Selective Cuttings

Japanese demand for lumber: reconstruction and government stimulus

January 17, 2013

Japan is Canada’s third largest export market for softwood lumber, after the U.S. and China, so interest in that market is high, especially in tracking how the rebuilding after the 2011 earthquake and tsunami progresses. 

Canada’s lumber exports to Japan have been quite flat over the past 2 years. From January to November 2012, lumber exports fell 2% compared to the same period of 2011, after a 1% increase from 2010 to 2011.

Monthly lumber exports to Japan

This chart shows the trend of soft wood lumber exports to Japan from November 2006 to November 2012. From January to November 2012, lumber exports fell 2% compared to the same period of 2011, after a 1% increase from 2010 to 2011.

As shown in the figure below, from January to November 2012, Japan’s wooden structure housing starts were 443,000, up just 4% compared to the same period in 2011. There were virtually no increases in 2011 over 2010. Rebuilding efforts from the tsunami are expected to add 85,000 housing starts over then next 2 years. This should provide a 12% increase to the housing starts figures over 2 years. While this has yet to materialize, the steady share of wooden structure housing starts among total housing starts in Japan is an encouraging signal that the long term prospects of the Japanese lumber import market will likely be more solid.

Japan’s housing starts

This chart shows the trend of housing starts of Japan from May 2004 to November 2012, including both wooden structure and non-wooden structure houses. Through November 2012, Japan’s wooden structure housing starts were 443,000, just up 4% compared to the same period in 2011, and there were virtually no increases between 2011 and 2010. Overtime, the share of wooden structure housing starts among total housing starts in Japan is stable.

To accelerate the reconstruction process and more importantly to revive the economy out of slump, Japan just announced a mammoth $227 billion economic stimulus package that is expected to boost Japan's gross domestic product 2% in fiscal 2013, and to create around 600,000 new jobs. Through this stimulus package, which is one of the largest in Japan’s history, coupled with easing monetary policies, wood products demand in Japan will also likely be increased. Given that Japan is a major buyer of Canada’s higher grade lumber, this could be a welcome boost to Canadian exporters.