In the scene where Mr Myagi gives Daniel the yellow car, we see him start it up and pull out of the driveway. It's obviously an automatic because he has both hands on the wheel when he starts it up and starts driving. You never see him reach for a stick shift. However, when he is at the arcade in the next scene and lets Allie drive, he tells her to ease off the clutch and put it in first. So, which is it? A manual or an automatic?