The extended New Year’s holiday is usually one of the happiest times of the year in Japan with families gathering to enjoy food and time together. This is one of the reasons why the January 1st Noto Earthquake in Ishikawa Prefecture was so devasting. Just as people were getting ready for a festive dinner, the 7.6 magnitude tremor collapsed buildings and ignited major fires. It also unleased a tsunami that reached shore within minutes and in some places stood at over 4 meters tall, bringing back painful memories from the Tohoku earthquake. Almost exactly a day later, this news was temporarily replaced by an explosive crash at Tokyo’s Haneda Airport. With this, hopeful expectations for the New Year seemed to disappear and many wondered what could possibly go wrong next. However, it is too soon to write-off Japan’s prospects for 2024.
While the earthquake will scar the region for a generation, the government’s quick response has won it praise and the fact that the number of deaths has remained lower than expected is a testament to tough lessons learned from previous disasters. Also, the miraculous safe evacuation of all passengers and crew from the JAL aircraft, despite the fact that the inferno rendered 5 of the 8 emergency exits unusable, showed both the best of Japanese corporate planning and training as well as the selflessness of the population to work together in times of crisis. Looked at it this way, these terrible tragedies can be seen as positive examples of Japanese resilience and overcoming.
With a weak Yen, inflation on the rise, and overall demand behind estimates, it would be easy to also write off 2024 economically with these disasters potentially derailing consumer sentiment further. However, this too needs to be looked at more deeply. It is true that the earthquake sent the Yen sliding temporarily, but in December when rumours broke about a shift in the Bank of Japan’s rate policy sent the Yen soaring, it was obvious that the market was looking to jump on the currency’s bandwagon at the first hint of an increase in rates. The Yen seems set to bounce back this year and the earthquake’s impact will fade. The Japanese stock market average has also been on a tear, crossing the 36,000 level for the first time since the bubble. In fact, many analysts see the Nikkei besting the all-time high later this year. This run-up started as the Yen was climbing and has continued after the earthquake. Investors obviously see strong prospects for the overall Japanese economy in 2024.
This time of year is filled with lumber industry receptions and company visits so I have been out talking with many builders and importers. While everyone is quick to cite the twin disasters to say that things are terrible, when asked about their businesses they reveal that demand started to come back in the fall and sales are improving. Even lumber inventories, which had remained stubbornly high, have returned to healthier levels. Growth in wages is also starting to finally follow inflation, which will bring consumers off the sidelines for big ticket purchases and foretells of a sustained recovery going forward. Barring any further major natural disasters, 2024 will likely end up as a much happier year economically than many would have assumed on January 2nd.
For information about market development opportunities in Japan including the March Nikkei Architectural and Construction Materials Show, please contact Jim Ivanoff at ivanoff@bcwood.jp.
