Japan
Wood Products Prices
Dollar Exchange Rates of 10th
February
2021
Japan Yen 104.9
Reports From Japan
Business confidence dented
Preliminary data from the Cabinet Office shows the index
of economic conditions (coincident index, a key index
reflecting the state of the Japanese economy) fell in
December last year, the second consecutive monthly
decline.
The December drop was the biggest single monthly
decline since May 2020 when the index fell following
Japan's April 2020 state of emergency declaration. Japan is
now experiencing its 3rd state of emergency declared in
January which is now extended to mid March in those
prefectures seeing the worst pace of infections.
Tighter law to beat back spread of
infections
Under the current state of emergency the government is
asking people to refrain from non-essential trips not only
at night but also during the day and is urging companies to
work harder to support ¡®work from home¡¯. Travel between
prefectures is also discouraged.
Japan's parliament has introduced fines for people and
businesses that do not comply with restrictions imposed
during a state of emergency to prevent the spread of the
novel coronavirus.
Initially the government proposed prison sentences for
Covid-19 sufferers who refuse to be hospitalised. This was
eliminated from the final law. Covid-19 patients resisting
hospitalisation can be fined up to 500,000 yen and those
who fail to participate in epidemiological surveys by
health authorities, up to 300,000 yen. Restaurants and bars
that fail to cooperate with orders to reduce their operating
hours can be fined up to 300,000 yen.
Big drop in household spending
Data from the Ministry of Internal Affairs and
Communications has revealed that in 2020 monthly
spending by Japanese households fell over 5% from the
previous year, the sharpest drop on record. The decline
was the largest since comparable data became available in
2001.
The 2020 decline in household spending was worse
than in
2014 when the consumption tax was raised. However, as
people are spending time at home as well as working from
home spending on computers and video game equipment
rose sharply last year.
It has been suggested that household spending is expected
to gradually recover in 2021 after a decline in the first
quarter due to the ongoing state of emergency. Household
spending is a key indicator of private consumption which
accounts for a sizeable slice of GDP growth.
Prospect that yen will strengthen ¨C BoJ readies
In the face of a potential strengthening of the yen against
the US dollar the Bank of Japan (BoJ) is looking at ways
to signal that it will act, possibly pushing interest rates
even further below zero.
The next Bank meeting will be in March but, because of
the risk of a yen rise they need to prepare now. The
problem is to balance the negative impact of rate cuts
against avoiding yen strength. The BoJ wants to alter the
general consensus that it does not have the option to cut
rates further.
Looking at the medium term many analysts are forecasting
a rise of the yen to 100 to the dollar, up from the present
104/5.
Sales of second hand homes rise
The impact of the corona pandemic on the Japanese real
estate sector has been considerable. As companies follow
the government¡¯s request for more ¡®work from home¡¯ they
are at the same to downsizing office accommodation. The
occupancy rate for office buildings in most of the main
cities in Japan has been declining and this could be a game
changer for the commercial as well as residential property
market.
Before the pandemic the pace of change in residential
housing starts in Japan was a reflection of the aging and
dwindling population. The pandemic added a new
dimension as workers found they could relocate to large
suburban homes as they no longer needed to commute. On
the one hand new home building has been falling but
demand for second hand homes has been rising.
Sales of second hand homes in Japan rose on average by
2.5% in 2020 with the biggest rise of 7% being recorded in
Kanagawa Prefecture. The average price of a second hand
home in Japan is now yen 31 million and has been rising
steadily.
The Japan Lumber Reports (JLR) has said (page 16) the
assumption for 2021 is that housing starts (new homes)
would be about 780,000-800,000 units, the COVID-19
epidemic would be under control in the second half of
2021 in Japan and the Tokyo Olympic Games would be
held as scheduled.
Radiocaesium contamination of logs in
Fukushima
undermines prices
A recent study of the impact of radiation on trees
surrounding Japan¡¯s Fukushima Daiichi nuclear power
plant has been released. The publication focuses on
radioecologjcal experience and data acquired and lessons
learned in Japan following the nuclear accident at the
Fukushima Daiichi nuclear power plant in March
2011. The research focused on radionuclide interception
by forest trees and a few agricultural crops.
The major part of Fukushima Prefecture is covered by
forest, so research projects were established in forests to
quantify the rate of reduction of the external gamma dose
rate from radiocaesium and to better understand soil
chemistry. The studies also evaluated the distribution of
radiocaesium within different components of trees (wood,
bark and leaves) to gain knowledge about the amount of
radiocaesium in timber and firewood, wild plants, fungi
and wild animals and to analyse the time trends of activity
concentrations in such products.
Approximately 70% of the territory affected by the
Fukushima Daiichi accident is covered by forest and
forests in Fukushima Prefecture consist of about 0.34
million ha. of forest plantations and 0.58 million ha. of
natural/semi natural forest.
Radiocaesium dynamics within forest ecosystems are
more complex than in agricultural land because trees are
perennial plants and forests are highly structured
ecosystems. Leaves/needles, branches, bark, forest floors
and soil surface organic layers were initially contaminated
at the time of deposition.
The report notes ¡°The important long-term contamination
pathway for trees is root uptake. Both the soil surface
organic and the mineral soil layers are sources for uptake
of radiocaesium by trees and understory species via roots
or mycelia. The above processes lead to redistribution of
radiocaesium within a forest ecosystem, eventually
forming a quasi-equilibrium steady state of the
radiocaesium activity concentrations in the tree and soil¡±.
There is a direct economic cost from this contamination as
mills in eastern Japan pay more for less contaminated logs
The additional costs were covered by TEPCO
compensation. The authors of the report say ¡°For
sustainable long-term production, remediation methods are
needed to produce wood that conforms to the standard
limits¡±.
See:
https://www-pub.iaea.org/MTCD/Publications/PDF/TE-1927web.pdf
and
https://www.iaea.org/publications/14751/environmental-transferof-radionuclides-in-japan-following-the-accident-at-thefukushima-daiichi-nuclear-power-plant
Imports of builders¡¯ woodwork
The value of Japan¡¯s imports of builders¡¯ woodwork
(HS441820, 441810 and 441871-79) declined in 2020 as
could be expected given the various restrictions on
businesses as a result of efforts to contain the spread of the
corona virus.
Compared to the value of imports in 2019 wooden door
imports in 2020 were down 18%. Imports of wooden
windows dropped 24% year on year in 2020 and the value
of imports of assembled wooden flooring dropped 20%.
The decline in year on year volumes of plywood fared a
little better dropping just 13% in 2020 compared to a year
earlier.
Looking at the data for the last two quarters of 2020 there
was an uptick in the value of wooden door imports in the
last quarter imports and a rise in the volume of plywood
imports but the final quarter of 2020 saw the value of
imports of wooden windows and assembled wooden
flooring decline.
The tables below show the main suppliers of wooden
doors windows and assembled flooring to Japan along
with the respective share of that product import values in
2019 and 2020. For all three products just a handful of
suppliers account for over 90% of imports by Japan and
the majority of these shippers are in Asia.
For wooden doors (HS441820) two countries, China and
the Philippines accounted for over 80% of the value of
Japan¡¯s wooden door imports in 2019 and 2020.
In the case of wooden windows (HS441810) China was
the main supplier in 2019 and 2020 with the Philippines
and the US accounting for most of the balance. In 2020
Vietnam emerged in the list of top 20 suppliers of wooden
windows for the first time.
Japan¡¯s imports of assembled wooden flooring
(HS441871-79 in 2019 and 2020 were dominated by
suppliers from China. Other longer term suppliers in SE
Asia such as Malaysia, Indonesia and Thailand had
growing competition from shippers in Vietnam.
Plywood imports
Malaysia and Indonesia are Japan¡¯s traditional suppliers of
plywood and companies in Japan have had long term
relationships with suppliers in both countries.
In the past plywood imports moved up and down
depending mainly on construction spending and house
building in Japan but remained at a steady pace over the
decade up to 2018/19 when supply issues arose especially
in Malaysia. This, along with government calls for
domestic forest resources to be better utilised, began to
impact the volumes of plywood imported.
The down trend in plywood imports started to appear in
2019 and was driven further down in 2020 under the
impact of measures to control the spread of the corona
virus.
Trade news from the Japan Lumber Reports (JLR)
The Japan Lumber Reports (JLR), a subscription trade
journal published every two weeks in English, is
generously allowing the ITTO Tropical Timber Market
Report to reproduce news on the Japanese market
precisely as it appears in the JLR.
For the JLR report please see:
https://jfpj.jp/japan_lumber_reports/
Demand projection for imported wood products in
2021
The Japan Foreign Timber General Supply and Demand
Liaison Conference made demand forecast of imported
wood products in 2021. Total is almost flat with 2020.
Total demand of imported logs and lumber is 7,310,000
cbms, 2% less than 2020.
South Sea hardwood logs would decrease largely while
logs from North America and New Zealand, lumber from
Russia and New Zealand would increase so softwood
becomes dominant products.
Assumption for 2021 is that housing starts would be
about
780,000-800,000 units, epidemic of COVID 19 would be
under control in the second half of 2021 and the Tokyo
Olympic Games would be held as scheduled.
Growth of housing starts get slower after the consumption
tax was raised to 10% in October 2019 and recovery of
wood demand is unlikely and also situation of supplying
regions continues giving no grounds of optimism. New
Zealand log prices keep climbing by active purchase by
China, North American log and lumber prices are record
high by booming housing starts and European wood prices
are escalating by busy North American market. Russian
log export is hopeless with increased export duty.
South Sea hardwood logs business is dying. Main log
supply source of PNG increased log export duty and the
last main user of tropical hardwood logs for plywood,
Daishin in Japan will close down for good in March 2021
so annual volume would be down to 20,000 cbms for
lumber manufacturing.
Prices of foreign wood products are likely to stay up high
and Japan needs to accept and if not, import volume would
decline and domestic wood is only alternative.
That the inventory dropped for six consecutive months.
Inventory of softwood plywood was 100,400 cbms, 4,900
cbms less than October. However, the shipment continues
less than the same month a year earlier so that the
manufacturers continue production curtailment to avoid
excessive supply.
Import plywood in October recovered over 180,000 cbms
but again November arrivals dropped down to 150,000
cbms. The supply from all the sources decreased.
Suppliers in South East Asian countries experience log
supply shortage and labor shortage so production increase
is difficult.
Ten big news in 2020
1. Pandemic of COVID 19
2. 10% decline of housing starts
3. Skyrocketing SPF lumber prices
4. Cancellation of major events and meetings
5. Drop of softwood plywood prices
6. Drop of domestic logs and lumber prices
7. Changing work style with remote work
8. Growth of builders of units built for sale
9. Decline of import of foreign logs
10. Withdrawal of Daishin Plywood, end of tropical
hardwood logs.
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