NEWS RELEASE
RTG REPORT: Japan Part 2 – Wood Market & Consumption Trends
Despite fading housing starts, non-residential construction remains an opportunity!
January 7, 2021 — Vancouver, BC
RUSS TAYLOR GLOBAL is pleased to announce a second complimentary report that summarizes Japan’s wood industry and consumption trends. The Japan Part 1 report (released in December) covered log and wood products imports and domestic production and supply trends, including some historical perspectives back to the 1960s and 1970s. The new Japan Part 2 report discusses trends in business, demographics, housing, other end uses, and lumber prices.
Japan remains a most important market for global exporters of higher quality and value-added/engineered products. Understanding and reviewing some of the major demand and demographic trends and issues in Japan (in combination with import and domestic production trends) should be useful to most industry players.
The full Part 1 & 2 Report is available by request: simply send an email to: russtaylor@russtaylorglobal.com or visit www.russtaylorglobal.com for further details or to join our email distribution list.
Highlights of the RTG Part 2 Report are summarized here:
Recent Business Conditions
Japan’s Cabinet has approved an additional economic package worth 73.6 trillion yen (US$707 billion) to keep the economy on a recovery track. The government estimates the stimulus measures will boost Japan’s GDP by around 3.6%. As well, the Cabinet Office index of business conditions for November continued its upward trend, rising 5 points from the previous month to 89.7 against the 2015 base of 100 – this represented the second largest month-on-month increase since records started in January 1985.
Consumer confidence in Japan improved for the third consecutive month in November, but the pace of improvement slowed.
Population & Demographics Trends
Japan’s population peaked about 2010 and its’ indigenous population is now shrinking at an annual rate of about 500,000 persons. Japan is one of the world’s fastest aging nations with almost 30% of the population over 65 years of age. This is one of the reasons for Japan’s low unemployment rate and reflects the country’s contracting labour force and chronically tight labour market. Demographics will remain a headwind for economic growth over the coming years as “guest” workers and productivity gains are not expected to make up for the shrinking workforce and the increasing cost of elderly care.
Housing Starts
Japan’s culture of living with wood, plus government stimulus targeted at increasing use of domestic wood in construction, and favorable changes to building and fire codes, have supported the steady increase in the proportion of wooden housing starts since 2007. Before COVID-19 hit, the Government of Japan was in the process of implementing progressive taxes from 2019 through 2025. This was to provide a budget that would exceed US$700 million per year by 2025 for programs to support development of Japanese commercial forestry, logging, wood products manufacturing, increased promotion, and wood consumption in Japan. The proportion of wooden housing starts is expected to grow to eclipse a market share of 60% within the next 5 years from its current level of 56%.
Total housing starts are predicted to reach about 800,000 units in 2020 – a large drop from 905,000 in 2019. This was not only caused by COVID-19, but also from the increase in the consumption (VAT) tax from 8% to 10% that occurred in late 2019. Following an expected rebound in 2021, the overall housing starts trend is then expected to move lower over the next 5 years.
Non-Residential Demand
The main non-industrial end use segments include elderly, medical care and social welfare facilities that top the list, followed by agricultural buildings and mixed residential and commercial buildings, restaurants, and accommodations. Wood frame construction has consistently accounted for around 10% of total floor area in non-residential construction. Based on housing starts, the wood market share is probably stronger due to the success of wood frame in elderly care facilities and the commercial units surrounding those facilities (seniors homes need 7-Eleven-type stores close by), although the average floor area in these sectors is low. With government incentives in place to encourage increases in wood construction in non-residential uses, it is conceivable that wood’s share could double or even triple the current floor area by 2025.
A number of key factors (pros and cons) driving the Japanese market and demand over the next five years conclude the report.
The full Part 1 & 2 Report is available by request: simply send an email to: russtaylor@russtaylorglobal.com or visit www.russtaylorglobal.com for further details or to join our email distribution list.
For further information, contact:
Russ Taylor, President
RUSS TAYLOR GLOBAL – Wood Business & Market Consulting
Email: russtaylor@russtaylorglobal.com
Mobile: +1 604 897 5666