Japan: February housing starts better than forecast

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Housing starts in Japan increased at a slower pace in February, marking the fourth month of reduced growth. Housing starts rose 3.0 percent in February 2013 compared to levels in the same month in 2012. Despite the decline in the pace of growth February figures were better than the expected 2% decline but worse than the 5.0% year on year rise in housing starts reported in January this year.

The better than expected numbers were the result of improved consumer sentiment, low interest rates and firm demand as home owners try to beat the planned sales tax increase due some time next year. Major house builders reported that orders in February rose over 16% compared to February 2012.

For the complete housing data see the Construction Research and Statistics Office Policy Bureau, Ministry of Land, Infrastructure, Transport and Tourism website at:
http://www.mlit.go.jp/toukeijouhou/chojou/stat-e.htm

Yen continues its slide against major currencies
On 8 April the yen fell to 99 to the US dollar, its lowest in almost four years. The steep drop in the value of the yen surprised markets and was driven by an immediate buying spree by the Bank of Japan (BoJ), sweeping up debt issued by the government. The BoJ began its debt buying on 8 April, purchasing almost US$16 billion in its first phase of its stimulus plan. This move by the BoJ will ensure that borrowing costs remain low.

The yen fell to new lows against major currencies in the first week of April almost testing the 100 yen to the US dollar mark. However, every fall in the value of the yen pushes up the cost of imported fuel and this poses a risk to domestic demand as almost all fuel is imported. Almost all nuclear power plants in Japan have been shut down for safety checks after the recent disaster.

When the yen 100 level is crossed analysts expect profit taking which could slow the depreciation of the yen but probably not for long. For a sustained weakening of the yen there would need to be decisive moves by Japanese institutional investors to start buying higher-yielding assets. A suggestion that this has begun is the yield on some European bonds which have fallen.

Business sentiment improves but less than expected
The Bank of Japan (BoJ) released its first quarter 2013 Tankan survey on 1 April. The Tankan is an economic survey of Japanese businesses used by the BoJ to decide monetary policy. The survey results are issued four times a year in April, July, October and mid-December. The survey reports views on prospects derived from around 10,000 companies with a specified minimum amount of capital, although firms deemed sufficiently influential may also be included.

The companies are asked about current business trends and conditions as well as their views on future investment and sales. Overall, business sentiment improved in the January to March quarter but the improvement was less than expected, highlighting the challenge facing the Japanese government as they try to revive economic growth. The index for big manufacturers remains negative but improved from minus 12 in December to minus 8 in the latest survey. A negative figure indicates that private sector pessimists outnumber optimists.

Analysts had forecast a substantial improvement in business sentiment amongst the large manufacturers anticipating an index improvement to -1 for the Jan-Mar quarter but the latest data suggest that even in the second quarter the pessimists will outnumber the optimists.

Weaker yena boost to exporters
The new government and the central bank have taken various steps to try and revive domestic demand and weaken the yen. Analysts say these moves helped improve company profit outlook for large sized businesses and boost sentiment. This is the first survey since the government and BoJ adopted aggressive policies to lift the economy out of recession. While these moves have helped business sentiment and the weaker yen is providing a boost to exporters business remain cautious.

The survey reports that large firms plan to reduce capital investment in the current financial year and this is interpreted by analysts as suggesting business leaders are yet to be convinced that domestic demand will improve or that the risk of external shocks has diminished.

Small companies yet to feel benefit of stimulus measures
For small manufacturers sentiment remains very negative. The small companies included in the survey anticipate an even larger reduction in capital investment than the larger companies. The slow pace of improvement in business conditions in the private sector reflects fears that the economic stimulus measures being proposed by the government and BoJ will be slow to arrive. Adding to the concerns of businesses is the unsettled global economic outlook and the continuing stain in Sino-Japanese relations.

The disappointing results of the Jan-Mar 2013 Tankan influenced the bold and unprecedented moves by the BoJ which, at its last meeting, announced further wide ranging monetary easing measures. If pessimism dominates the next Tankan it will be very difficult for the BoJ to achieve the 2 percent inflation target it has set as succeeding with this would require companies to increase investment and wage levels. Many analysts, including the previous BoJ governor say that stimulus measures alone will not end 15 years of deflation and that structural reform and deregulation must be addressed also.

Trade news from the Japan Lumber Reports (JLR)
The Japan Lumber Reports (JLR), a subscription trade journal published every two weeks in English, is generously allowing the ITTO Tropical Timber Market Report to extract and reproduce news on the Japanese market.

The JLR requires that ITTO reproduces newsworthy text exactly as it appears in their publication.
For the JLR report please see:
http://www.n-mokuzai.com/modules/general/index.php?id=7

Plywood supply in February
Total supply of plywood in February was 494,200 cubic metres, 3.1% more than the same month a year ago and 7.3% less than January. This is the first time that the supply dropped below 500,000 cubic metres in five months. This is due to decline of imported plywood by about 40,000 cubic metres. Imported plywood in February was 284,200 cubic metres, 2.0% more than February last year and 12.5% less than January. In particular, the volume from China dropped by 25,500 cubic metres from January, 32.1% less than January because of delayed shipments by Chinese New Year holidays.

Average monthly import volume for last twelve months is 293,300 cubic metres. Decline of import from Malaysia and Indonesia is result of log shortage in rainy season. Plywood suppliers in both countries reduce offer volume and meantime Japanese buyers reduce purchase volume due to high offer prices. Domestic production in February was 215,000 cubic metres, 4.6% more than February last year and 0.6% more than January, out of which softwood plywood was 197,200 cubic metres, 5.0% more and 1.0% more.

Monthly production volume exceeded 190,000 cubic metres for six consecutive months. The shipment of softwood plywood was 204,900 cubic metres, 30% more and 6.9% less. The monthly shipment volume exceeded 200,000 cubic metres for five straight months. The inventories are 127,600 cubic metres, 7,600 cubic metres less than the inventories at the end of January. This is the lowest since October 2011.

Domestic made softwood plywood has been moving well despite demand slow winter months so dealers had been making speculative purchase since late December but it finally simmered down in late March. Until the inventories dealers carry are digested, there won’t be much active purchase but total inventory level remains low. At the end of February, the softwood plywood inventories were 127,600 cubic metres, lower than monthly consumption of about 200,000 cubic metres and this is the lowest since October 2011 so the supply and demand balance will be held for some time.

The manufacturers eased stiff sales policy after speculative purchase was over. Current prices of JAS 12 mm 3x6 are 890-900 yen per sheet delivered, 40 yen up from March.1,790 yen on 24 mm 3x6, 90 yen up and 1,300-1,330 yen on 9 mm 3x10, 50-80 yen up. On imported plywood, speculative purchases were over and the market prices stay in high level. The prices shot up sharply since late January by rapid depreciation of the yen then the suppliers’ export prices also climbed because of log shortage and high log cost.

This induced speculative purchases by the dealers then delayed arrivals in late March eased tightness of supply. The market prices in Tokyo region are 1,080-1,100 yen on 3x6 JAS concrete forming, 30-100 yen up from March. 1,180-1,200 yen on JAS coated concrete forming, unchanged from March. 1,100 yen on structural 12 mm 3x6, same as March.

House builders flush with orders
Major house builders have ample orders in February. Low mortgage interest rate, recovery of stock market and gradual rise of property prices seem to stimulate housing demand. More people are visiting house exhibition sites and people think this is time to buy house. This is nothing to do with consumption tax increase in April next year so as long as economic recovery continues, housing demand seems to stay active even after the tax is raised.

Sekisui House had 8% more orders than the same month a year ago on detached unit and 40% more on rental unit then 23% more on units built for sale. 2% more on condominiums. Renovation orders increased by 38%. So overall a total of 20% increase for house business. Daiwa House’s units built for sale increased by 33% although orders on detached units decreased by 6%, the first decline after five months. 6% increase on multi family apartment type buildings then 5% increase of condominiums. Renovation orders are 20% up.

Sumitomo Forestry had 3% more orders on detached custom made house and the value was 5% more. Misawa Home’s detached unit orders are up by 12%. Also units built for sale increased sizably by 50%. Rental units are up by 7%. Mitsui Home’s orders on custom made house in February were 14% more in value. The increase continues for three month since last December. PanaHome’s orders on detached unit were 6% more in value, out of which custom made orders increased by 9% while units built for sale declined by 5%.

Japan’s furniture imports
Office furniture imports ( HS 9403.30)
February 2013 imports of office furniture totaled Yen 2.1. bil. down 19.8% from a month earlier. Imports from China in February were around half the level in January and the decline in imports from China and Indonesia accounts for almost all of the difference between January and February import levels. In February Chinese suppliers of office furniture to Japan accounted for 41% of total imports followed by Poland (18% up fro 10% in January) and Indonesia and Malaysia (jointly accounting for 15% of imports by Japan.

The top seven suppliers accounted for 80% of all office furniture imports. The main suppliers to Japan were in descending order China, Poland, Taiwan P.o.C, Malaysia, Portugal, Indonesia and Italy.

Office furniture imports (HS 9403.30)

  Imports Feb-13 Yen 1,000 Imports Jan-13 Yen 1,000
S. Korea 8900 3193
China 68133 141665
Taiwan P.o.C. 20672 14228
Thailand 1912 1642
Malaysia 13715 9617
Indonesia 10950 14787
Sweden - 3983
Denmark 2310 2148
UK 8903 0
Belgium - 210
France 1977 385
Germany 7872 7641
Switzerland - 935
Portugal 11265 9790
Italy 10272 9547
Poland 30263 26181
Austria 1357 0
Lithuanian 1751 2871
Czech Rep. 474 293
Slovakia 3131 8197
USA 2700 292
total 206557 257605

Source: Minisy of Finance Japan

Kitchen furniture imports (HS 9403.40)
Kitchen furniture imports are the second largest segment of all wooden furniture imports into Japan after bedroom furniture.

In February 2013 kitchen furniture imports totaled Yen 111.4 bil. an increase of around 6% on levels in January 2013. The top five suppliers in terms of the value of imports in February 2013 accounted for 89% of all imports of kitchen furniture. The top suppliers were Vietnam (34%), Indonesia (20%), China (16%) Philippines (15%), and Malaysia from which imports doubled in February. Japan’s imports of kitchen furniture from China and Malaysia increased in February but imports from Vietnam feel around 7% from Yen 4.2 bil. in January to Yen 3.9 bil. in February.

Kitchen furniture imports (HS 9403.40)   

  Imports Feb-13 Yen 1,000 Impots Jan-13 Yen 1,000
China 179997 135223
Taiwan P.o.C. 829 1896
Vietnam 391415 423976
Thailand 22583 12606
Malaysia 52651 27110
Philippines 168673 161053
Indonesia 225985 217742
Sweden 305 0
UK 1193 0
Belgium 0 220
Germany 43214 36004
Spain 593 0
Italy 19574 5566
Lithuania 261 2116
Canada 8352 4035
USA 24893 47596
Argentina 367 0
total 1140885 1075143

Source: Minisy of Finance Japan

Bedroom furniture (HS 9403.50)
The value of Japan's bedroom furniture imports in February 2013 fell 9% from a month earlier, from Yen 17.6 bil. to Yen 16.0 bil. As in January this year the top five suppliers accounted for just over 93% of all imports of bedroom furniture with the largest supplier being China (57%) followed by Vietnam (26%), Malaysia (10%), Thailand (4%) and Indonesia (3%).

Bedroom furniture (HS 9403.50)

  Imports Feb-13 Yen 1,000 Impots Jan-13 Yen 1,000
S Korea 1600 0
China 841417 1043248
Taiwan P.o.C. 27177 19078
Vietnam 382555 381574
Thailand 59131 44550
Singapore 0 905
Malaysia 149431 150178
Philippines 4049 2473
Indonesia 47139 24293
India 425 0
Sweden 6018 16006
Denmark 326 1846
UK 0 270
France 827 3798
Germany 237 1474
Spain 1661 0
Italy 11573 16081
Finland 6900 0
Poland 15071 24346
Austria 0 652
Romania 932 1795
Turkey 0 911
Bosnia 347 429
Slovakia 11673 17802
USA 28062 11996
Total 1596551 1763705

Source: Minisy of Finance Japan

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