system could be one guide, and we want to seek help from the government."
The German government is offering car owners 2,500 euros (AU$4,819) if they turn in vehicles over nine years old and switch to new models with lower emissions. The plan has helped the country's new car sales jump 21 per cent in February from a year earlier, for the first rise in half a year.