Japan Economy, Housing and Lumber Shipments
Two Years On: Abenomics & Japan’s Aggressive Monetary Easing Program
In March of 2013 Prime Minister Shinzo Abe tapped Haruhiko Kuroda to serve as the Bank of Japan’s Governor with a clear mandate to end the country’s deflationary spiral. The BOJ set to achieve a 2% annual inflation rate within 2 years. The plan launched an aggressive monetary policy which included such measures as Japanese government bond purchases and a doubling of the money supply. So is it working?
Depends who you ask. Governor Kuroda’s policies have certainly benefited exporters and higher net worth individuals with investments in Japanese equities, however, the wider economic benefits have yet to trickle down to the mainstream economy. The dramatic increase in the money supply has driven a depreciation in the yen’s value: from the 80 yen to the USD level in the middle of 2012 to the 120 yen to USD at present. The yen’s decline has helped exporters post record earnings and is buoying Japan’s stock market. After seemingly flat lining for over a century, this April the Nikkei 225 index surged to over 20,000 for the first time in 15 years – jumping 60% over the past 2 years. And although the BOJ has yet to reach its target inflation of 2%, the consumer price index is steadily registering in positive territory and reached 1.5% in June. In January wages increased for the 11th consecutive month. Real wage increases are expected this year.
But despite rising wages, equities and inflation, the economic benefits do not appear manifest in the broader economy. Consumer spending fell 3% in January for the 11th consecutive month, still languishing from a modest 3% increase in the consumption tax a year ago. On the surface it wouldn’t be wrong to expect that with nearly full employment, rising wages and prices, Japan’s consumers will begin to open their purse strings. Representing 60% of the Japanese economy, reinvigorating consumer spending is a vital element in Japan getting back its economic Mojo. However, structural issues and a widening wealth gap are holding Japanese economic growth back. Nearly half of Japanese workers in their 20s and 30s are employed as temporary contract workers under compensation packages worth roughly half that of regular permanent employees. In the last 2 years while Abenomics have helped the number of wealthy households to increase by 24%, at the same time the number of households living on welfare hit an all time high of 1.6 million. Addressing the growing wealth gap in Japan’s economy is likely to become a key theme in Japan’s economic policy going forward.
Japan Housing Starts Summary
Sluggish housing market conditions continued in February, however, the pace of the downturn began to moderate. Compared to year prior results, total housing starts fell 3.1% to 67,552 units. Owner occupied and rental starts fell 9.1% and 7.5% respectively. The mansion condominium market registered a 23.3% increase. Total wooden housing trailed by 2.1% at 35,999 units.
By construction method post and beam starts finished 3.5% lower at 26,672 units, pre-fabricated housing edged off 1.5% to 10,672 units and plat frame starts posted a 2.4% gain to end at 8,132 units. Within 2×4 starts owner occupied units fell 5.6% to 2,270 units, built for sale spec homes increased 14.3% to 1,089 units and rentals increased 3.8% to 4,752 units.
Softwood Exports to Japan
B.C. exported a total of 2,135,500m3 in 2014 compared to 2,626,400m3 in 2013. January and February cumulative softwood lumber shipments totaled 305,900m3 compared to 346,900m3 in 2014. Year to date until the end of February, SPF shipments have fallen 4.5%, Douglas Fir 5.3% and Hem Fir 32%. Year to date exports by value totaled $107.8 million compared to $120.2 million in 2014.