Econometric Analysis of Regional Timber Demand/Supply in Japan

Abstract

Because of the substitutional relationship between the domestic and the imported timber for the use of construction materials, the timber market structure has changed over the last several decades. The foreign timber was initially introduced in order to fulfil a shortage of the domestic timber supply. Approximately 80% of the Japanese timber market is currently occupied by the imported timber. The two major foreign timber supplies are the U.S. and Canada. In this paper, we analyse a change of substitution between the domestic and the imported timber in terms of price elasticity of timber demand and supply. Econometric models for timber demand and supply are constructed with use of the log-transformed linear function. The Japanese timber market is divided into the following eight regions, Tohoku, Kanto, Hokuriku, Chubu, Kinki, Chugoku, Shikoku and Kyushu. Our analysis shows that in such a major timber consumption region as Kanto, Chubu and Kinki, timber demand is elastic to price. It is also shown that the domestic lumber supply is inelastic to price in each region, while the import lumber supply is slightly elastic to price.