Fukamatsu’s comprehensive solutions in civil engineering
Combining expertise in the fields of civil engineering as well as construction of hydro- power plants and housing, Fukamatsu Group can offer comprehensive solutions that benefit not only enterprises but local communities as well.
The last construction boom in Japan occurred more than 50 years ago, prior to the 1964 Tokyo Olympics. Since then, due to Japan’s demographic shift, on one hand, there is an increased need for maintenance and upkeep, however, on the other, there is less demand for newer construction projects. What is your take on the current state of the Japanese construction market?
The Japanese construction industry has a lot of things to do. There are many things that need to be improved, not just previously built assets, but also roads and other infrastructure, as they are experiencing a period of deterioration. A lot of repair work needs to be carried out and existing buildings need to be refurbished. The population decline is also causing a drastic effect on the overall construction sector itself and it does not paint a good picture. With that being said, a good effect is that there are many projects. One example is high-speed lanes. In Japan, in most urban areas, high-speed lanes are required. However, that is not the case here in Tohoku, as the highways here have only provisional two lanes. In light of logistics and disaster response, they need to be converted to four lanes as soon as possible.
(Shows chart) This chart shows the investments made in the construction industry on a nationwide scale. It peaked in 1992, with the calculated numbers reaching JPY 84 trillion. Currently, this figure is JPY 58 trillion, which clearly shows a huge decrease in investment in construction. Another problem that the construction companies here in Japan are facing is that they have to improve productivity. They need to solve their problems promptly and in a more modern way. However, some Japanese companies are slow to adopt new technologies such as BIM, CIM and AI. Right now, there is a necessity for maintenance due to infrastructural deterioration. Many companies are now optimistically looking forward by adopting drones that can go to the actual places where the mold is happening, or where the cracks in the concrete have appeared. This allows them to quickly fix the problem. This is a new initiative for Japanese construction companies and one example of the benefits of modernizing.
In 2014, you started a solar power generation business using the idle land that you had in your possession. Why did you set up a solar power plant and what other initiatives are you employing in order to reduce your environmental burden?
This was an initiative from the Japanese government as they realized that we need to utilize renewable energy more regularly, rather than continuing to use conventional sources of energy. In part, this was influenced by the disaster that occurred here in Tohoku in 2011. The government’s initiative provided financial aid including tax benefits and full compensation to regional companies in Tohoku who started using renewable energy. That was why we decided to enter the solar power generation business in 2014, using the idle land that was owned by our company.
When it comes to Japanese companies that harness renewable energy, most of them are dependent on the government’s feed-in tariffs (FiTs). They were first introduced in 2012, and slowly, the government has been decreasing the number of subsidies through the tariffs. What are your thoughts on this? How do you think the renewable industry in Japan can develop and progress so as to not be reliant on the government’s FiTs?
I think the future is bright. By the time the feed-in tariff program ends, large companies doing business globally will have to convert their electricity consumption to renewable energy 100%. Even Japan's leading automotive industry will be limited in its ability to achieve that goal by themselves.
The purchase of electricity must be shifted from the government to the private sector, and Japan as a whole must move away from its dependence on conventional energy resources and shift to renewable energy sources.
Since your company’s founding in 1925, you have become a very diversified construction group with projects in housing, factories and power plants. Can you highlight some key milestones in your near 100-year history? What are some of your competitive advantages that have allowed you to be successful?
Our company was established in 1925. The founder was my grandfather, who came from Toyama Prefecture, and we started in the hydro-power plant business. At the time, electricity was not widely adopted in Japan, as the country was in the early stages of introducing electrical power across the country. My grandfather used the power of water by establishing hydro-power plants in Toyama. Gradually we expanded beyond our local area to Niigata and then also to the Tohoku region. The largest electricity company in the Tohoku region told us that if we wanted to run our business there, we would have to have a physical presence. That was the reason why we established our headquarters here. That was back in 1953, as the Japanese economy was beginning to grow rapidly.
The economic boom in Japan led us to move into the construction business. With the population rapidly increasing, and the economy booming, we started to diversify our business, rather than solely focusing on hydroelectric power plants, beginning our civil engineering and construction businesses.
The 1990s was during the Hesei era. The next president of our company, my father, further diversified through the rental business. That was a good cushion for the company as it is a very stable industry, despite the price fluctuation. It provided us with a good cash flow, which further strengthened our company, and allowed for us to expand further. These are the assets of the company right now. We have 27 buildings, with 979 flats in them.
The 2008 Lehman Brothers shock was a hard time for the company. All new contracts that had been scheduled were lost, and the 400 million yen in completed work for existing condominiums was temporarily unrecoverable. We managed to recover 300 million yen, but the client went bankrupt and 100 million yen was unrecoverable. The period after the Lehman Brothers shock was a bad time for construction companies. The national budget that was aimed at helping the industry was decreased by 18% for two years consecutively. The budget cut made it very difficult for firms operating in the construction industry.
While major, medium-sized, and large local general contractors were restructuring, I did not lay off a single person. This was made possible by the rental income I inherited from my father. Thanks to this income, I was able to protect the company and the employment of my employees.
The second generation of our company was run by my father. He managed to keep the company stable by focusing on three pillars: construction, civil engineering and rental. These stable pillars kept the company going and that was a great contribution from my father. I became the president in 2008 during the Lehmann Brother shock. The 2011 disaster in the Tohoku region actually provided us with a lot of opportunities to revitalize the region and start many building projects. I thought about what my aims were for the company and what other pillars I myself could introduce to make the company more stable. That pillar is renewable energy. The renewable energy business has made our company even more concrete. As well as that, the rental service apartments and the Okinawa resort hotel are initiatives that I added to the company’s portfolio. I also built a commercial facility on the land where the homes were destroyed by the tsunami in 2011.
Your company was recently in the news for its small hydro-electric power plant, which was the first of its kind to be built in Japan. Constructed in the small town of Asahi, it is an answer to problems linked to electricity sources in the local region. Can you tell us a little more about this project? How did it come to be? What were some of the challenges that you faced, and how did you overcome them?
I was born in the Sasagawa district of Asahi Town, Toyama Prefecture, a small community of 105 households. A major problem in the area was the aging water supply system. In a normal city, the government operates the water service, but in my community, the water service is operated by the neighborhood association, called a simple water service. The Sasakawa waterworks had been in operation for 40 years and had deteriorated to the point of costing as much as 300 million yen to replace, which was a huge burden for the residents. I came up with a solution: install a small hydroelectric power plant and use the income from the electricity sales to renew the aging water pipes.
A local company in Gifu Prefecture, named “Sumire Area Trust”, that had expertise in building hydro-electric power plants helped us on the project. This company conducted research in the local area and found that Sasagawa river near the town had the potential for this project.
We held explanatory meetings for residents and conducted a year-long flow study to verify that the Sasagawa River is suitable for power generation. As a result, we were able to obtain a subsidy of 60 million yen from Asahi Town for the water pipe replacement. The bank was also willing to cooperate in this project. The bank was willing to finance the project at a low interest rate because of the social significance of the project and its promising future prospects. The small hydropower plant is currently under construction and will be operational in June of next year.
Right now, there is a lot of talk about taking small villages that are not connected to the national power grid and having an energy supply system that is more local. Have you ever thought about exporting these kinds of projects to other regions or countries?
Yes, there are many potential places where the same example could be adopted, as there are so many small villages in Japan that face the problem of deteriorated infrastructure. Big companies from Tokyo could certainly help in this regard. However, they are probably not aware that these small villages have these issues. Somebody has to do something about that in the future. We could potentially connect the big corporate companies and banks to fund these projects. Of course, it would be a long process, but we see that potential for sure.
From our perspective, we see that we have made a great social contribution. We protect the land of our birth with hydroelectric construction work, the roots of our company. The world has seen our good intentions and has become more favorable to us. For example, it became easier to acquire land, and they were able to give us land at a lower price. We were also able to obtain the necessary permits for the use of water rights, which was the most problematic issue, for the local community
We relayed the ownership of the hydro-electric power plant to the local community and government, which provided insurance in case our company went bankrupt. From the residents' perspective, safety and security are guaranteed for 20 years. This system was the first of its kind in Japan.
Another one of your projects is in Myanmar, where your company has completed the construction of new service apartments in Yangon, with a total of 62 units. As we understand, you are currently in preparations to open this new building. Why did you choose Myanmar for your international operations?
There was actually a lady from Myanmar, Thuzar Myo Nyunt. who lived in Sendai. Our plans began in 2011, the next year after the East Japan Disaster occurred. We were busy clearing the debris in the aftermath of the disaster. We spoke to Thuzar and she told us that Myanmar lags behind in infrastructure development and asked us to come and see from the perspective of the construction industry. So, I visited Myanmar when the debris removal had been completed.
I met Thuzar’s parents. They were very devoted to Japan. During World War II, while many Japanese soldiers fought and died in Myanmar, it was Thuzar's parents who took care of the Japanese soldiers who were on the verge of starving to death. Thuzar's father offered the land for a Japanese cemetery in Yangon to the Japanese government. Her parents were a great benefactor to Japan.
I had heard that in Myanmar, people see a fortune teller for important decisions, so I was taken to see one. As soon as the fortuneteller met me, he said, "You will be working in Myanmar in the future." I thought there was no way that was possible, but then he told me that Thuzar and I were brother and sister in a previous life, and her mother hugged me and told me that I was her son in Japan. I instantly felt that I had become a member of Thuzar's family. Thus, my time in Myanmar was very enjoyable.
My second visit to Myanmar was also an eye-opener. On my first visit, there was almost no traffic, however on my second, there was a lot of it. There were many neon lights and I could see that the economic situation in Myanmar was improving. I spoke to Japanese expats who lived there and there were a lot of complaints, as the services there were nowhere close to being as good as in Japan. For example, when the air conditioner breaks, it is difficult to find a company to fix it. Some people suggested that we build serviced apartments in Myanmar, as the Japanese people who lived there would be interested in renting them.
Another reason why we began our project in Myanmar was that once you help somebody, then eventually they will return the favor. Japan is a country that is vulnerable towards natural disasters and may experience another big natural disaster in the future. If that happens, the good will we have shown to Myanmar might result in help from them in the future. Giving technologies to Myanmar, helping people and building houses will be repaid to Japan in future times of trouble.
It took us six years to reach the point where we began to see the fruits of our project. In the beginning, it was very hard. We faced a lot of difficulties such as resistance from land owners and neighboring residents, procurement of funds, permissions of the authorities and change of the national government. We were the first Japanese company to undertake property development in Myanmar, with a budget of JPY 1.1 billion. Gradually, we started working with a local developer, and finally, we built our first apartment in 2020. It then spread through word of mouth. All the employees that worked for the development company started adopting Japanese technology and were keen to find out more about the construction method and materials that we used. The developer then went on their own and began to construct similar types of buildings by themselves, which they were then able to sell at a great price. They were also able to increase the rent prices and make the enterprise even more profitable for themselves. It worked out very well for both companies.
Are there any other countries or regions that you are looking to further expand into?
While our operation in Myanmar went very well, recently there was a coup there which closed the country. Nobody can transfer money from Myanmar as a result and our company is not reaping the benefits of our project there. We are currently not looking to expand to other overseas countries as the situation in Myanmar turned out to be bad.
You are the president of Idea International, which was founded in 2011 as a research firm linked with Tohoku University and develops lithium-ion encapsulated fullerene. What is this new molecule, and what are some of the practical applications of lithium-ion encapsulated fullerene?
Lithium-ion Encapsulated Fullerene (we call it as” LiEF”) is a nano-sized molecule consisting of 60 carbon atoms and one lithium ion. These carbon atoms form a round shape (like a soccer ball named Fullerene) with 1 nm diameter. One lithium ion is encapsulated inside the Fullerene (this molecule is LiEF), The lithium ion floats stably inside the carbon cage (completely vacuum). LiEF is very mysterious and shows many unique properties, electronically and chemically, which would lead to practical applications of innovative devices. It is the only Idea International in the world, a R & D venture firm in Sendai, who can synthesize LiEF in a macroscopic volume. I serve as Chairman of the Board of Directors of this company.
Some 16 years ago, I met researchers who were working in Sendai on development of LiEF and its applications. Since then, I have supported them in various ways. Three years ago, we acquired Idea International Ltd. in the hope of furthering their R&D activities.
Among others, it was recently found that LiEF could contribute significantly to high photovoltaic conversion efficiency and long life of perovskite solar cells. As you know, perovskite solar cells have great potential for the next-generation film-type solar cells. This is one of the promising applications of LiEF.
In addition, various other applications have been proposed. They are ultra-high-density molecular switches, safe/large power/high-speed charge-discharge supercapacitors, highly sensitive medical gas sensors, and new cancer therapies.
However, basic research is still needed before LiEF and its applications can be truly implemented in society. Last September, I proposed to the Dean of the Graduate School of Science at Tohoku University to establish a 30 million yen endowed chair. This is a rather small amount of money, but I hope that this endowment would inspire others to recognize the importance of basic research and take similar actions.
The Endowed Chair is named as “Nano-materials Science for Fusion of Dimensions” where young researchers take on challenges together with their students. It is expected to become a platform for collaborative research by/among researchers of leading academic institutes, such as Tohoku University, Osaka University, Nagoya University, the University of Edinburgh, and the National Institute of Advanced Industrial Science and Technology. I hope that the project will significantly develop over the next 10 years.
Imagine that we come back to interview you again on the last day of your presidency. Is there a particular goal or objective that you would like to have achieved, and that you would like to be remembered for?
The commercial facility that I mentioned earlier actually just opened in April of this year. Many people are calling it a symbol of rebuilding Sendai, as it was built in the area that the tsunami struck. It acts as a showcase for us to show people what we have done in the area that was devastated. Unfortunately, the coronavirus prevented people from coming to Japan and seeing what is being done to rebuild Sendai. Even the Olympics were affected, with only a very small number of people being allowed to enter Japan.
In my lifetime, I would like to present Sendai in a good light so the next generation can see the work that has been done. Everything around us is built by construction companies; buildings, railways, infrastructure, and commercial buildings. However, many people take it for granted and tend not to recognize that these are the results of our predecessors’ efforts. I want to contribute our company’s best efforts to create a better Miyagi, and a better Sendai. I want people to see the contribution our company has made over many years.
Currently, the shrinking population is a major issue in Japan, But nothing has changed in terms of what needs to be done. For the sake of the next generation, we want to create a more disaster-resistant country, and to further technological development so that Japan can contribute to the world. We hope that the next generation will be proud of our efforts.