Japan Economy, Housing & Lumber Shipments

Japan Economic Update

Japan’s economy grew by 1% in 2016, posting 4 straight quarters of positive gains. This compares with a 1.2% GDP rise in 2015. The gain was primarily as a result of increased external demand for exports. Aided by a weakening yen, exports in 2016 increased by 2.6% thanks to recovering conditions in China and the United States. Despite efforts to re-start Japan’s domestic economy, overall consumer spending, which represents 60% of the overall economy, remained sluggish.

December Housing Starts Summary

December housing starts increased 3.9% to 78,406 units. For the first time in several months owner occupied single family housing led the gains with a 6.5% increase compared a 2.2% rise in rental units. The mansion condominium market gained 10.7%.

December total wooden starts improved 6.6% to 45,974 units. Post and beam housing increased 4.9% to 34,572 units. Pre-fab wooden starts fell 4.5% to 1,109 units and total pre-fab fell 4.1% to 12,179 units. Platform frame construction gained 13.9% to 10,293 units. Two by four starts broke down as follows: custom ordered single family units rose 11.9% to 2,716 units; rentals gained 16.8% to 6,422 units and built for sale speculative housing increased 1.6% to 1,122 units.

2016 Year End Japan Housing Starts: The Year in Review

In 2016 record low lending rates combined with a postponed consumption tax hike helped propel Japan’s housing market to its strongest showing since 2013. Annual housing starts closed off 2016 at 967,705 units. The results represent a 6.4% increase over 2015. Wooden housing was particularly strong, with an 8.3% increase to 546,336 units.

Although certain housing market analysts, citing demographic headwinds and anemic growth, had forecast doom and gloom ahead for Japan’s builders, 2016 gives us pause to think that it is rather the resiliency of wooden housing which is noteworthy. As a percentage of all housing, wooden construction held a 56.5% market share – the second highest ranking in over 30 years. And at the mid-550,000 range, wooden starts in 2016 attained their second highest level in the past 16 years.

By wooden housing types fortunes vary. Post & Beam clocked the strongest growth of 8.9% to finish at 408,632 units. However, average post & beam floor area advanced at a slower 6.2% rate indicating shrinking average floor area per P&B unit. Shrinking average floor area is also a trend evident in platform frame housing.  While 2×4 starts increased 7.9% in 2016, growth in floor area trailed at 4.4%. What’s behind the shrinking footprint? Over the past year rental housing has consistently outperformed single family housing thus skewing the overall floor average – as the typical rental units typically represent about just over half the floor area of a single family owner occupied unit.

Platform frame construction achieved a new high in 2016, registering 123,713 units. This represents a 7.9% increase over year prior results.  The composition of 2×4 starts reflects stronger relative growth in multi-family rentals – which advanced 11.7% to 77,114 units. Owner occupied single family homes edged up 1.1% to 32,305 units. Built for sale single family spec housing improved 3.0% to 13,795 units. As a percentage of overall starts, 2×4 saw a modest but steady market share increase to 12.8%.

Pre-fab housing trailed the pack with total results up 3.5% to 148,528 units. Within this group wooden pre-fab fell 2.5% to 13,991 units; reinforced steel & concrete fell 8.8% to 3,886 units; and steel frame increased 4.6% to 130,651 units.  Most industry watchers expect that current market conditions will continue into 2017.      

BC Wood Exports Summary 

December 2016 year end British Columbia softwood lumber exports to Japan totaled 2,155,600m3: a decrease of 4.4% compared to year prior figures. By value 2016 exports totaled $725.7 million – a decrease of 4.4%. By species groups, SPF shipments dropped 0.7% to 1,564,202m3; Hem Fir shipments fell 14.1% to 267,444m3; Douglas Fir fell 10% to 210,886m3 and Yellow Cedar fell 17.6% to 67,944m3.

71 Million Visitor’s Hotel Stays in Japan

World Famous Scramble Intersection in Shibuya, Tokyo

The Japan Tourism Agency reported the estimated number of hotel stays by visitors to Japan hit 70.88 million in March, 2017.  This represents an 8 percent increase from the previous period and a new record for overseas travelers hanging their hats at hotels in Japan. Currently, foreign visitors account for 14.3 percent of the total 494.18 million hotel stays reported for the period, which also takes into account of the number of Japanese guests staying at hotels. The growth in the number of visitors staying at hotels in this country can be attributed to the great success that the Japanese government is having in attracting overseas travelers to spend time here, which saw 24 million tourist visit Japan in 2016, also a new record for the country. In addition, the agency reported a favourable trend, and what I think is very good news for our industry, that hotel stays in places outside the three major metropolitan areas of Tokyo, Osaka and Nagoya increase by 13.2 percent, which clearly outstripped the 4.8 percent increase that was realized for these three metro areas. This will certainly increase the demand for lodging in the local regions of Japan, where land prices tend to be cheaper, making the building of low and medium-rise wooden hotels and resorts more competitive, compared to the way most of these buildings are currently being constructed in this country.

A Man’s Castle is his 2×4 Home

A traditionally styled Japanese “imperial palace” under construction.

“A man’s home is his castle” is an old English cliché, but when I recently went to visit a 2×4 house that’s been newly built in Ibaraki Prefecture, in the northern Kanto region of Japan, this saying clearly became true. It’s distinctly designed after a famous Japanese villa with its accompanying gardens and other buildings in the western suburbs of Kyoto, Japan called the “Katsura Imperial Villa”, but of course not on such a grand scale. This new home, only loosely resembles one of Japan’s most important large-scale cultural treasures that inspired its design, as it’s a single storey 80m² detached structure that is connected to the owner’s main house

A traditionally styled Japanese “imperial palace” recently completed.

(previously there) via a Japanese styled connecting interior corridor. What’s really astounding, is the design flexibility that platform frame construction allows, as you would have thought that any such an important piece of Japanese architecture would surely have been built using Japan’s traditional post and beam construction method. However, this little citadel was framed all with SPF dimension lumber and sheathed with Canadian OSB. And since it’s a private home, I know you want have a chance to visit, so that is why I have embedded a hyperlink here, so you can visit and check out the real Katsura Imperial Palace.

MAFF Seeks More Internationalized JAS Standards

The Ministry of Agriculture, Forestry and Fisheries (MAFF) is planning on submitting a JAS law amendment bill to the regular National Diet session currently taking place.  The JAS law, stipulating how the Japanese Agricultural Standards (JAS) should be operated, has been facing several challenges.  Among those are decreasing JAS-Certified Business Entities, slow growth of JAS product exports or less credibility of JAS-graded commodities than expected.  MAFF hopes that the solution for these challenges would be to make the JAS standards more internationally recognized.  This internationalization includes expanding the scope of the standards such as standardizing manufacture methods, operational methodologies or measurement/analytical methods as opposed to the conventional scopes limited to material standards.  It is hoped that this law amendment may result in realizing our long-time wish; establishment of pressure treatment JAS standard for sawn lumber.  If pressure treating methods can be standardized in the JAS system, it may become possible to JAS-certify pressure treated Canadian lumber graded to NLGA rule or the JPS-1 Canada Tsuga grading rule.

CLT JAS Standard Revision Work Commences

Almost 3 years have passed since the first Japanese CLT standard JAS 3079 was established in December 2013.  Most JAS standards are usually revised every 5 years, however MAFF* started its revision work in January of this year.  COFI sits as one of the 16 revision committee members.  Our goal includes to let them revise the standard so that Canadian lumber with species groups can be used as the planks in the JAS-certified CLT.  We also elaborate a plan to make the standard accept North American recipe of the polyurethane adhesive (also see this blog in October, 2015).  The revision work is scheduled to be completed by March 2019.

*Note: Ministry of Agriculture, Forestry and Fisheries