As another sign that Japan’s economy is heading in the right path, a Nikkei Newspaper survey revealed that average bonuses are expected to rise 2.78% this summer. This will be the first rise in three years and is the result of improved earnings at manufacturers. However, service industries are not faring as well yet.

On the face of it, the sharp rise in lumber prices over the past several weeks should be welcome news for Canada’s recession-battered forestry companies.

But industry players are not prepared to relax their cautious stance quite yet as they search for signs that a true recovery in the critical U.S. housing market – a major buyer of Canadian lumber – is taking hold.

For West Coast lumber giant Canfor Corp., indications of a sustainable recovery of the U.S. housing construction market are not, so far, apparent.

“We still really feel the price increases we have seen are supply-driven,” Canfor spokesman David Lefebvre said.

Prices have increased to reflect the reduced supply but there is no actual upswing in demand.

“The elements we’re looking at include housing starts and an increase in demand, but we’re not seeing that right now,” Mr. Lefebvre said.

The market remains volatile, said Russell Taylor, president of Vancouver-based consultancy International Wood Markets Group.

“In 2009, we hit prices we thought we would never see, at below cost, and housing starts at all-time lows. It was a brutal year. Now, all of a sudden, there is this kind of bubble,” he said. “These prices have no technical support and can only go down, but it will take several weeks.” Read More

The 2010 Vancouver Olympics is being called the most sustainable Games ever. The organizing committee has incorporated LEED standards into venue design and construction, developed a substantial carbon off-set program, and invested in the world’s biggest hydrogen powered bus fleet. But that’s not all. At these Olympics, you can go green and have fun at the same time by visiting Club Energy, a sustainable dance floor that produces energy as people dance.

Located in a tented venue not far from all the Olympic venues, the attraction is part of the Power Smart Village hosted by British Columbia Hydro. BC Hydro collaborated with Sustainable Dance Club, an organization based in Rotterdam, Holland to bring the innovative technology to downtown Vancouver. The organization attempts to inspire young people to live a more sustainable lifestyle by uniting energy saving products and fun.

Less than a week into the Games, it has generated over 8,000,000 watts — enough to power 80 houses for a day.Read More

image is from bchydro.com

Several cities exceeded expectations for housing starts in 2009.  Especially Edmonton saw more housing starts in fall and winter 2009 than CMHC forecasters expected. Only Greater Vancouver had fewer starts in 2009 than expected.

To view the January 2010 Western Canada Housing Market Tracker, click here.

While Japan was one of the first major economies to pull out of recession, many worried about the possibility of a double dip recession. The release of 2009 Q4 GDP figures that showed strong growth of 4.6% has relieved some of these concerns, at least for now.

On the positive side, some observers credited the growth to increased exports as well as the fact that corporate capital investment grew by 1%. This growth was attained despite a 1.6% drop in public works spending. Many people have feared that the new Japanese government’s move to eliminate wasteful construction projects would hit the economy hard. These results should give the government some breathing room to continue with its campaign against wasteful spending.

However, others point out that domestic demand has been propped up with the “eco-point” system offering financial incentives to people buying fuel efficient cars and energy saving appliances. It is feared that this program just pushed forward demand from consumers who were planning to make purchases anyway and thus once this stimulus is gone demand will fall off again. Economists are looking for signs that domestic demand is on a self-sustaining path before they are willing to say that Japan’s growth is firmly back on track.

As for the housing sector, spending was down 3.4% in Q4 which doesn’t sound great but is an improvement over the 7.8% drop in Q2. Overall, industry watchers are expecting growth in 2010 over last year especially in the single family home segment. Such an increase in spending on housing will help both cement Japan’s economic growth and of course benefit BC Wood exporters.

The Nikkei Newspaper has reported that it is expecting the Japanese government to raise its GDP growth forecast to the mid-1% level. In July, the government projected growth of 0.6% for the year. The improved growth forecast is being attributed to stronger recoveries in industrial production and exports. Stimulus spending is also seen as being a contributing factor.

A survey of leading economists conducted by the Nikkei Newspaper predicts that the Japanese economy will rebound by 1.4% in the April-June quarter. The majority of the respondents also suggested that the economy has bottomed out. However, they cautioned that the recovery won't last if the weakness in the US and European economies is long and drawn-out.

As the whole country is on holidays celebrating the start of 2009 with their families, all of the traditional hope for the new year is being tempered by worries about which way the economy will go. There are many big questions that are being discussed with the help of a lot of sake these days.

The one thing that seems to be certain is that the plight of Japan's temporary workers (hakken) is going to get worse. In fact, commentators are now starting to talk about this being the "2009 Problem."

While the recent weakness in exports has forced many Japanese manufacturers to not renew temporary workers' contracts, unemployment among hakken is expected to greatly increase in 2009 as a result of labour law changes made in 2006. The change basically extended the term a manufacturer could employ hakken from 1 year to 3 before having to decide whether or not to make them lifetime employees or let them go. The longer-term commitment and booming exports at the time encouraged many companies to greatly expand their use of hakken. 

With export markets in the US and Europe in the dumps, there is little incentive for manufacturers to turn these temporary workers into full-fledged employees. Undoubtedly many of them probably expected that they would be able to make the transition in 2009 but are now fearing for their futures. 

What does this mean? For one, it might be the beginning of the end for the hakken system. Younger workers who were open to non-lifetime employment positions in the past are already saying that they will not accept any hakken position now. The fallout from mass unemployment among hakken workers will also pressure the Japanese government to bring in new measures to encourage companies to hire people as full employees (as it was thought that employees with 3 years of experience and training would become to valuable to let go, the extension from 1 year to 3 years was actually also aimed at encouraging more lifetime employees).

Due to all of the volatility expected in the hakken labour market, increasing weakness can also be expected in the apartment markets that serve these workers. I have already mentioned that the termination of temporary workers' contracts will have an adverse effect on the construction of new 2×4 apartments. However, if this "2009 Problem" does result in the mass layoffs that some are now predicting, then the 2×4 apartment business model itself could be in for a very unhappy 2009.

By Jim Ivanoff

BC Wood Japan Office