Construction Sector Growing In Strength Over The Near-Term
BMI View: Japan's construction sector continues to grow from strength to strength and we believe this could continue over the near term due to several factors - namely the stimulus package announced in January 2013, renewed demand for Japanese real estate, the growing use of thermal generation for electricity, the LDP's recent success in the Upper House elections, and Tokyo's successful bid to host the 2020 summer Olympics. However, it still remains to be seen whether the Japanese government will be able to overcome its fiscal problems and carry out the necessary reforms that could lift long-term construction demand. At present, we have seen some progress in implementing reforms specific to the infrastructure sector.
Japan's construction sector is performing well. Latest estimates from the Ministry of Economy Trade and Industry showed that monthly value-added construction activity grew by 13.3% year-on-year (y-o-y) in September 2013, the highest monthly growth rate in a decade. We believe this indicates that the economic stimulus package approved by the Liberal Democratic Party (LDP) on January 11 2013 is providing strong impetus in spurring reconstruction and infrastructure activity in the country.
Indeed, construction activity looks set to grow from strength to strength as several factors are generating a huge number of construction orders for Japan's largest construction companies. These factors are the stimulus package, renewed demand for Japanese real estate, the growing use of thermal generation for electricity, the potential for policy formation and execution in Japan following LDP's success in the Upper House elections, and the announcement of Tokyo's successful bid to host the 2020 summer Olympics in September 2013 ( see 'Reforms Not Guaranteed Despite Greater Policy Execution', September 1 2013, '2020 Olympics: Initial Euphoria Will Not Overcome Structural Risks', September 26 2013, and 'New Thermal Plants Indicate Gravity Of Nuclear Woes', October 30 2013).
|On The Ascent|
|Japan - Monthly Estimate Of Value-Added Construction Activity, Seasonally Adjusted, (Base Year 2005 = 100)|