BMI View: The sluggish growth in construction and infrastructure growth in Japan is a sign the government's aggressive stimulus measures have already begun to wear off. This again underscores our long-held view that Japan's fiscal stimulus programme is not sustainable for the infrastructure sector and significant structural reforms are needed to restore competitiveness. To this end, a new market on the Tokyo Stock Exchange for infrastructure funds has the potential to boost private participation in the industry, while simultaneously taking pressure of f government expenditure. Minimal construction industry growth is expected over the coming five years, followed by industry contraction to 2025.
Latest Updates And Structural Trends
Japan's construction industry growth will remain extremely weak, albeit positive, over the coming five years. The country's economic stimulus measures are not sustainable over the long term and will need to be accompanied with structural reforms to have positive long-term effects. At the time of writing we even expect the industry to contract from 2021 onwards.
Transport infrastructure growth will be weak, albeit will remain in positive territory throughout our forecast period, averaging a yearly 0.9% growth rate over our 10 year forecast period. Within the different sub-sectors of the transport infrastructure indicator, the roads and bridges infrastructure and the railway sub-sectors will drive growth. High speed rail projects will lead transport sector investments.
We highlight growth in the residential and non-residential buildings sector will be driven by the continuing reconstruction of Miyagi, Iwate and Fukushima Prefectures, following the March 2011 earthquake and tsunami. It is our view a significant amount of the reconstruction work is still uncompleted as of early 2016. Housing starts have been on an uptrend since February, growing 2.8% y-o-y over 9M15, with interest in the country's property market buoyed by the Olympics.
We see opportunities in coal-fired power plants in the Japanese energy infrastructure sector, with the segment supported by lower costs and easing regulations. Gas will continue to provide opportunities as it will be required to make up for the reduced nuclear output throughout the forecast period.
The outlook for a progressive return of nuclear energy in Japan will create opportunities for equipment manufacturers and EPC (engineering, procurement, construction) contractors operating in Japan.
|e/f = BMI estimate/forecast. Source: Cabinet Office, BMI|
|Construction industry value, JPYbn||30,339.04||30,570.36||31,411.05||32,369.09||33,305.48||34,273.30||35,273.65|
|Construction Industry Value, Real Growth, % y-o-y||0.82||-0.84||0.40||0.45||0.14||0.06||-0.03|
|Construction Industry Value, % of GDP||6.1||6.0||6.0||5.9||5.9||5.9||5.8|
Japan maintained its RRI score of 61.9 in 2116, coming in 6 th position out of 17 countries in Asia.
Deterioration in the country's business environment due to rising construction costs indicates some downside to the country's Rewards score.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Japan Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Japan Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the Japanese infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Japan to test other views - a key input for successful budgetary and planning in the Japanese infrastructure market.
- Target business opportunities and risks in the Japanese infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Japan.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.