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Messages from Keidanren Executives and Contributed articles to Keidanren Journals November, 2019 Revitalizing the Regional Economy from the Demand Side

Shuzo SUMI Vice Chair, Keidanren
Senior Executive Advisor, Tokio Marine & Nichido Fire Insurance Co., Ltd.

Vitalization of regional economies is essential for Japan's economic health. Through my visits to various regions, I came to realize the decline of regional economies can lead to the loss of soundness of the whole society.

Every time I saw poorly maintained forests, I was aspired to include regeneration of Japan's forest resources, which cover nearly 70% of the land, in regional revitalization as one of the pillars. Yet the voices of the people in forestry were not optimistic. They stressed revitalization was hopeless without the support of subsidies due to "(the difficulty working with) steep mountains," "devastated forest roads," "cost of cutting," "price difference between domestic and foreign timber," and "lack of young workers in forestry," etc.

In Japan's attempt to diversify and reorganize the agriculture sector, we saw great products failing one after another for being short of meeting the market's demand. Should this be the case, conversely, I thought of generating production reform from the demand side. Forest product companies may be incentivized to reform the current practice on their own should they recognize potentially strong demand for domestic timber. Unless producers themselves take such initiatives, the production side will never change regardless of how much subsidies are poured into forestry.

Creating massive demand for domestic timber.
To achieve this, simply using timber in public buildings such as city halls and schools will fall short; given private demand is the largest, there is no alternative solution but to construct privately-owned, mid- and high-rise office buildings with timber. In Europe, private-sector timber offices are on the rise, and moreover, there are plans to construct timber skyscrapers. This has been made possible by technological progress in laminated timber (including Cross Laminated Timber (CLT)), which is made by bonding together layers (laminates) of timber. However, unfortunately, most people in Japan do not know about this.

Despite Japan having the world's oldest wooden architectures, wood is commonly perceived in Japan as combustible, breakable, costly, and not earthquake-resistant, and most people in Japan "have never thought of constructing high-rise building with timber." I want to break this "social myth" and raise awareness that timber has become as good material as steel reinforced concrete in terms of strength, fire resistance, durability, and cost. I hope through construction of mid- and high-rise timber buildings in Japan, the demand of domestic timber will increase, leading to regeneration of forestry, more jobs for young workers, and as a result, vitalization of the regional economy.

Recently, the construction for the 12-story timber commercial complex in Ginza 8-chome has finally begun. Word is that there are also construction plans of apartment and nursing home made of timber. To corporate managers who order construction of their buildings, I sincerely recommend them to consider timber as one of their options.

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