Japan Economy, Housing, and Lumber Shipments
Economic Update: In Search of the Virtuous Cycle
In 2013 Prime Minister Shinzo Abe’s “Abenomics” economic reform policies showed progess in re-energizing Japan’s economy and ending two decades of deflation. As the year closed Japan’s Nikkei 225 equities indexed surged 57% over the year and the Japanese yen tumbled 18% versus the US dollar over the same time frame. GDP growth turned positive, corporate profits and confidence inceased and unemployment fell to 4.0%. While leading market and macro-economic indicators aligned, Prime Minister Abe’s message for the new year was focused on creating a “virtuous cycle” which improves living conditions for Japanese citizens.
With asset values, corporate profitability and inflation turning positive, the Abe administration is actively lobbying corporate Japan to increase wages in view of boosting domestic consumption. While consumer prices have gradually eroded over the past 20 years, average wages have also followed suit. Since 1998 average wages in fell 8% to $34,138. However, thanks to the Bank of Japan’s quantitative easing program, a weaker yen and rising fossil fuel energy imports, consumer prices advanced 1.2% in November – the fastest increase in 5 years. With the 3% increase (5% to 8%) to Japan’s consumption tax coming into effect in April, the Abe administration’s key challenge in 2014 will be to sustain economic growth through increased consumption. The Abe cabinet has been vocal in calling upon corporate Japan to open up their wallets and boost employee earnings. Keidanren, Japan’s largest corporate organization, has publically called upon member companies to boost wages. So far there are reports that certain large Japanese companies such as Daiwa Securities and Lawson’s are planning wage hikes, yet the scope and scale of wage increases remains to be seen. Despite the implementation of the consumption tax, the Japanese government is forecasting GDP growth of 1.4% for 2014. Achieving this target will depend largely upon whether or not companies and consumers continue to squirrel away their savings or adopt “virtuous cycle” spending habits.
Housing Starts Summary
Total October housing starts posted the 14th consecutive monthly increase. Total starts finished up 7.1% to 90,226 units. Total wood housing starts advanced 14.8% to 53,217 units. In contrast, mansion condominium units declined 17.7%.
By construction method, October post and beam starts increased 18% to 40,095 units. Wooden pre-fab was up 16.9% to 1,442 units whereas total pre-fab edged up 3.1% to 12,929 units. October platform frame starts strengthened 4.7% to 11,680 units
The housing market momentum carried through in November as total housing starts jumped 14.1% to 91,475 units. Total wooden starts finished up almost 20% to 54,804 units. Mansion condominiums lagged 14.6%. As a result the market share of wooden starts as a percentage of total starts advanced to 59.9%.
November post and beam starts surged 25.6% to 41,259 units. Wooden pre-fab was up 18.7% to 1,646 units. Platform frame starts strengthened 3.5% to 11,899 units – a relatively slower growth increment compared with post and beam, but an all-time monthly high in absolute terms. Owner occupied custom homes increased 11.7% to 3,648 units; built for sale spec homes declined 8.7% to 1,374 units and rentals increased 11.7% to 6,851 units.
Japan Softwood Exports Update
In November, B.C. SPF exports to Japan totaled 120,284m3 for a value of $32.5 million. Year to date through until the end of November, SPF exports rose 12% to 1,669,727m3 for a value of $442.3 million or 47% above year prior levels.
Total B.C. softwood shipments totaled 184,959m3 in November. Year to date total softwood shipments totalled 2,440,684m3 for a value of $761.8 million. The value of B.C. softwood exports to Japan increased 23.2% through until the end of November.