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Japan Economy & Housing Starts

Shawn Lawlor

By Shawn Lawlor

Director, Canada Wood Japan

July 26, 2017

Japan’s economy continued along a path of modest growth in an environment of low inflation and tightening labour conditions. Thanks to recovering inter-Asian trade, Japan’s exports jumped 9.5% between January to June. The strengthening outlook helped the Bank of Japan in lifting its GDP growth forecast for 2017 to 1.8% from 1.6%. Japan now has now had five consecutive quarters of GDP growth.

The nation is now at the limits of full employment with the unemployment rate averaging 3.0% and a jobs to works ratio at its strongest level in four decades, despite increasing participation of women, foreign laborers and the elderly into the economy. Lack of available labour has been identified by government officials as a barrier constraining growth. These constraints are in turn driving change in the workplace. While traditionally the retirement age for full time salaried employees was 60, according to a recent Reuters poll more than half of Japanese companies surveyed plan to increase the retirement age to 65 and even in some cases 70 years of age. In rural regions the government is developing new standards to permit self-driving tractors and farm machinery to help combat regional labour shortages.

Yet despite tight labour conditions, consumer spending remains weak and inflation remains below 1% despite the Bank of Japan’s aggressive monetary easing. The Bank of Japan commenced its monetary stimulus program in 2013 with a goal of achieving annualized inflation of 2%. However, after a recent BOJ meeting the inflation target was pushed back for the sixth time into 2019. Japan’s monetary easing program is widely considered to have reached its limits of effectiveness

Japan Housing Starts Summary for May 2017

Total housing starts tapered off 0.3% to finish at 78,481 units. Wooden starts were up modestly, but non wood starts fell thanks to a 12.6% decline in the mansion condominium market. Total wooden housing starts increased 4.6% to 44,761 units. Post and beam housing led these gains with a 5.4% increase to 34, 074 units. Moderating this increase however was a 3.5% decrease in floor area for post and beam housing. Wooden pre-fab starts shrank a modest 0.8% to 1,051 units and total pre-fab starts remained essentially flat at 11,148 units. Platform frame starts increased 2.4% to 9,636 units. Platform frame starts broke down as follows: custom ordered single family homes advanced 0.9% to 2,627 units, rental apartments were up 1.3% to 5,796 units and spec housing jumped 10.9% to 1,192 units.