Creating new value through diverse businesses and their synergies, and contributing to the realization of a sustainable and prosperous society is the goal of Toyo Group.
Japan’s last construction boom was more than 50 years ago, prior to the 1964 Olympics, and as a result, many buildings and infrastructure require maintenance. What is your take on the current state of the Japanese construction market and how do you expect it to change?
Since the construction bubble burst, there was the Great East Japan Earthquake 11 years ago, and more recently, various building developments were taking place, mainly in the Tokyo metropolitan area, in preparation for the Tokyo Olympics.
From those perspectives, there has been a great demand for the rebuilding or reconstruction of existing buildings. Adding to that has been the Covid-19 pandemic, causing temporary stops on different construction projects with workers not being able to get back to construction sites, so we did see a slight decline in the market.
However, to offset that, we are seeing a great boom in terms of investment which is directed primarily at apartment housing in particular, and various types of apartment housing complexes. Apart from that, you can also see an increase in urbanization and population density where people are searching for locations that are close to stations that provide transportation, and these strategically key areas are starting to see more and more reconstruction projects to renew and redevelop those areas.
There is also a demand for redevelopment to improve the strength, durability, seismic and disaster resistance of buildings. In a way, we believe that buildings that were previously built to old standards will increasingly be reconstructed to meet the new standards for earthquake and disaster resistance set by the government.
In the past, the main trend was to demolish old buildings and rebuild them, but now there is a move towards renewal, renovation and maintenance, and demand for this is also growing.
In addition, I believe that when we look at public demand in terms of infrastructure requirements for things like water, sewage, bridges and roadways, there's a constant need not just for maintenance of existing structures, but for their improvement also, particularly in major cities like Tokyo and Osaka.
There is also a desire to create solid urban environments that are also attractive to international travelers and foreign investors. This will help to strengthen the construction and real estate sector. I also believe that to become highly attractive to overseas investors and to really be able to attract more foreign investment, what is important is to become more transparent and be able to ensure that information about our technologies, the quality of our services and the materials we use is properly conveyed to your overseas readers.
By doing that, we can properly promote that in the long term, we are definitely cost effective. Secondly, what's important is for more companies in the construction sector, including ours, to strengthen recruitment of overseas staff so that we can really be able to fulfill these objectives and in doing so, strengthen the construction sector.
Your business can be divided to four main divisions. You have your construction business where you plan construction and offer maintenance services for both public and private projects. Your real estate business offers rental management and brokerage services. There is also the renewable energy and agriculture businesses. Which division is your main focus domestically and which one has the most potential for overseas markets?
All of them, but when we really consider how to combat the climate crisis and how to contribute to the various goals set by the government, it’s really our renewable energy business that's key.
According to the former Suga administration, Japan needs to be carbon neutral by the year 2050. What are the key technologies that Japanese construction firms are adopting to reach these carbon neutral targets?
When we consider Japanese goals towards de-carbonization, what's really important is to ensure a balancing of the various sources of energy to make them more effective. That way, you can enhance the stability of the supply of these various renewable energy sources for Japan, including solar, fuel cells and batteries.
Being able to balance out the demand for each of these energy sources to ensure a steady supply of energy will also contribute to cutting CO2 emissions. This is an increasingly important objective for the Japanese sector. Also, with regards to agricultural related industries, there’s a huge burden on the environment, and we’re striving to improve and make that more optimal.
The key to our business is our highly regarded methane fermentation gasification power plant, a proprietary technology that contributes to CO2 reduction, and related technologies such as the generation of agricultural fertilisers as a by-product. Renewable energy is one of our key initiatives, as it can ultimately be used not only in power plants but also in the automotive sector.
When it comes to the housing construction and building construction how to really contribute to the kinds of buildings that reduce carbon emissions - low carbon emitting buildings – what is important is to slowly move away from concrete and steel structures and move in the direction of more wooden materials.
Our company has a very rich and successful track record in creating large wooden structures in Japan. We hope to utilize that know-how and the technology that we have in order to contribute greatly and push towards wooden materials being used more in the construction sector.
Front: "Toyo Biomethane Gas Power Plant", a methane fermentation gasification power plant that also produces agricultural fertiliser.
Back: Vinyl greenhouses with automatic control of the environment suitable for crops, 'Toyo Yabu Farm'.
With regard to DX, it is possible to make manufacturing and construction operations more efficient, accurate and less wasteful. By doing so, we can realise an optimal construction style and reduce CO2 emissions.
In fact, both my hometown and the roots of this company are in Hamadori, Fukushima Prefecture - an area that became a symbol of recovery after the 2011 Great East Japan Earthquake.
It was the only prefecture to experience the hardship of a nuclear power plant explosion in the aftermath of the Great East Japan Earthquake, and it became the only prefecture which proclaims to achieve a full recovery through renewable energy.
Namie-cho has independently declared itself Carbon 0 by 2030. Through our renewable energy business, we want to contribute to Namie-cho's carbon zero in Fukushima Prefecture.
Right now, we are supporting agriculture in Minami Soma City through solar sharing, crops are grown under 11 megawatts of solar panels which is thought to be one of the largest in Japan. The crops there are harvested from a special ginger plant called myoga. It is a type of plant used as a condiment in Japanese cooking along with spring onions. This makes Fukushima Prefecture the third largest producer of myoga in the country.
Mega solar power plant, 'Minami Soma Power Plant'.
Can you tell us more about your R&D strategy when it comes to your smart agriculture business? Are there any products that you are working on that you would like to share with our international readers?
Research and development of smart agri-culture is being carried out with Tsukuba University. We have also developed our own automatic navigation machine to detect and measure defective products and diseases.
This automatic navigational camera is an image recognition model, which is learnt by AI, and demonstration tests have been completed in multi-stage hydroponic cultivation, achieving more than 98% accuracy in determining poor growth, more than 97% accuracy in determining disease outbreaks and more than 80% accuracy in predicting harvest time.
By utilising AI, technology can be developed to automate processes that have until now been carried out by farmers using their senses, enabling them to create the optimum environment required for agricultural products. Examples include opening and closing greenhouse windows and adjusting temperature and humidity. All of these processes could be automated.
We utilize drone technology to do all of the image processing which helps to roll out this process. This technology has been demonstrated to be successful here in Japan, but that doesn't mean it's only for domestic purposes. Our technology is even able to inspect and analyze, through image processing, plants that may be shaking in the wind or are located in areas where it is quite difficult to get a precise image. This is something that could be highly effective in areas where wheat is grown, for example.
What role does collaboration or co-creation play in your business model and are you currently looking for partners either in Japan or overseas?
As for co-creation with Tsukuba University, we originally had a professor who works with foreign countries, and together we have been researching how to produce tasty, growable and high-quality agricultural products in regions such as Vietnam and Indonesia, where the climate is not always optimal, such as hot and humid environments.
The aim was to establish techniques and enable farmers to deploy them in a variety of harsh climates and environments without having to rely on their own intuition. We believe this has the potential to contribute to different regions abroad, which are not always the best environments for crop growth.
In which field do you believe that you have the most potential to contribute with your unique technology, and what added value can you bring?
In a nutshell, we believe that the technology we have can contribute to many different fields. Right now, the introduction of DX and IT in the construction sector seems to be lagging behind, but it is very important to move forward. I am sure that our technology can help to strengthen and enhance such fields.
Also, in the field of agriculture, our technology is being used in the development of our AI and the DX of agriculture. The use of such AI and related technologies is not only for image inspection and image processing, but also for analysing and proposing appropriate solutions and instructions for optimum effectiveness and results. We believe that such technologies are very effective in a wide variety of applications in a wide range of fields and that there are opportunities for co-creation in many different areas.
You established Toyo International in Vietnam in 2019 and also worked on a hydropower plant in Indonesia that same year. Moving forward, which countries or regions have you identified for further expansion, and what strategies will you employ to tap into those markets?
In fact, our first overseas foray was in Taiwan. There, we created a company with trading company functions, dealing with various materials related to energy, such as photovoltaic power generation, and imported these materials to the Japanese market.
Then we went to Qingdao, China. There, we developed our business with the aim of selling cut vegetables in Japan. Ordinary cut vegetables have a short shelf life of two to three days, but we invested in technology to extend this to 21 days. Currently, we are sharing the technology locally and have started developing vegetable products with an even longer shelf life, and the new product that has been created is under-boiled vegetables. In collaboration with a new vegetable processing company in China, we are now producing under-boiled vegetable products with a shelf life of 150 days. Imported under-boiled vegetable products are supplied to a wide range of customers in Japan, including delicatessen factories, lunchbox companies, restaurants and food service companies.
In terms of our hydropower plant in Indonesia, now it is fully functional and producing 12 megawatts of energy. Currently, discussions are underway to consider out a second plant and create more projects within Indonesia in this sector, and we're looking forward to that growth.
In recent years, Toyo International Company has been established in Vietnam and has been involved in the construction of factories of local companies and various facilities mainly for Japanese companies as a general construction business, making use of the experience and know-how gained in Japan. The company has recently obtained a certificate of construction activity capability Grade -2 and is expanding the scope of its work.
Is there any specific country or region that you would like to tackle in the future? How would you approach it - joint ventures, mergers or partnerships etc?
In Vietnam, apart from our Toyo International Company, we actually have a real estate management company, ASAHI JAPAN – INVESTMENT & PROPERTIES MANAGEMENT SERVICE JOINT STOCK COMPANY, which is currently managing real estate of some 7000 units.
What we are looking to do in Vietnam is attract more Japanese investors there by having these types of services, and we are also targeting local Vietnamese companies that may want to utilize these services.
Other MOU contracts were signed in Hanoi in 2018 to accept 1,500 tonnes per day of food waste and generate electricity through methane fermentation. Due to the pandemic, this project has stalled, but we hope to resume it in the future so that the project can continue.
In the Philippines, we actually met with the Mayor of Manila, and also with the mayor of the city of Baguio. In the Southeast Asian region, waste management is still often done through landfill. We are looking to help them reduce their environmental impact by utilizing our methane process.
In terms of co-creation partners, we definitely are looking at how to strengthen our presence in the renewable energy sector and how we can tie up with various companies or partners in different areas within Southeast Asia, with a particular view to rolling out our bio-methane field production through M&As and other types of tie-ups.
We believe that our AI based smart agriculture technologies are able to create optimal environments, and this kind of technology will be very useful for overseas partners. As a result, we are looking for interesting tie ups and partnerships in that region too.
Let's say we come back to interview you again in four years' time for the company’s 55th anniversary. What would you like to tell us about your goals and dreams for the company in that timeframe, and what would you like to have achieved by then?
By our 55th anniversary, I really hope that Toyo Group will have expanded more overseas, our international presence will have been strengthened and that we will have more projects and footholds in different parts of the world. I think international expansion is where I want to put the most effort going forward.