Wholly committed to developing products that draw out the charms and unique characteristics of wood, NODA corporation highly accredited wood fiberboard business has evolved into a comprehensive wooden building material supplier. We sit down with President Tsutomu Noda, who explains NODA’s past, present, and plans for the future.
The Japanese construction boom occurred more than 50 years ago, and today the Japanese construction industry is affected by three main trends. The first two trends are positive, while the other is negative. There is the rapid organisation of more vertical buildings being built and the need for maintenance of aging infrastructure. Nevertheless, with the decreasing population, we are seeing fewer new projects that are being built. Can you please tell us what your assessment of the Japanese construction industry is? How do you foresee it in the future?
There were inbound demands when the Olympic Games were just about to start. The investment for construction was very vigorous, and we tried so hard. We were almost done before the Olympics, but the Covid 19 pandemic started. In the next few years, it is difficult to see tourists coming into Japan and the investments of the construction industry will be stagnant.
Thinking about the future, we need to consider separately urban and rural situations. After Covid 19, it is expected that people will flood into urban areas both domestically and from abroad, which can point to some level of demand. On the other hand, there will be a decrease in rural areas.
I think that the gap between the urban and rural areas will be more pronounced, not only in the construction industry but also in more general domains. In that sense, it will be a great challenge for the national government to maintain the infrastructure in rural areas. We need to consider how to get the demand in urban areas for the benefit of our business.
From a more global perspective for construction and building, there are two main powers, Japan and China, which are competing to win different types of projects. As a company involved in that industry, can you please tell us how Japan is competing in the race to build the world?
When it comes to Japan competing in foreign markets, the environment is very difficult because of the uniqueness of Japanese construction. One of the characteristics of Japanese buildings is their impressive resistance to natural disasters. This shows that we need to satisfy very strict specifications. On that account, it is difficult for us to provide low-priced products, which puts us at a disadvantage in the competition.
Maybe, we Japanese are also too sensitive in all things, whereas others are only strict about some certain points. The Japanese mindset gives us the tendency to provide decent products in every respect. From an overseas point of view, it may be an over-engineered product.
Also, Japanese housing is a little bit unique because of our culture of taking our shoes off before entering a house. So that there are basically no flooring that you can walk with your shoes on. The quality standards or criteria are clearly unlike overseas flooring materials. I hear that in foreign countries, strong materials are favoured over wooden materials for flooring. It may be hard to make foreigners understand the strengths of Japanese products.
If we set some targets in the overseas market, I think it would be in Southeast Asian countries. In those countries there are some billionaires however not many middle-income class households. Our products may either be considered of good quality, but too expensive or not especially good. Since the Southeast Asian economies are now developing, the middle-income class can become the majority in the five years or so to come. If that time comes, we will have the chance to introduce our housing materials to those markets.
To help our readers know more about NODA Corporation by talking about your history. NODA was founded in 1902, and next year you will be celebrating your 120th anniversary. Can you please run us through the key milestones of your company?
Our company started as a Timber dealer. After that, through the lumber industry, we started to process those materials to add value, which we are continuing to do until now. We also made solid timbers for pillars and beams. Our company was founded in Shizuoka prefecture, a major producer of Japanese tangerines. We were then engaged in manufacturing wooden boxes for their produce.
In 1934, we have converted into the plywood business. At that time, the technology for plywood was introduced from overseas, and we considered it as a good opportunity to expand our business. We started to produce plywood as engineered wood.
The plywood business was initially for the domestic market but later expanded when the United Kingdom had an increased demand for plywood during World War II. They needed plywood to protect their windows from air raids; however, those European markets were lost after the war. On the contrary, when Japan needed plywood for rehabilitation and reconstruction just after the war, it became a major market, along with the United States. Back then, Japan had a limited number of products that could be exported to foreign countries in order to earn foreign currency; as a result, the Japanese government supported the plywood export. The foreign exchange rate was ¥ 360 per dollar, which shows that we were strong competitors.
Then the floating exchange rate system came out. In the US market, we lost our price competitiveness because of the revaluation of the Japanese yen against the dollar. Therefore, we are now focusing on the domestic market. If I remember correctly, our export to the US market ended in the early 1980s. Rather than just selling plywood, we wanted to add some value by adding some processing; we searched the methods to do so. This is the reason why we concentrate on housing materials.
At that time, we have started manufacturing the paper overlaid plywood (paper faced plywood). We pasted a sheet with an accent pattern on plywood to make it look more beautiful, and to be utilised for the interior wall. In addition to pasting the wood paper, we use technology to directly print on the boards to be used for interior decorative materials. At the same time, we also began to utilise scrap wood in our plywood factory or processing plant that led us to our fibreboard business.
We used to import plywood from abroad for other building materials. Nonetheless, because we wanted to manufacture our own, we built a plywood plant in Malaysia as a joint company. The factory that we set up in Indonesia produced and imported our solid wood for building materials, which was more cost-effective for us. It was a joint company that supplied to the high-end market in Japan. Those activities were in the late 1980s to 1990s. We invested in those foreign manufacturing plants for the Japanese market.
As I mentioned earlier, we currently have a series of interior materials like BINOIE, a wood interior brand. The source of our competitiveness is plywood or fibreboard. The new plywood factory in Japan was constructed with the aim of producing building materials. Also, we invested in a fibreboard manufacturer in Indonesia. That is our company’s history.
With the environmental challenges that we face today, the wood-making industry is under scrutiny. People continue to cut wood in the forest, and deforestation is becoming a real problem. One of the SDGs is aimed towards tackling wood-related problems. Can you explain to us how you have been able to create a sustainable wooden business?
Let me explain separately about plywood and fibreboard. In our domestic plants, almost all trees are Japanese wood. What kind of wood do we use?
Before explaining about our company, I would like you to know about the Japanese wood situation. Actually, Japan’s government strongly recommends wood companies to cut down the trees in forests because the number of trees that were planted after WWII is increasing at a fast rate. There are the trees that are 50 years old and older that should be cut down. About 75% of Japan’s surface area is covered by forests. The Conference of Parties (COP) has the initiative to cut down the old trees in order to plant new trees because younger trees absorb carbon dioxide as they grow. Japan’s forest cycle is now at the phase of planting new trees and utilising the old trees.
That is the basic information, and I will now discuss more about plywood. There are a lot of trees in the forest, but we leave the trees that are in very dense conditions and cannot be reached; these can hinder the growth of younger trees. In order to prevent this from happening, we need to decide carefully, which ones to leave or cut down.
However, if the thinning is appropriately done, the sunlight reaches, the trees grow, and the undergrowth grows, creating an environment where the next tree can grow. With regard to natural disasters, if we leave the natural forests as they are, the soil will have a lesser capacity to hold water. Recently, we had a landslide in the Atami area, but the cause is a little bit different from the forest management. Generally, landslides are an eventuality of leaving the natural forests as they are.
Thinning is very important to maintain the sound condition of forests. Nonetheless, there was no way to utilise the wood obtained from the thinning process so, it is not timely done. We are putting forth the effort to address this situation and working towards using the wood from thinning as a raw material of plywood through sophisticated methods and technologies. Through this, we are not only helping in the forests’ sound condition, but we also produce cost-effective and competitive plywood.
You mentioned that you have unique technologies in processing plywood that have enabled you to create a wide variety of innovative products, such as BINOIE in 2014. Do you have any upcoming products that you would like to showcase to us and our international readers? What are your bestselling products overseas?
Currently, I think there is something that we can introduce to potential users in other countries. We have barrier-free and elderly-oriented products that were designed for aging society. These products provide convenience and peace of mind for the elderly.
We also see the aging society in countries in North America, the US, and Europe, especially in Italy and France. Do you have a specific country that you want to introduce your unique technology?
That is a very difficult question. China is a target because it is evident that an aging society will become more pressing in the future as well as in Korea and Taiwan. Southeast Asian countries will be among our targets. On that note, the most important thing is price-competitiveness in exporting our products to those countries. We need to have partners, build a factory, or share our technologies in those regions. Whether we can establish partnerships in those areas is a very decisive point in expanding our business. As of now, we do not have such partners in any country.
When we interviewed the President of Oshika, a company that is in the same business, he mentioned that it is quite difficult for Japanese companies to tackle other countries, particularly with price competitiveness. Therefore, many find partners in terms of co-creation, blending Japanese and foreign know-how, and creating technologies that cater to the needs of the market. What know-how can you bring to any foreign partner? Are you looking to find any partners in China, Taiwan, or South Korea?
The basic idea for the development of the product is what barrier-free for elderly people is? What kind of product or solution is needed? Another thing is the technical support to manufacture those items and giving advice throughout the development process. There are seven NODA showrooms (Japan nationwide) that display barrier-free building materials.
Looking towards the future, what is your midterm strategy to continue your corporate growth? What goals would you like to have accomplished in the next midterm strategy?
Let me explain our domestic and foreign strategy. Domestically, we have a huge chance in front of us, and so far, the wooden construction is almost limited to ordinary houses. However, recently, the national government is changing its policy to utilise wood and forest resources for large-scale constructions. Thus, we can use wooden materials for housing and other products. We consider it as a major chance because the construction of office buildings, schools, gymnasiums, and other building facilities are now opened to us. Regarding the foreign market, we are thinking of converting our foreign factories, which have been producing products for the Japanese market to cater to the local market where the factories are. Since we predict that Indonesia will have big growth potential, I think we can supply moderate-quality building materials to them.
That is the basic direction, and if we consider the nearer future, there are two points. The first is the aging society, and the baby boomer generation represents the majority of the Japanese population. This group is almost reaching 75 years of age, and in near future more and more nursing facilities will be needed. The second point is the Covid 19 pandemic is causing the movement of people from urban to rural areas and from apartments to houses. I think that these will be business opportunities for us.
You are the sixth generation President of Noda Corporation, and in the distant future you will eventually retire and hand down the company to the seventh generation. When that happens, what objectives would you like to have achieved, and what legacy would you like to leave for the next generation?
Our corporate philosophy is to contribute to society by bringing the comfort of wood from the home to all sorts of spaces. We want to use wood as a sustainable material without destroying nature, rather, protecting it. This philosophy is common in Japan and foreign countries. Instead of just factoring in the numerical targets, I would like to hand over this philosophy to the next generation. I want to pass down the technology and human resources to realise our philosophy. Another thing is our relationship with our stakeholders that we have valued and nurtured for a long time. I have experienced two major crises during my 15 years in this company. At the time of the 2008 financial crisis (Lehman Shock), we faced a management crisis, and Eastern Japan’s great earthquake caused devastating damage to the plywood production base in Ishinomaki, our core subsidiary. My generation was helped by the genuine efforts of our employees and the support from our clients. It was not just me who built those meaningful relationships, but our predecessors as well. I want to share these lessons with our successors.