BMI View: Japan's enormous construction sector is facing numerous structural challenges. A lack of skilled labour and limited manpower means labour costs are rising and capacity to undertake large- scale projects is being eroded. The economy continues to stagnate, with annual GDP growth expected to linger at less than 1% annually over the next decade, and the maturity of the market means opportunities for major private investment are few and far between. That being said, the overall size of the market is a positive and some areas are recording growth, primarily transport infrastructure projects and residential construction. As such construction industry value will expand over the medium term (2016 to 2020), al though we continue to expect a recession longer term (2021-2025).
Latest Updates And Structural Trends
Residential and non-residential construction is the current bright spot, with a number of projects planned or under way. Work has started on the OH-1 development in Tokyo, which is being built by Mitsui Fudosan and involves the construction of two buildings totalling a floor area of 360,000sq m. The scheme, designed by Skidmore, Owings & Merrill, will feature office space, a luxury hotel, retail and cultural facilities as well as a landscaped public area. Work is slated to be completed in 2020.
Various transport infrastructure projects are also progressing. Expansion of Tokyo's metro system is one of the primary sources of growth, although investments are also taking place to expand airport capacity at several locations and modernise road networks. Less positive growth will be seen in the energy sector, although the upgrading of nuclear power plants is ongoing.
Japan's construction sector is expected to see growth of 1.6% in 2016 and will maintain a substantial 6% contribution to GDP. Growth will slow over the remainder of the forecast period, although we do note some upside risk from fiscal stimulus packages and ongoing attempts to reform the labour market and boost productivity.
|e/f = BMI estimate/forecast. Source: Cabinet Office, BMI|
|Construction industry value, JPYbn||29,627.81||30,206.87||31,037.56||31,984.20||32,910.33||33,867.46||34,856.67|
|Construction Industry Value, Real Growth, % y-o-y||-0.58||1.55||0.75||0.45||0.15||0.06||-0.03|
|Construction Industry Value, % of GDP||5.9||6.0||6.0||6.0||6.0||6.0||5.9|
Japan again maintains an infrastructure Risk/Reward Index of 61.9 out of 100 this quarter. In terms of regional performance, Japan is ranked seventh out of 21 countries assessed in Asia Pacific.
Although one of the largest in the world in value terms, Japan's infrastructure sector is expected to see only slow growth moving forward which limits the country's performance on the Rewards side.
Japan has a very strong Risks profile with excellent access to financing options and a high degree of policy continuity, making it a regional outperformer for this indicator.
|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.