B.C. softwood lumber and panel exports to Japan

(Softwood lumber, plywood, OSB, MDF and particleboard)

B.C. Position

  • 24% of all commodity wood product (lumber and panels) imports by volume
  • 38% of softwood lumber imports by volume
  • 4% of wood panel imports by volume

Export Sales

  • 2015: 2.3 million m3 of commodity wood products valued at $799 million (this represents the same amount of volume, but a 1.4% increase in value over the year before)
  • 2016 (through Aug): 1.5 million m3 valued at $500 million

Market Overview

Despite Prime Minister Shinzo Abe continuing to enact a platform of structural reform, fiscal stimulus and monetary easing, the Japanese economy slid into its fifth technical recession since 2008. Due to a slowdown observed in China, the lack of sustained confidence in trade prospects with its largest partner saw corporate Japan respond by limiting capital reinvestment. This corporate hoarding of profits, compounded by negative trade and market anxieties, contributed to a GDP growth of only 0.5%.

In response to these sustained economic circumstances, the Bank of Japan continued its quantitative easing program by increasing purchases of government bonds to $730 billion USD and continuing with negative interest rates for central bank deposits. Additionally, the scheduled consumption tax increase from 8% to 10% has been delayed until 2019.

Despite these economic conditions, residential starts rebounded 1.9% in 2015 to 909,299 units – the second highest level since 2009. In part spurred by favourable policy and incentives, wood units advanced at an even higher pace of 3% year over year, five-times the pace of non-wood starts (the largest multiple of the last 10 years).

Despite the upturn in housing starts, Japan’s demand for softwood lumber and wood panels both contracted in 2015. For softwood lumber, production and imports fell 5% and 4% respectively, which translated to 4% decreased consumption. While imports fell, it did not hinder B.C. exporters’ abilities to sell in Japan as shipments (per Statistics Canada) were up 2%.

Panel consumption declines were more severe than softwood lumber. Japanese producers were able to stem losses much more effectively, while foreign suppliers saw imports tumble 15%. 2015 also marked the first time in 10 years that Japanese domestic production of panels exceeded the volume of imports.

Imports of value-added wood products (VAWP) remained stable at $4.6 billion CAD in 2015. While VAWP trade has traditionally been driven by China, both the Philippines and Vietnam are becoming more significant import partners. This shifting dynamic follows Japan’s broader strategic direction in Asia as foreign direct investment (FDI) growth in both the Philippines (8.9%) and Vietnam (10.4%) has notably outpaced China (4.3%) over recent years.

Market Trends

Ageing demographic – Japan’s population is in decline and it has the world’s largest percentage of people over 65 (26%). The issue is compounded by problematic growth components including low fertility and low immigration rates. As young people and those of working age head to large city centres, the accumulation of vacant housing stock across the country continues to grow.

Surging tourism – Tourism in Japan has increase over 30% per year since 2011 and, in 2015, Japan attracted nearly 20 million tourists who spent a record $34 billion USD. Tourism has been driven by visitors from China (25%), South Korea (20%) and Taiwan (18%). The influx of tourists is good for the economy, but has brought challenges, stressing infrastructure and putting pressure on accommodation availability. Because wood currently holds an 18% share of the accommodations market, demand for wood in this segment has the potential to increase significantly.

Japan’s push toward timber self-sufficiency – Throughout the Abe government’s term, Japan’s domestic forest products sector has been supported by a forestry revitalization strategy underpinned by a goal of reaching 50% industrial wood selfsufficiency by 2020. Japan’s forest land base of 25 million hectares is expanding at a rate of 100 million m3 per year. The government also plans to provide $5 billion USD in timber harvest subsidies to overcome structural issues and improve economics to access more domestic fibre.

Increased wood use in non-residential buildings – Much like North America, the nonresidential and institutional construction markets hold great promise for increasing wood demand in Japan. To make inroads, legislation targeting specific building uses has been introduced and new construction solutions are being developed and tested to build higher while still meeting code requirements.