Japan Infrastructure Report Q1 2008

The Japanese construction industry contributes over 6% to the nation's gross domestic product (GDP).

Strictly pursued delivery times and quality systems in Japan constitute benchmarks for the global construction industry. BMI forecasts the industry to touch US$333.21bn in 2008, contributing nearly 6.20% to GDP.

Housing construction has been a revenue source in Japan, primarily because of the low average lifespan of dwellings. But the Japanese economy is now been driven by the surge in demand for goods, including construction machinery, from China. There is some renewed interest in industrial construction, with players like Sharp, Canon, Suzuki Motor and Fanuc building manufacturing facilities in Japan. Major infrastructure projects currently on the anvil in Japan include high-speed magnetic trains connecting Tokyo and Nagoya; the 300m tall commercial building in Osaka, and the NAND flash memory plant at Yokkaichi. Conversion of old buildings for new uses is also a fast-growing trend in the Japanese construction industry.

The Japanese government is under pressure to trim its infrastructure spend. On the other hand, a regulatory labyrinth and over promotion of 'special interest groups' make it difficult for foreign construction players to compete in Japan. This is against the backdrop of slackening domestic demand.

Then again, a rapidly ageing population has serious implications for labour supply in the medium term, especially in the face a xenophobic aversion to the immigration option.

In the emerging situation, the Japanese construction industry is likely to post flat growth performance, with many players seeking projects overseas. BMI forecasts the construction industry to reach a value of US$328.23bn by 2012 and grow at an average rate of 1.40% during 2008-2012.