Japan Market Update – Japanese Government’s Wood Points System

Posted by Jim Ivanoff
June 6th, 2013

While Japan has long been a large and lucrative market for Canadian wood products, it is also a market in which we always have to be on the lookout for discriminatory trade policies. During the current fiscal year, Japan’s Ministry of Agriculture, Forestry, and Fisheries (MAFF) has prepared a budget of approximately $400 million to promote the use of domestic wood in both new home starts as well as renovation work. There have been similar schemes in the past, but in order to maintain WTO compliance, those gave equal status to certified imported wood. This does not seem to be the case with the current proposal so far, but it is possible that some positions may be reversed as overseas pressure is being applied on MAFF to make changes. The program allows for subsidies of Y300,000 per home to the end-users, which means there is enough budget this year for over 100,000 starts under it.

Main Issues with the Current Draft of the Program:

  • Over 50% of the structural wood must be domestic
    • At present, there is no equivalency for certified wood from overseas. In theory though, the remaining 49% could be imported.
  • Any imported wood used must be certified and come from a “growing forest.”
    • With the pine-beetle infestation, it will be questionable whether SPF will be viewed as coming from a “growing forest.”
  • 2×4 Housing was not originally included under this program.
    • This has now been softened so that 2×4 is also recognized as an eligible system along with post and beam and log homes. However, there is very little domestic Japanese dimension lumber available so it is seen as impossible to clear the 50%+ requirement for domestic wood.

The size and intent of this program is scaring everyone involved with imported lumber in Japan. If successful, this scheme could lead to a significant increase in Japan’s wood self-sufficiency. Having said that, even many post and beam companies using domestic wood believe that this system is unworkable in its current format. This is mainly due to the limited capacity of the domestic forest industry, so if MAFF does intend to build 100,000+ homes with this program, they will have to open it up to use imported wood as in the past.

Additionally, Japan is currently negotiating free trade agreements with both the EU and Canada while also taking part in the US led TPP talks. As a result, there is a lot of pressure from lumber supplying nations involved with these various talks and there is even talk of a WTO case being launched. It is quite possible that other Japanese ministries will also exert pressure on MAFF to make this program at the very least WTO compliant.

My personal opinion is that politicians are pushing this massive subsidy through this year as a final bone before Japan agrees to toughen conditions under the TPP that could cripple the domestic forest industry. Basically it is a big payout to keep the industry quite while the government negotiates the TPP. Japan wants free trade with the US for autos and other high-value sectors so something like forestry will likely be thrown under the bus to get it (pun intended). However, even if that is the logic behind this program, Canada must make some noise and fight against it as it has the potential to significantly harm our exports to Japan. BC Wood is in close consultations over this with our Canada Wood partners at COFI and the Canadian Embassy who together are taking the lead on this issue on behalf of the entire forest products industry.

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