Japan Economy, Housing & Lumber Shipments
Economic Update: “Abenomics 101”
In December of 2012 the LDP’s Abe majority government returned to power with a clear mandate to reinvigorate the economy. The LDP’s economic reform platform, dubbed “Abenomics” consists of “three arrows”. Firstly, the administration plans to boost fiscal stimulus with a focus on public spending. In January the LDP passed a record high 92.6 trillion yen (About a cool US $1.006 Trillion): 46.3% of which is financed through new bonds. In contrast to the previous DPJ government, which boosted social welfare and child allowance spending, the LDP is increasing public works spending by 15.6%. Moreover, reconstruction spending in the Tohoku region is increasing 16.1% to 4.4 trillion yen. In addition to the fiscal 2013 budget, the Abe government approved a 13.1 trillion yen supplementary increase to the fiscal 2012 budget. In total the Abe administration is planning to spend $107 billion on infrastructure in the next 15 months. The spending is an attempt to increase GDP growth by 2 percentage points and create 600,000 jobs.The second arrow is accommodative monetary policy to achieve a target inflation rate of 2.0%. Since coming to power in December, the Abe cabinet has increased pressure on the Bank of Japan to raise the inflation target from 1% to 2% and do whatever it takes in terms of quantitative easing to get there. Bank of Japan Governor Shirokawa is scheduled to step down in March and be replaced by a more “accommodative” LDP pick that knows how to print money. Currency markets have responded in anticipation with the Yen depreciating by roughly 10% versus the USD since Prime Minister Abe took office. The third arrow is to promote reform enabling strategic economic growth. The LDP plans to release a plan to promote economic reform by the summer.
2012 Housing Starts Summary
Japan’s housing market showed signs of steady improvement 2012. Year over year total starts increased 5.8% to finish at 882,797 units. Spurred in part by looming consumption tax increases and renewed economic confidence brought about by the return of Prime Minister Abe’s LDP Government in December, housing starts posted double digit increases from September through to December.
By segment total wooden housing increased 4.7% to 486,756 units. Wooden housing averaged 55.1% of the overall market. Wooden housing recovered to within 6% of 2008 results – the last year wherein Japanese total starts surpassed 1 million units. Non-wood starts increased 8.6% to finish at 278,974 units, however despite this increase non-wood starts remain less than 2/3 below of where they were in 2008.
Post and beam starts for 2012 edged up 3.4% to 364,092 units. P&B overall market share eased off 1% to 41.2%. Wooden pre-fab increased 5.9% to 15,177 units and total pre-fab advanced 4.3% to 132,244 units. Overall market share for pre-fab edged down 0.2% to 15.0%.
Platform frame starts increased 9.4% from 98,248 in 2011 to 107,707 units in 2012. 2×4 recovered to within 220 units of the 2008 all time high of 107,707. Platform frame construction’s overall market share increased from 11.8% to 12.2%.
Japan Softwood Exports Update
Total SPF exports between January and November 2012 to Japan totaled 704 million feet compared with 716 million the year prior. By value over the same time frame SPF exports accounted for $345 million versus $353 million. Western BC Hemlock exports declined from 443,709m3 in 2011 to 404,819 in 2012. Total softwood lumber shipped from B.C. fell from 2,496,535m3 in 2011 to 2,441,608m3 in 2012.