The Japanese are renowned for building high-quality wooden housing designed to withstand earthquakes and other natural disasters. Today, Wing, a leader in the 2x4 construction method, aims to bring the Japanese way of wood to global markets.
Within the last 30 years, Japan has seen the rise of regional competitors that have replicated the Japanese monozukuri processes but doing so at a cheaper labor cost. However, we still see that many Japanese firms are still leaders when it comes to niche B2B fields such as building materials. How have Japanese firms been able to maintain leadership despite the stiff price competition?
Japan has a long history and tradition in wooden construction. Our technical skills in wooden construction are highly regarded worldwide. As a company involved in construction, we are committed to uncompromising quality, and we want to enhance this tradition by utilizing the diligent and meticulous Japanese temperament, respecting and valuing culture through our unique sales strategy, production technology and materials strategy.
In the next 15 years, one in three Japanese people will be over the age of 65. This presents challenges such as the labor crisis, with another being the shrinking domestic market. What are some of the challenges and opportunities that this demographic shift has presented for Wing?
The aging population is a serious issue in Japanese society. We are leading the world on this issue: it is predicted that by 2048, Japan's population will be less than 100 million. I hope this will not happen, but eventually it will. I feel that the problem is not the aging of the population per se, but the drastic decline in the working population: by 2060, the working population will only be 44 million. Our company is already struggling to recruit staff for factory production. As a countermeasure, the factory has introduced efficiency improvements by linking design and machines (CAD CAM), increased the efficiency of pre-cutting work, recruited foreign personnel, and aims to create a more comfortable working environment where women can play an active role.
Demographic changes will lead to a decline in demand for housing construction, which is our core business. There is also a concern about a shortage of craftsmen on housing construction sites. In Japan, there is a working environment where women cannot easily find work on construction sites. We want to create an environment where women can fully demonstrate their abilities. There are few places where women can play an active role, especially on construction sites. We want to increase the added value of panel production in factories (reducing on-site work) in response to this change in the industry.
One of the effects of Japan's demographic situation is that demand for new construction is decreasing. However, we are seeing an increase in demand for the maintenance and upkeep of aging infrastructure. What is your assessment of Japan's current construction market?
Buildings in Japan are required to be disaster-resistant, especially against earthquakes. Japanese companies involved in building and housing construction are required to provide earthquake-resistant building structures. Our core business, 2x4 housing construction structures, is highly earthquake-resistant and airtight. This is one of our greatest advantages. We create an environment that increases the value of buildings by renovating them in the same way as houses in Europe and the USA. They can withstand pests such as termites, which can damage wooden buildings, and maintain them over the long term. These advantages are why we are promoting 2x4 housing in the Japanese housing industry.
The 2x4 houses have been installed in about 2 million buildings in Japan. It is also widely used in North America. Can you tell us a little bit more about the 2x4 method and how you were able to achieve its unique features of being earthquake and rot-resistant? How were you able to improve these features over time since its inception?
After the introduction of the 2x4 construction method about 50 years ago, the 2x4 industry treated the foundations with a preservative treatment and some housing companies replaced it by utilizing domestic cypress and hiba for the foundations, and also strengthened the rot resistance of the foundations by utilizing foundation packing. As for structural timber, the use of laminated timber, LVL and TJI has led to increased demand for large facility properties. Another evolution has been in surface materials. Strength has been improved according to the characteristics required for each type. The system is now flexible enough to accommodate the use of a variety of materials, including OSB (oriented strand board), domestic structural plywood and domestic fiberboard (particleboard), which are commonly used in North American housing.
We interviewed Hyakunen Jutaku, a firm specializing in anti-seismic housing, especially through WPC, they stated that wood is not a reliable material during seismic activity as the structure can collapse. The majority of the buildings that you handle are constructed using lumber and wood-based materials. What are your thoughts on their comments, and what benefits do wooden structures have?
It is not my place to criticize concrete buildings. It is really up to the preferences of the occupants what kind of house they want, and the earthquake resistance of 2x4 housing has been demonstrated in the Great Hanshin-Awaji Earthquake and the Great East Japan Earthquake. Different materials have different uses and purposes. With regard to timber, there are more reinforced types of timber, such as laminated timber and layered timber, which can withstand strong forces. These types of timber are also used in the construction of high-rise buildings. Wood and concrete each have their own unique strengths. Depending on the purpose of the structure, either material can be chosen or they can be combined for best results.
Timber houses have excellent carbon storage in terms of carbon neutrality. It is also a good source of carbon dioxide emissions during manufacture and emissions during processing.
What strategies are you employing in order to contribute to a more sustainable society?
The timber utilization promotion project was launched. In order to build a recycling-oriented society, we have been working with the Ministry of Agriculture, Forestry and Fisheries and other local authorities since last year to achieve the same goal and implement specific activities to build the supply chain. We have already held three tree-planting events and will plan and implement activities with the participation of local children. We actively promote the use of timber in the construction sector and work together with other housing manufacturers and public bodies to create an environmentally friendly society. We have introduced a calculation method to determine how much carbon dioxide can be absorbed using timber. It is concrete and therefore helps people understand how much their actions affect the world.
What role do collaboration and partnerships play in your business model, and are you currently looking for partnerships in overseas markets?
We are currently looking at expanding and cooperating with new potential partners in the field of 2x4 construction in rural areas. Due to the shrinking housing market in Japan, several Japanese housing manufacturers have expanded abroad to open up new sales channels. However, they do not have the capability of a Japanese-style 2x4 component factory. This reduces and limits the number of workers required on site and shortens construction times. In aging societies in Japan, Europe and North America, this is a viable option to compensate for labor shortages. We would like to open factories in Canada and the USA to offer Japanese-style panel-type construction methods.
One aspect of your business is manufacturing, but another aspect is trading. Why did you decide to diversify and add trading to your services, and what benefits has it brought Wing?
The company was founded by people from trading companies. We established the company because we felt that we had decided that our business form had limitations. Especially in our industry, it is important to be able to see and work directly with the quality of timber, improving the quality of materials and construction methods. This is why we have added a trading company structure to meet the demands of our industry, with manufacturing and construction as our main pillars. Trading companies can go directly abroad to find factories and partners that may meet our standards and provide us with the pre-cut materials we need.
We have seen a big devaluation of the JPY to the USD since the beginning of last year, raising the cost of raw materials and making Japanese exports cheap. As such, Japan has become cost-effective while competitors in China are facing power cuts, surging commodity prices and COVID-related delays. As a firm with trading capabilities, what is your judgment on this macroeconomic environment? Has it proven to be a challenge or an opportunity for you?
Currency fluctuations are difficult to foresee and have had a significant impact on our business. However, our fundamental mission is to ensure a stable supply to our customers, regardless of currency issues or wood shocks. It is also important to diversify our supply chain to ensure a secure supply chain, so that we are not affected by the COVID logistics disruption or the China crisis. We are currently trying to diversify and are sourcing from Europe and domestically, rather than relying heavily on materials sourced solely from Canada and the US. To add to our sourcing options, we are opening channels to source domestic wood.
You have been in Canada since 1997. Why did you choose Canada as your sole location for your overseas operations? Are there other regions that you have identified for further expansion?
We have an office in Vancouver, Canada, and direct contact with local wood manufacturing plants. This is part of our trading function. Having a local presence allows us to respond quickly, discuss directly, develop new business channels and ensure high-quality products. The Japanese already have high quality standards, but we want to raise the quality standards of the Wing we offer our customers, so having a local presence is important for this. Many Japanese housing companies are expanding overseas and we want to expand overseas with them. We want to export Japanese wooden construction technology to overseas markets by introducing them to Japan's excellent quality control and precision panels.
If we come back in five years and have this interview over again, what goals would you like to have accomplished?
We hope to be able to explain our progress in overseas markets by our 40th anniversary. With Japan's population declining and the market shrinking, I want to bring traditional Japanese housing construction methods to overseas markets and utilize them locally. The future of housing construction as I envisage it is without carpenters on site. Everything - interiors, windows, doors - is pre-made in a factory. The pieces are then transported to the site and installed using a crane. We hope that this vision will become a reality in Japan in five years' time and eventually become a global standard. North American housing is a leader in 2x4 construction but has not yet introduced ready-built construction. In the future, we hope to introduce this efficient construction method.