Japan: Rough sailing ahead

12-04-2018

Shawn Lawlor, director of Canada Wood Japan, suggests that Japan’s economy may experience some speed bumps this year.

 

Although Japan has seen one of the longest periods of uninterrupted growth since the 1980s, recent indicators point to some rough sailing ahead, according to Shawn Lawlor, director of Canada Wood Japan.

Exports have posted 15 consecutive months of growth, registering a 1.8 per cent gain in February. From the beginning of January to the end of March, Japan’s Nikkei 225 equity index fell close to 14 per cent to the low 21,000 level. With the imposition of new U.S. tariffs on steel and aluminum there is growing concern Japanese exporters will be caught up in rising trade tensions. International trade uncertainty is also resulting in a strengthening of the Japanese yen from the 112 level to USD in January to the 105 level by late March, according to a blog post.

The Bank of Japan Governor Kuroda was re-elected for a second five-year term and is widely expected to keep in place his monetary easing policies. Yet after five years of aggressive monetary easing, Japan’s core consumer prices are only rising at about one per cent annually or half of the BOJ target. Economists also suggest that the BOJ stimulus programme may have already reached its limits in terms of effectiveness.

Housing starts

Total housing starts dropped 13.2 per cent to 66,358 units in January. In particular, non-wood construction fell significantly while wooden housing largely held its own. The mansion condominium starts fell 50.2 per cent, dragging down the non-wood starts average. Lawlor cautions against reading too much into this statistic as condo starts are notoriously volatile depending on the timing of when large projects start or stop. Wooden starts totaled 38,962 units, just 0.3 per cent behind last year’s pace. Single family owner occupied housing increased 0.1 per cent while rentals declined 10.8 per cent.

By building method, wooden housing broke down as follows. Post-and-beam starts fell 0.9 per cent to 29,459 units. Wooden pre-fab dropped 13.9 per cent to 910 units and total pre-fab declined seven per cent to 10,600 units. Platform frame starts gained 3.4 per cent to 8,593 units with the breakdown as follows: custom ordered single family homes increased 0.6 per cent to 2,274 units, rental apartments rose five per cent to 5,144 units and spec housing improved 3.6 per cent to 1,170 units.