Analysis of the Factors Obstructive to Forest Investment Funds in Japan

Abstract

The 2015 Paris Climate Conference acted as a catalyst for the acceleration of international efforts towards the mitigation of greenhouse gas emissions, and has shed light upon one source of CO2 reduction in particular; forests. Forestland, owing to its capacity to reduce carbon levels in the atmosphere, is expected to play an integral role in the post COP21 paradigm. The local forest industry in Japan remains inefficient and leaves ample room for optimization－despite the country’s wealth of planted trees, Japan’s wood supply is at a net deficit. This study benchmarks the successful role of US timberland investment funds in heightening productivity and optimizing operational efficiency in the forest industry, and compares this to Japan’s struggling forestry. An examination of the key differences between the two regional industries, such as historical background, investment duration, and valuation methodologies, uncover that there are deeply rooted differences in how forest resource and public policy are perceived. Presenting a strong case for commercially viable and profitable forestry projects, for example, as energy crops for biomass power plants, will be the key to overcoming the structural setbacks that have inhibited growth in Japan’s forest industry.