BC Wood: Live from Japan

Premier Clark Announces 1st Canada-Tohoku Reconstruction Project in Miyagi

From May 13^th to 16^th Premier Christy Clark visited Japan to reinforce the importance of both trade relations and the friendship long enjoyed between BC and Japan. While she had many high-level meetings and important trade promotion events during her stay, her announcement of the first “Canada-Tohoku Reconstruction Project” was the most demonstrative of the depth of the relationship.

The tsunami of March 11^th, 2011 devastated the coast from Ibaraki to Aomori and has created a need to rebuild entire communities in many places. Together the governments of both BC and Canada along with the forest industry pledged to help in the rebuilding with a combined fund of $4.5 million. Since this initiative was announced last November by Minister Joe Oliver, BC Wood and its Canada Wood partners have reached out to the affected communities looking for projects that our industry could take up as a part of the massive reconstruction effort underway in the Tohoku Region.

The first project to be approved by the industry committee managing this humanitarian effort is the Yuriage Market in Natori City, Miyagi Prefecture. Before 3/11 this was the largest fish and farmers market in Tohoku attracting about 600,000 visitors a year. The tsunami not only washed away this crucial economic driver, but also destroyed the community around it. Despite the fact that 5 of the market vendors and 10 of their family members were killed in the tsunami, the association that manages the market on behalf of the city vowed to reopen Yuriage Market as quickly as possible in order to help bring both people and commerce back to what is now a barren landscape.

The city government and local 2x4 builder Selco Home together proposed to Canada Wood to rebuild the formerly concrete market with Canadian wood as well as incorporating a Canadian atmosphere. They hope that the new unique and attractive structures will help to quickly lure back customers and tourists to boost the shattered local economy. In this way, the market will become a centerpiece of Natori City’s revival as well as a symbol of Canada and Japan’s strong friendship. Additional projects will be announced in the coming months.

One Year from 3/11

Last week the BC Wood Japan Office once again organized a Canadian Pavilion on behalf of our wood products industry at the Nikkei Architectural and Construction Materials Show in Tokyo with eight member companies participating. We were very much looking forward to this show as it is one of the main venues for our promotional activities in Japan. However, it was on the final afternoon of last year’s Nikkei Show that the 9.0 magnitude earthquake wreaked havoc across northern Japan and for this reason there were many mixed emotions around the show this year.

Many of the participating BC Wood members also took part with us last year and thus experienced firsthand the violent shaking at Tokyo Big Sight and the resulting chaos in getting home. We all remember the horror we felt after reaching the relative safety of our hotel rooms and homes only to see on TV that the entire coastline north of Tokyo had been literally wiped out. Relief in the fact that Tokyo survived the earthquake and tsunami quickly turned to great fear as nuclear reactors began exploding and spewing radioactive material into the atmosphere. At the time it seemed like a never ending disaster. As we braced for aftershocks, we could only wonder what would happen next.

With TV crews from around the world flocking to Sendai, fear and despair was replaced by pride and respect as the people of Tohoku admirably worked together to survive the harsh conditions and begin the arduous process of rebuilding. There were no riots, only organized queues. People helped each other and the Japanese military moved in immediately to support them. The international community led by 35,000 American troops came rushing with shovels, heavy machinery, food, and blankets. Next, BC Wood with its members stood ready as the Japanese government turned its attention to building temporary housing for the thousands of homeless and emergency shipments of lumber and plywood began to flow.

Along with our Canada Wood partners, I made several trips to the worst hit areas. It was shocking to see the level of destruction first hand and to see the resolve of the local people in their desire to rebuild their towns. Mayors and other city officials who were lucky to survive the killer wave were working 16+ hour days to make sure that this would happen (most have not taken a single day off since last March). Despite the usual politicking in Tokyo, these towns were able to secure budgets to move their populations to higher ground and begin new communities. 

This year as the country marked the sorrow of March 11^th, 2011, many people wondered how these communities were fairing. The TV shows that I watched explained that the affected area has seen on average a 10% drop in population as young people left to find work in Tokyo and beyond. Many of those who have stayed so far are also looking to leave as the lack of substantial reconstruction so far has meant that there has been no revitalization of the local economies and thus very few jobs.

In fact, in the hard hit town of Minami-Sanrikucho only 10% of the neighbourhoods have been able to put together plans to move to higher ground and rebuild. However, as of this March 11^th, not even one such project has been started. Hopes of moving the first groups of people into their new homes by early 2013 seem impossible. People with the financial means are deciding not to wait and are buying homes in neighbouring towns unaffected by the tsunami. The future of towns like Minami-Sanrikucho seems almost as bleak now as it did one year ago. However, the message that those towns wanted to give on this dark anniversary was that they are not giving up.

On the floor of the Nikkei Show, you could also feel the energy of a country trying to move forward. Attendance was good and people were discussing real projects along with new business opportunities. Maybe things have not moved as quickly or as smoothly as had been hoped, but progress is being made on both the reconstruction and nuclear fronts as well as the economy overall.

Let us not forget, but let us move forward.

 

Labour Shortages in Japan

While many major economies around the world have been suffering high unemployment since the Lehman Shock, Japan has faired relatively well with rates in the range of 4.4% to 5.5%. The current rate in Japan is still around 4.5%, but within the construction industry many people are talking about labour shortages.

The shortages are being caused by reconstruction efforts in the Tohoku area coupled with strong demand from consumers across most of the country. The number of housing starts per year in Tohoku were not that large so as result there were not as many construction workers available there. In fact, due to weak demand before 3/11, many carpenters actually left to work in the Kanto region. Now that there is so much reconstruction work, these people are being called back while workers from other areas are also being recruited with the lure of higher wages.

This is leading to a domino effect where construction companies as far away as Kyushu are having to pay higher wages or risk losing their workers to Tohoku. This year the Sea of Japan side of the country has seen record snowfalls and the labour shortages are even hampering snow removal efforts. In places such as Aomori local communities in the past could count on construction workers and their dump trucks to help with cleaning roads. This year both the workers and the heavy equipment are working overtime in tsunami devastated areas.

The biggest concern to many industry people is that real reconstruction efforts have not even begun yet. Removing debris is still the main task, but this is expected to transition to full scale reconstruction as the summer approaches. Additionally, the Japanese government has announced its intentions to raise the consumption tax to 10% from 5% within a few years which means that many people considering to build new homes will push up their plans to avoid paying the extra tax. Full scale reconstruction in conjunction with increased demand will inevitably lead to even more pressure on the construction labour market.

This situation is very reminiscent of the period after the Kobe earthquake. Just as reconstruction of the city was in full swing, homebuyers were preparing for the consumption tax to be raised from 3% to 5% in 1997. This is leading people in the industry to predict a return to Kobe era trends such as bringing in carpenters from North America as well as a boom in imported housing packages.

 

Update on Niseko

This January’s cold snap has been blessing ski hills around the country with an abundance of snow after a slow start to the season. However, the Fukushima nuclear crisis still looms heavily over the prospects of resorts attracting foreign tourists. In fact, for 2011 the number of tourists coming to Japan fell 27.8%. Niseko has benefitted the most from inbound tourism over the past few years so it was safe to assume that it was also being hit the hardest by this steep decline in travellers. Therefore, I recently visited the area to find out what was happening and what the prospects were for a rebound.

The first thing that struck me driving around the area was the number of construction sites that seemed to be stopped. In meeting with local people I soon learned that developers quickly put the brakes on many projects after 3/11. However, unlike past boom and bust cycles the owners of these projects are now well financed professional developers. Therefore, they have both the capability to weather the tough short-term conditions and they also have the foresight to see that over the longer term the nuclear fears will dissipate and foreign tourists will return in large numbers. Everything that has made Niseko the most talked about ski resort in Asia is still there.

One positive outcome from the current downturn is that a central “village” may finally be built in the Hirafu area. Over the years many people involved with developments in the area told me that the shoddy shape of the main access to the Hirafu lifts and the lack of a Whistler type village area was holding Niseko back from reaching the next level as an international destination. Many of the old buildings lining the main road were owned by people waiting for the area to grow further but without the means to properly develop the properties themselves. It seems that several of them were persuaded by the bleak prospects last year to finally sell. Once that part of Niseko is redeveloped, the whole area will benefit greatly from it.

Another thing that seems to be changing is the attitude towards domestic travellers. One of the amazing aspects of the Niseko success story was how it could prosper while only catering to foreigners and completely ignoring the massive Tokyo market. Hokkaido was always seen as a clean and pristine area, but that image has been further reinforced by the fact that it was one of the few areas in Japan that was spared any fallout after the Fukushima explosions. By actively pursuing the Tokyo market, Niseko operators can not only fill more rooms now, they can also build a more diversified client based so that the area is less susceptible to future shocks from overseas.

While 2011 was a terrible year for Niseko developers and lodging operators, there is some optimism returning. Apparently the number of inquiries from Australia and ex-pats in Asia has been increasing recently. Hopefully the Japanese government’s declaration in December that the Fukushima plants have achieved cold shutdown will encourage the Chinese tourists to also comeback. At the very least, the Japanese government is looking positively at 2012 by aiming to attract over 9 million inbound tourists topping the previous record of 8.6 million. Let’s hope they are right!

 

BC Minister Thompson & Federal Minister Oliver Visit Japan

Recently the BC Wood Japan office welcomed some special guests to Japan: BC Minister of Forests, Lands and Natural Resource Operations Steve Thompson and the Federal Minister of Natural Resources Joe Oliver. Working with our Canada Wood partners in Japan we arranged visits for Minister Thompson to see a large concrete building using over 1000m3 of wood in finishing applications, a large importer of WRC products, a senior's home being built in 2x4, a pre-cut plant using hem-fir, the Tokyo Lumber Terminal, two temporary housing projects that were built with Canadian materials, and Sendai Port. Minister Oliver was also able to join some of these stops while also taking part in a customer appreciation dinner in Sendai for companies operating in the earthquake affected region.

The main event for the combined Ministerial Mission was a joint press conference in Tokyo to announce $4.5 million in funding to construct wood framed buildings in the tsunami devastated region of Tohoku as a part of Canada's earthquake relief efforts. As the location of the project and the type of facility to be built has yet to be decided, we took Minister Thompson to the coastal towns of Onagawa (90% destroyed) and Minami-Sanrikucho (95% destroyed). Meeting with the mayors and other officials the Minister was able to learn about the magnitude of the tsunami as well as scale of the human tragedy. One story that will be hard to forget was about how the Mayor of Minami-Sanrikucho and 9 colleagues survived by hanging on to a steel fence on the roof as the tsunami crashed over and submerged them.  Sadly the other 50 workers at city hall were not as lucky and perished in the deadly wave.

Town officials were overjoyed by the news of Canada's proposed donation and were quick to suggest ideas on the types of buildings that are needed. The Minister was also told that all of the homeless survivors were now in temporary housing units so the next major issue for this area is to rebuild their industries/economies. Until there are local employment opportunities, people will not be able to return to normal daily life. This is an important point that we will have to keep in mind as we review possible projects to be built with the Canadian donation.

Talking with both companies in Tohoku and other parts of Japan recently, it seems that the reconstruction efforts in the north are creating a shortage of carpenters across the country. The scarcity of workers and resulting higher labour costs are leading builders to look at importing wall panels as a part of house packages. The same phenomenon was seen after the Kobe earthquake with Japanese companies importing large numbers of house packages as well as North American carpenters. 

 

Tokyo Designers Week 2011

Once again BC Wood took some of Canada's top designers to Japan to display their latest pieces at Tokyo Designers Week. This year's contingent was made up by Judson Beaumont, Brent Comber, Marie Khouri, Mario Sabljak, and Martha Sturdy.

For the first time the show organizers gave us the highly prized location at the front of the main tent. For this reason, we developed a new open concept that replaced the walls between members with branded pillars acting as the anchor for each of the displays. It was a risky move, but as a group we decided that we needed a bold display that showcased a unified Canadian presence.

The decision proved to be correct as our space was always full and we received endless complements that our pavilion was the best at the show. Adding an additional element of excitement were the long lines of people waiting for Judson Beaumont to sign his drawings. It was surprising that we didn’t receive any complaints as the lines often snaked around neighbouring pavilions!

Over the past few we have held several receptions in collaboration with the Canadian Embassy to tie in our presence at Tokyo Designers Week with other Canadian companies selling design oriented consumer products in Japan. With our new open pavilion we decided to hold this event within our own space. While offsite talks and receptions are a great way to assemble industry people, this year’s format brought our guests into personal contact with the great work we had on display at the show. While a bit tight, this proved to be a very positive move. As always, we are also greatly appreciative of the Embassy’s support of our program.

Tokyo Designers Week is actually a large event held across Tokyo at many venues. We have always exhibited at the main venue, but this year we also took part in the Bamboo Expo which is a new event targeting only designers/architects working on commercial projects. With only 1200 attendees over three days it was much less “exciting” than the main venue, but what it lacked in quantity was made up in quality of the attendees. Also, the slower pace meant that we could have longer conversations with the attendees. As this was the first Bamboo Expo we expect that it will grow into a bigger and more influential event in the years to come.

One of our success stories from last year’s show was that a high-profile Tokyo gallery took an interest in Martha Sturdy’s work. This interest grew into them inviting Martha to hold her own art exhibition in their gallery during this year’s Tokyo Designers Week. The exhibition was very well received and some of the galleries clients are now looking to work with Martha. The gallery mainly represents European artists, but the great reception that Martha’s work received has made them to want to look at other Canadian designers as well.

Steve Jobs

Like most Apple fans, the news of Steve Jobs passing while expected was a shock. This is because we loved the products he brought us and respected him as the greatest business leader today. However, for me there was very much a personal benefit to his genius in making great devices that were so simple to use.

I bought my first Mac (Powerbook 5300cs) when I moved to Japan because English based Windows machines at the time could not use Japanese. I was grateful for this flexibility, but really learned of the Mac’s power when my mother decided she wanted to start using the Internet. She was over 70 and had never really used a computer before. I knew that with a constantly crashing PC she would give up on computers within a year, so I made sure she bought an iMac and told her to take a one-day Mac course. She has never looked back.

A few years later Apple brought out iChat and we began video chatting every weekend for free! I am really glad that my father was able to see his grandchildren so often this way before he passed away a few years ago. He got to see them grow and at least my elder daughter remembers him and still talks about him. I doubt this would be the case if it weren’t for my mom’s iMac.

Thanks for everything Steve!

Japan Home & Building Show 2011

For over 30 years the Japan Home & Building Show has been one of the most important events in marketing calendar of foreign companies selling into Japan. However, this year there were many challenges facing the event, some resulting from the 3/11 earthquake while others were self-inflicted.

Several years ago the show organizers decided to change the date of the 2011 show so as to time it with the planned UIA event at Tokyo Forum. I personally expressed my concerns over this numerous times as I have seen how such date changes have hurt other shows. Especially with the JHS’ long history, everyone expects it to take place in November. However, they believed that holding it in conjunction with the UIA event would inject new energy into the show.

These plans were greatly complicated by the March earthquake. By having bumped up the show, the organizers also bumped up the recruiting period of the show to late spring, which was still the dark period when no one knew what tomorrow would bring. As a result, purse strings were tightened and I am sure the JHS had trouble signing up exhibitors.

The earthquake and the nuclear disaster also worried the expected 10,000 overseas UIA attendees. In April there was even talk of cancelling the UIA event. However, they moved ahead with it as the situation in Fukushima gradually improved.

As we set-up for the show, I wondered and worried about how it would turn out. As feared, the attendance fell dramatically, from 87,000 to 43,000. Luckily though the quality of the visitors greatly increased as many more architects came to the show for the first time. This was undoubtedly due to the cross-marketing with the UIA event. We even received many overseas guests who came for the UIA event. Overall, even though the overall numbers were down, we felt just as busy as last year since the architects were spending more time with us asking questions about products.

The other thing that I had been wondering about was how much traffic we would receive related to reconstruction efforts in the Tohoku area. Over the three days we met with many builders, developers, and distributors from the earthquake/ tsunami affected areas and they seemed to be getting themselves prepared for the big reconstruction projects. I learned that developers from across the region and even other parts of Japan are buying up all the available elevated land near the coast for such projects. However, they are experiencing labour shortages and are thus looking at overseas suppliers that can help with packaged homes and other solutions.

Despite the drop in attendance I was very pleased with the results of the show. We were able to make a great number of new contacts including ones involved in the reconstruction efforts. This helps us prepare for the Nikkei Show next March where reconstruction projects will definitely be taking center stage.

Japanese Delegation to the 2011 GBM

Every year we bring a new group of buyers from Japan to BC Wood’s GBM in Whistler. To be honest, this year I was quite worried about who from Japan would be willing to travel overseas considering everything that has happened since the March 11^th earthquake. However, it turned out that there were many people that despite everything did not want to miss this opportunity to visit Canada and meet with potential suppliers. As a result, we have another great group of 24 Japanese industry professionals coming for the GBM.

The core of this year’s delegation is a group of nine interior design professionals. Through our participation in Tokyo Designers Week we have become quite close with Hiroko Machida who not only runs her own interior design schools (Machida Hiroko Academy), but is also credited with being one of the first to bring “imported housing” to Japan from North America. She personally wanted to attend this year’s GBM and then decided to organize a group of interior designers she is connected with to come with her. For this reason, our extended mission this year is going to focus on how wood is used in Canada both as a finishing material and structurally on buildings that would typically not be built in wood in Japan. Hiroko and her group are also excited to see new and innovative products when we get to Whistler.

The rest of our delegation is made up of a wide spectrum of companies spanning the Japanese housing industry including trading companies, WRC specialists, a sawmill, log home builders, import housing companies, as well as general building products importers. One new interesting member of our delegation is a company based in Japan that maintains all of its manufacturing facilities in China. They currently already use Canadian SPF, but are now looking for other lumber from Canada including hardwoods. Hopefully BC Wood members will be able to meet all of our Japanese guests in Whistler and I encourage you to stop me on the show floor if you would like a specific introduction.

 See you in Whistler!

 

Japanese Housing Starts Up Again in June

MLIT reported last week that housing starts were up 5.8% in June. This marks the third straight month of increases after the March 11^th earthquake. In April starts were up 0.3% and 6.4% in May. The June figures received a large boost from the condo sector as it was up 47.9%. Rental housing starts were up 4.6%. This was the first increase in nine months for rental units.

 

While shortages of plywood and other materials delayed construction across the country in March and April, the strong rebound since then indicates that there is still strong demand amongst consumers despite uncertainties in the overall economy resulting from the earthquake as well weak overseas markets. Some of this demand is being driven by the combination of historically low interest rates along with fears of a consumption tax increase as the Japanese government looks for ways to pay for reconstruction while also getting its deficit under control.

 

The government has not yet unveiled any specific plans or schedule for an increase, but there has been speculation that it could rise from the current 5% to anywhere from 8% to 15%. A significant jump would have a strong negative impact on housing starts, so some large home builders are already calling on the government to include at least a partial exemption on housing.

 

Aside from the tax hike fears, many industry people see the recent increases in starts as simply a recovery from the lows caused by the after-effects of the “Lehman Shock” in 2007. A recent report published by the Nomura Research Institute predicts that housing starts will continue to increase through 2015 and peak at 841,000 that year (in 2010 they were 813,126) . After that demographics combined with longer lasting homes will force starts to decline. However, even with such downward pressure, Nomura believes that starts will still be at the 785,000 level even in 2023.

Download Monthly Housing Starts June 2011