A surge in the yen, following the Brexit effects, has caused serious trouble regarding millions of hectares of prized Japanese forest.
There is an ongoing oversupply crisis in the domestic Japanese lumber industry, which has attracted a “promotion of wood” act of parliament in 2010 and construction code deregulation in 2014, as reported by Financial Times.
The issue caused by the oversupply puts a heavy mark on the future of construction and the currency markets in Japan. Several types of domestic Japanese timber are affected, but it particularly important for hinoki (Japanese cypress).
After the Second World War, all of the forests that hadn’t been destroyed had to meet the demand for the reconstruction boom in Japan. So the country invested in planting sugi (cedar) and hinoki (a higher-quality lumber). As to protect the forests in these last 70 years, Japan slashed tariffs on the imported wood, so the domestic forestry reserves grew dramatically.
Thus, the hinoki matured in 2016, just when the yen reached multiyear highs against the dollar, euro and a variety of Asian currencies. Yet, the hinoki market isn’t as strong as expected, even if the government enforced building projects to use wood panelling or flooring. In Japan, ageing demographics and long years of sluggish growth have depressed demand for wood, especially the more expensive varieties, according to Financial Times.
“Finally, 70 years after we planted, it is time to harvest. Our biggest problem, the country’s biggest problem, is how to utilize the timber,” said Akira Ichikawa, president of Sumitomo Forestry.
A solution to the problem would be to export the hinoki to wealthier countries, but it would mean a blow to the strong yen.
