The Lumber Industry Cluster: A Comparative Study of Japan and Germany

ABSTRACT

The clustering of the lumber industry in Europe is continuing, and it is becoming an important pillar for supporting regional economies. Meanwhile, in Japan, despite being blessed with lumber resources consisting of two thirds of its total territory, domestic lumber supply is stuck in a continuing decline and the lumber industry that processes the timber is also becoming impoverished.

Logs are heavy, and by volume they are relatively cheap. Moreover, logs account for 70 percent of the total cost of cutting lumber. For these reasons, supply-chain management is the major source of competitiveness in the lumber industry. To this end, competitive advantage in the lumber industry can be found in industrial locations that are close to timber resources. Aside from Japan, there is no other country with imported lumber processing, a process where logs are imported and then cut and processed domestically. The reasons why this system was established in Japan lay in the cost disparity of domestic versus imported logs, and the fact that during the past greenwood period in lumbering, absolute competitive superiority came from cutting timber at the location of consumption.

There are three primary reasons for why Japan's lumbering industry has lost its competitiveness. First, the system of imported lumber processing has protected Japan's lumber industry from international competition, and as a result, there has been no pressure to improve productivity. Second, the stable, long-term provision of imported logs is not easy and the supply of domestic lumber resources is unstable, which has become a disincentive to consolidating the scale of supply. Third, there has been no pressure to encourage innovation from the housing industry side, as that industry also suffers from structural problems.

Since the latter half of the 1990s, lumber has shifted from a greenwood period to one of full-fledged drying. This shift has heralded the collapse of the absolute competitive superiority of cutting lumber at the location of consumption, and now the Japanese lumber industry has come face-to-face with the age of international competition. Without setting domestic lumber as a firm base, Japan's lumber industry will be unable to exercise competitive superiority. Thus, it is imperative for Japan to construct a system for stable lumber supply, and to consolidate the scale of supply in order to raise productivity.