Construction & Building Technologies Market Study

JULY 2018

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The information and views set out in this study are those of the author(s) and do not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein. The contents of this publication are the sole responsibility of EU Gateway | Business Avenues and can in no way be taken to reflect the views of the European Union. The purpose of this report is to give European companies selected for participation in the EU Gateway | Business Avenues Programme an introductory understanding of the target markets countries and support them in defining their strategy towards those markets. For more information, visit www.eu-gateway.eu.

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EU Gateway to Japan

Central Management Unit

Japan Market Study

July 2018

Submitted to the European Commission on 25 July 2018

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Table of Contents

TABLE OF FIGURES ...... 5

LIST OF ABBREVIATIONS ...... 7

1. EXECUTIVE SUMMARY ...... 10

2. WHAT ARE THE CHARACTERISTICS OF JAPAN ...... 19 2.1. POLITICAL OVERVIEW ...... 19 2.2. ECONOMIC OVERVIEW ...... 21 2.3. TRADE OVERVIEW BETWEEN EU AND JAPAN ...... 23 2.3.1. EU and Japan Business in Figures ...... 23 2.3.2. EU-Japan Economic Partnership Agreement (EPA) ...... 25

3. MARKET OVERVIEW AND BUSINESS OPPORTUNITIES ...... 27

3.1. JAPANESE CONSTRUCTION & BUILDING TECHNOLOGIES MARKET ...... 27 3.1.1. Brief Historic Overview ...... 27 3.1.2. Market Overview ...... 29 3.1.3. Market Challenges ...... 40 3.1.4. Market Trends ...... 45 3.1.5. Market Players: Construction Companies ...... 53 3.2. SMART GRIDS ...... 64 3.2.1. Market Overview ...... 64 3.2.2. EU Entry Opportunities ...... 69 3.3. SMART AND GREEN BUILDINGS ...... 72 3.3.1. Market Overview ...... 72 3.3.2. EU Entry Opportunities ...... 80 3.4. MACHINERY SECTOR ...... 83 3.4.1. Market Overview ...... 83 3.4.2. EU Entry Opportunities ...... 87 3.5. BUILDING MATERIALS AND INSTALLATIONS ...... 90 3.5.1. Market Overview ...... 90 3.5.2. EU Entry Opportunities ...... 93

4. CONSTRUCTION AND BUILDING TECHNOLOGY REGULATIONS ...... 97

4.1. BUILDING STANDARD LAW ...... 97 4.2. BUILDING ENERGY CONSERVATION ACT ...... 98 4.3. JAPAN INDUSTRIAL STANDARD (JIS) AND JAPAN AGRICULTURAL STANDARD (JAS) ...... 100

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5. ANNEXES ...... 102

5.1. BIBLIOGRAPHY ...... 102 5.2. CONSTRUCTION AND BUILDING TECHNOLOGY INDUSTRY ASSOCIATIONS ...... 105 5.3. TRADE FAIRS ...... 106

Table of Figures

Figure 1: Building and Construction Technology Market Overview per Sector ...... 12 Figure 2: Key Building and Construction Regulations ...... 17 Figure 3: Japan Factsheet ...... 19 Figure 4: Three Arrow Policy of Abenomics ...... 22 Figure 5: EU-Japan Trade Figures for Goods 2015-2017 ...... 24 Figure 6: EU-Japan Trade Figures for Services 2014-2016 ...... 24 Figure 7: Facts and Figures Economic Partnership Agreement (EPA) ...... 25 Figure 8: EU Japan Summit: EPA Agreement ...... 26 Figure 9: Comparison Global Construction Market ...... 28 Figure 10: Construction Investment Value per Geographic Area ...... 30 Figure 11: Overview Breakdown Construction Investments ...... 31 Figure 12: Construction Breakdown per Type FY2016 ...... 32 Figure 13: Evolution Total Annual Value of Public Infrastructure Works ...... 32 Figure 14: Future Maglev Tracks ...... 33 Figure 15: Design Image Haneda Zone 1 by Kajima Corporation ...... 35 Figure 16: King SkyFront by Daiwa House and Connection Bridge by Cabinet Office ...... 36 Figure 17: Shibuya Station Redevelopment Project ...... 37 Figure 18: Hills Multi-Use Complex with New Hibiya Subway Station ...... 38 Figure 19: Aerial view of the new Toyosu Fish Market ...... 39 Figure 20: New National Stadium in by Architect Kengo Kuma ...... 40 Figure 21: Age Demographics Workforce in the Construction Industry ...... 41 Figure 22: Annual Working Hours in the Construction Industry vs Average All Industries ...... 42 Figure 23: Evolution Overseas Construction Projects in Value ...... 44 Figure 24: After-care and Maintenance Market is Strong ...... 48 Figure 25: Voluntary Action Plan of the Construction Industry: 6th Policy 2016-2020 ...... 49 Figure 26: Japan wants robots to help build its ...... 51 Figure 27: Daiwa House unveils construction robot ...... 52 Figure 28: Top 10 Japanese General Contractors FY2017...... 54 Figure 29: Decision Maker for Construction Materials ...... 56 Figure 30: Top 10 Architectural Design Offices in Japan ...... 57 Figure 31: Annual New House Starts ...... 58 Figure 32: Typical New Detached House for Sales in Tokyo Area ...... 59 Figure 33: Top 8 Housing Construction Companies Sales Turnover FY2016 ...... 60 Figure 34: Typical Larger Scaled Condominium Project developed by Mitsui Real Estate ...... 61

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Figure 35: Typical 3LDK Condominium Layout near Tokyo ...... 62 Figure 36: Top 10 Condominium Developers Sales Turnover FY2016 ...... 62 Figure 37: Japan’s Electricity Market Outline: 2 Frequencies 50Hz and 60Hz ...... 65 Figure 38: Image Drawing of Smart Grid in Japan ...... 66 Figure 39: Smart Grid Industry Taxonomy ...... 67 Figure 40: Japanese Smart Grid Manufacturers ...... 68 Figure 41: Diagram of the P2P electricity purchasing platform ...... 70 Figure 42: Skelcap Ultracapacitor Batteries ...... 71 Figure 43: Road Map Report ZEH by METI ...... 73 Figure 44: ZEH example by METI ...... 73 Figure 45: Roadmap Report ZEB by METI ...... 75 Figure 46: ZEH Sales Percentages of Major Home Builders FY2016 ...... 78 Figure 47: Visual of Sekisui House ‘Green First’ ZEH ...... 79 Figure 48: Domestic Market Share per Construction Machinery ...... 84 Figure 49: Domestic Market Share for Hydraulic Excavators ...... 85 Figure 50: Major Japanese Construction Machinery Manufacturers ...... 87 Figure 51: European Building and Construction Materials Exports to Japan ...... 90 Figure 52: Major Japanese Importers and Distributors of Construction and Building Materials ...... 91 Figure 53: Import and Domestic Supply Chains and Profit Margins ...... 92 Figure 54: Key Building Regulation Laws...... 97 Figure 55: Building Energy Conservation Act, revision 2015 ...... 99 Figure 56: Building-Housing Energy-efficiency Labelling System (BELS) ...... 100 Figure 57: JIS JAS Logos ...... 101

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List of Abbreviations

3D 3 dimensional AI Artificial Intelligence ANRE Agency for Natural Resources and Energy AR Augmented Reality AVG average b billion BELS Building-Housing Energy-efficiency Labelling System BEMS Building Energy Management System BIM Building Information Modelling BOT Build, Operate, Transfer BSL Building Standard Law CAGR Compound Annual Growth Rate CIM Construction Information Modelling CO2 Carbon Dioxide COP21 Conference of Parties CPV Concentrator PhotoVoltaic DC Direct Current DPJ Democratic Party of Japan EMS Energy Management System EPA Economic Partnership Agreement EPCO Electric Power Company EU European Union EUJCIC EU-Japan Centre for Industrial Cooperation EUR Euro EV Electric Vehicles FC Frequency Conversion FCF Frequency Conversion Facilities FDI Foreign Direct Investment FEMS Factory Energy Management System FIT Feed-in-Tariff FOB Free on Board FY Fiscal Year (April-next year March) G3 PLC G3 Power Line Communication GBP Great Britain Pound GDP Gross Domestic Product GPS Global Positioning System GW Giga Watt HEMS Home Energy Management Systems

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Hz Hertz ICT Information and Communication Technology IoT Internet of Things IPv6 Internet Protocol version 6 ISO International Standard Organization JAS Japan Agricultural Standard JIS Japan Industrial Standard JPY JR Japan Railways LDK Living, Dining, Kitchen LDP Liberal Democratic Party LED Light-Emitting Diode m million M&A Mergers and Acquisitions MAFF Ministry of Agriculture, Forestry and Fisheries MAGLEV Magnetic Levitation MEMS Mansion Energy Management System METI Ministry of Economy, Trade and Industry MLIT Ministry of Land, Infrastructure and Transport MR Mixed Reality NTT Nippon Telegraph and Telephone ODA Official Development Assistance P2P peer-to-peer PFI Private Finance Initiative PHEV Plug-in Hybrid Electric Vehicles PLC Power Line Communication PPP Public Private Partnerships PV Photo Voltaic R&D Research and Development RF Radio Frequency SC Supply Chain SME Small and Medium size Enterprise t trillion TEPCO Tokyo Electric Power Company TFCPS Toshiba Fuel Cell Power Systems UK United Kingdom US United States USD United States Dollar USP Unique Selling Propositions UV Ultra Violet V Volt

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VPP Virtual Power Plant VR Virtual Reality vs versus Wi-SUN Wireless Smart Utility Network ZEB Zero Energy Building ZEF Zero Energy Factory ZEH Zero Energy House

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1. Executive Summary

Japanese Market and the EU

Japan remains the third largest global economic powerhouse, following the US and China. It aims to achieve a Gross Domestic Product (GDP) of JPY 600 trillion (EUR 4.61 trillion) by FY2020. Prime Minister Shinzo ABE and his cabinet hope to reach this milestone goal based on his Abenomics strategy containing “Three Arrows” of boosting the economy, energising corporate activities and driving innovation and trade.

The signing of the Economic Partnership Agreement (EPA) between the EU and Japan is a major part of Abe’s efforts in further liberalising Japan’s international trade. The political agreement in principle for the EPA was signed in Brussels on 6 July 2017 during the 24th EU-Japan Summit in the presence of Prime Minister Abe, European Commission President Juncker and European Council President Tusk. The final ratification is expected by mid-2019.

The EU currently exports goods worth EUR 60.5 billion in 2017 and services valued at EUR 31 billion in 2016 to Japan on an annual basis. The EPA predicts an average 20% growth of EU exports, pushing up the nominal GDP by 1% and possible creation of 420,000 new jobs.1

Market Overview Building & Construction Technologies

In FY1992, at its peak, the total Japanese construction market was valued at JPY 84 trillion (EUR 646 billion). After 2 lost decades of almost no economic growth, the market bottomed at JPY 42 trillion (EUR 323 billion), right after the Lehmann shock in FY2010.

1 European Commission, Trade Sustainability Impact Assessment of the Comprehensive Trade and Investment Agreement between the European Union and Japan, Final Report, http://trade.ec.europa.eu/doclib/docs/2016/may/tradoc_154522.pdf

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Building and Construction Technology Market Overview per Sector

Sector Size Opportunities Challenges Players Building & EUR 422 billion Large public works: Quickly ageing skilled General Contractors: Construction (FY2017): Building Haneda International working force Obayashi, Shimizu, Taisei, Construction Airport, Tokyo Olympics Long working hours Kajima, Takenaka (EUR 232 billion); 2020, Maglev Line, Architectural Design PPP/PFI Rising Material & Civil Engineering Labour costs Offices: Nikken Sekkei, (EUR 190 billion) Large private works: NTT Facilities, Mitsubishi Limited share in rd Shibuya Station, Jisho Sekkei, Nihon Sekkei 3 largest overseas projects construction market Toranomon Area House Builders: Daiwa with 6% global share Works in nature disaster House, Sekisui House, CAGR: 1.2% till hit areas: Tohoku, Asahi Kasei Homes, FY2021 Kumamoto, Okayama Sumitomo Forestry EUR 433 billion After-care & maintenance Condominium Developers: (FY2030) private buildings and Mitsui Real Estate, Daito public civil engineering Kentaku, Iida Group, works (CAGR: 5% till Mitsubishi Real Estate, FY2030) Sumitomo Real Estate, Construction automation, Tokyu and Nomura robots & ICT systems Collaboration EU/Japanese architects Smart Grids EUR 61.5 billion Liberalisation process 2 National 10 EPCOs with biggest (FY2016) retail electricity market Frequencies with player Tokyo Electric from 2016 till FY2020 50Hz in Eastern Power Company (TEPCO) 7th biggest global +300 domestic newcomers Japan and 60Hz in GS Yuasa (storage smart grid market, Western Japan growing to in electricity retail batteries), Toshiba Energy EUR 292 billion by business, opportunities for Systems, Sumitomo FY2020 foreign electricity Electric Industries, companies Panasonic (Solar Power), 30 million smart ICT related FEMS, BEMS, Fujitsu (EMS), Mitsubishi meter market by Electric FY2025 HEMS, CEMS Big data management for Moixa (UK), Conjoule improved energy efficiency (GE), Skeleton (Estonia) Energy Storage Systems Transmission & Distribution Equipment Applications to increase grid smart meter related business

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Sector Size Opportunities Challenges Players Smart & +25,000 ZEHs in Increase lifespan of Comply energy saving Sumitomo Realty & Green FY2016 (10% share) Japanese houses (avg 26y standards for building Development, Sekisui Buildings => 45% share by vs 44y in France) materials between House, Daiwa House, FY2020 Smart energy saving and cold northern Asahi Kasei Homes, Ichijo insulating building Hokkaido and warm Komuten, Sumitomo materials for ZEBs & ZEHs southern Kyushu and Forestry Okinawa Feed-in-Tariff (FIT) system Schneider Electric Japan Clear Building (FR), Viessmann (GE), ZEH incentive of almost Environmental BDR Therma (UK) EUR 10,000 Efficiency (BEE) for Hot water supply systems Comprehensive Large scale advanced Assessment System aircondition systems for Build Environmental LED lighting systems Efficiency (CASBEE) Energy management Tough existing systems domestic competition Construction EUR 15 billion Opportunities in niche Strong oligopolistic Manufacturers: Komatsu, Machinery (FY2016), 55% markets like open-source market amongst major Hitachi Construction exports productivity management players Machinery, Caterpillar EUR 16 billion systems, GPS location Stricter exhaust Japan, Kobelco (FY2018), 58% services, IoT emissions for Construction Machinery, exports enhancements Particulate Matters Sumitomo Construction Innovative exhaust filters, (PM), Nitrogen Oxides Machinery, Kubota, Rental Sector: Tadano and Takeuchi EUR 10.4 billion products and technologies (NOx) and Hydro (FY2016) Carbon (HC) Rental Companies: Aktio, Kanamoto, Nikken Rental, Hydraulic/Mini Nishio Rent-All, Taiyo Excavators, Kenki Rental Construction Cranes and Tractors: +75% Liebherr Japan (GE), MB market share Japan (Italy), Putzmeister Japan (GE), Volvo Construction Equipment (Sweden) Building Imports from EU Direct sales efforts to Short delivery times Lixil, TOTO, ABC Trading, Materials & (FY2014) architectural design from SE Asia Advan, Hirata Tile, Sanshu Installations Processed Stone: offices, home builders, Competitive priced SE Noyasu, Maruei Togyo, EUR 10.2 million condominium developers Asian Building and Asahi Kasei Kenzai, and overseas purchasing Construction Materials Achiles, Nichiasu, Kaneka, Prefabricated departments of major Showa Denko Kenzai, Mag Buildings: general contractors Multi-layered Isover EUR 34.8 million distribution and USPs: Sustainable, wholesale system Gretsch-Unitas Japan Ceramics & Tiles: innovative, environmental- (GE), Hafele Japan (GE), EUR 37.5 million friendly, value added End-user price Halfen (GE), Honka Japan Wood Products: building & construction settings (Finland), Ove Arup & EUR 847.8 million materials like Insulation, Partners (UK), Glass Products: Glass, Window Sashes in Permasteelisa Japan EUR 18.4 million Wood and Aluminium, (Italy), Saint-Gobain (FR), Decorative Finishing Schott Japan (GE), Stone Aluminium Products: Materials Tech Japan (Belgium), EUR 16.9 million Lafarge (FR) Figure 1: Building and Construction Technology Market Overview per Sector

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Market Challenges

Some key challenges in the domestic building and construction market can all be traced back to general Human Resource issues, as explained below.

 Skilled workforce is declining rapidly: from 3.43 million workers in FY2014 to 2.15 million workers in FY2025

 Skilled workforce is ageing rapidly: in FY2017, +1.7 million workers were aged +55 years

 Construction work is referred to as “3K” in Japanese, standing for Kitsui (Hard), Kitanai (Dirty) and Kiken (dangerous)

 Clocking long working hours: Construction workers log an average of 2,102 hours annually versus 1,800 hours, the average of all other industries in Japan

 Frequent weekend and holiday work: almost 50% of all workers have only 4 days or even less days off per month

 Few women in the workforce in FY2016: a mere 14.9% in the construction sector compared to 43.5% on average in all other industries in Japan

Market Trends

Following Abe’s policy to revive the Japanese economy, the construction market is optimistic that the historically low interest rates on mortgage loans will keep the momentum going, even after the Tokyo 2020 Olympics projects.

To become more sustainable and less waste generating, the domestic construction sector is rapidly leaving behind its “scrap and build”2 mentality, where buildings had a brief lifespan of 20 to 30 years. In comparison, the average lifespan of a building in France is 44 years and, in the UK, even 75 years.3

2 https://edition.cnn.com/style/article/how-japan-makes-houses/index.html 3 Sumitomo Real Estate Market Report 2017

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For the aforesaid reason, especially the after-care and maintenance market is said to remain brisk over the next decade, both for private residences and public buildings/infrastructure in Japan. This market segment grew in the last 5 years from JPY 13.8 trillion (EUR 106.15 billion) in FY2011 to JPY 15.8 trillion (EUR 121.53 billion) in FY 2015, equivalent to a share of 28% in the total annual domestic construction value.

Domestic Market Players

The Ministry of Land, Infrastructure and Transport (MLIT) categorises Japanese construction companies as follows:

 The Big 50 contractors including the 5 Super General Contractors being Obayashi, Shimizu, Taisei, Kajima and Takenaka. These 5 have an annual sales turnover exceeding JPY 1 trillion (EUR 77 billion). The top 10 companies of this list handle +20% of Japan’s total construction market

 470 Local Construction companies, consisting of the 10 largest construction companies in each of Japan’s 47 prefectures. Together, they have a market share of 10%

 3100 Leading Construction companies, who operate regionally making optimal use of their specialised construction know-how. Largest group with a combined market share of 60%.

Other important market players are the large architectural design offices, who are key decision makers in 50%~70% of the cases, when it comes to the application of imported building and construction materials like tiles and bricks, roof and insulation materials and exterior insulation, to be used in their projects. Their main evaluation criteria are quality level, design aspects, price level and technical support afterwards.4

House builders, who sold 974,000 new units in FY2016, are another key player. The market for imported products though is mainly used by the 180 major builders. Together they have a market

4 Sustainable Building and Construction Sector in Japan and Analysis of Opportunities for European Firms, EU-Japan Centre for Industrial Cooperation, 2015

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share of +30%.5 They are especially searching for imports of sustainable, innovative, long life span and energy-friendly materials that they can apply in their housing units.

Lastly, the Japanese condominium developers are important market players. In FY2017, they sold 77,363 new units with a total value of JPY 3.66 trillion (EUR 28.2 billion), mainly located in the major Japanese cities. Their forecast for FY2018 is 78,500 units, an increase of 1.5% compared to FY2017.6

Smart Grids The electricity market in Japan was a monopolistic situation dominated by 10 Electric Power Companies (EPCOs) per region, until the recent retail liberalisation started in phases from FY2016. Japan is also the only global country with 2 different electricity frequencies divided into an eastern 50Hz grid, managed by 3 EPCOs, and a western 60Hz grid, managed by the remaining 7 EPCOs. The 2 grids are connected to each other by large Frequency Converter Facilities (FCFs) between Tokyo and Nagoya.

In FY2016, the electricity retail market in Japan was valued around JPY 8 trillion (EUR 61.5 billion).7 The smart grid business in Japan, mainly consisting of transmission and distribution, smart grid ICT applications and energy-efficient storage was valued at JPY 1.47 trillion (EUR 113 billion) in FY2012. Forecast is to rapidly grow to JPY 3.8 trillion (EUR 292 billion) by FY2020.8

Smart and Green Buildings

The Fukushima Nuclear incident in 2011 and the COP21 Paris agreement by Japan cleared the road in Japan for Smart and Green Buildings, as a prominent pillar of their long-term sustainable development goals. From FY2010 on, Japan also started to pro-actively promote Zero Energy Houses (ZEH), with both financial incentives valued at JPY 1.25 million (EUR 9,615) and through the Feed-in-Tariff (FIT) system for the purchase of the surplus generated electricity by solar power.

5 Daito Kentaku, Japanese News Release 2017 6 Japan’s Condominium Market 2017, Real Estate Research Institute 7 Nikkei News Online 2017 8 Outlook on the Global Smart Grid Market, Fuji Research 2012

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Through specific regulations and detailed guidelines mentioned in the Building Energy Efficiency

Act, revised in 2015, Japan aims to profoundly curb its CO2 emissions in the short-term. It will implement these regulations through the issuing of a Building-Housing Energy-efficiency Label System (BELS) certificate for smart buildings that cleared the Comprehensive Assessment System for Build Environmental Efficiency (CASBEE) evaluation.

Machinery Sector

In FY2017, the total market value of the Japanese machinery sector was estimated around JPY 2.116 trillion (EUR 16.22 billion), an increase of 9% versus FY2016. A share of +55% is exported to mainly North-America, Europe and Asia, with China being the biggest export market in Asia.9

Market entrance and business opportunities for European companies is focused on niche markets like advanced remote open-source productivity management applications with state-of-the art IoT technology, automation and robotics to cover the stringent labour shortage, preventive notification and remote maintenance management systems and GPS location service to increase up-time of construction machinery.

Lastly, given stricter exhaust emissions for larger construction machinery in Japan, diesel exhaust filters are in strong demand, an area where Europe is ahead of Japan.

Building Materials and Installations

Japan has been for long a large importer of high-quality European building and construction materials from various European countries like diverse types of stones, blocks, tiles, roofing materials, outer wall materials, decorative finishing materials, ceiling finishing materials, flooring finishing materials, entrance doors, windows, stairs, doors, insulation materials, building hardware, lighting equipment, interior fabrics, kitchen and bathroom equipment, too name only

9 Outlook and Forecast on Japanese Construction Machinery, Japan Construction Equipment Manufacturers Association (CEMA), 2017

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the biggest ones. Key for all these products is strong Unique Selling Propositions (USPs) to differentiate from Asian-made products.

In the short supply chain, the (European) manufacturer gets 30% of the final sales price, the home/condominium builder 20% and the end-user adds another 20% margin, making this product about 30% cheaper compared to the long supply chain with several players involved. As a rule of thumb, a retail price of 3 times Free On Board (FOB) value is considered aggressive price setting, 4 times standard pricing nowadays, while anything exceeding 5 times or more the FOB price is considered expensive price setting.

Building and Construction Regulations

The key building and construction regulations can be summarised as follows.

Key Building and Construction Regulations Field Restrictive Laws (Mandatory) Promotional Laws (Optional)

Building Design Kenchikushi Law

Structural Safety Building Standard Law (BSL) Seismic Retrofitting Law

Fire Safety Building Standard Law (BSL)

Fire Safety Fire Service Law

Hygiene Building Standard Law (BSL) Building Management Law

Accessibility Barrier-Free Law

Energy Saving Energy-Saving Law

Figure 2: Key Building and Construction Regulations

Within the aforesaid, especially the Building Standard Law (BSL), with its recent revision in FY2014, is important as it covers regulations ranging from inception till demolition of a building. More specifically, it covers general structure aspects, structural safety including earthquake resistance, fire safety and building equipment including services. All building and construction material exported to Japan must comply and be conform with the BSL.

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Finally, slightly older but not less important is that all imported building and construction materials must comply with the Japan Industrial Standard (JIS) and the Japan Agricultural Standard (JAS). Wooden products are subject to JAS standard, except for particle boards, which are regulated under JIS. JIS is managed by the Ministry of Economy, Trade and Industry (METI) while JAS is under control of the Ministry for Agriculture, Forestry and Fisheries (MAFF).

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2. What are the Characteristics of Japan

2.1. Political Overview

Japan Factsheet Population (last census FY2014) 127,220,000 inhabitants

Land Area 377,962 km2

Capital Tokyo

Currency Japanese Yen (JPY)

Gross Domestic Product (GDP) FY2017 JPY 551 trillion10 (EUR 4.238 trillion)

Sovereign Debt FY2016 (247% of GDP) JPY 1,371 trillion11 (EUR 10.54 trillion)

Foreign Direct Investment (FDI) FY2016 JPY 27.8 trillion12 (EUR 213 billion)

Country Competitiveness Index FY2016 Global Rank13: 8th

Tax Revenues FY2017 JPY 57.7 trillion14 (EUR 443 billion)

Consumption Tax (Value Added Tax) 8%

Unemployment Rate FY2017 2.4%15

Life Expectancy (Men) 80.5 years16

Life Expectancy (Women) 86.8 years17

Figure 3: Japan Factsheet

It is well known that Japan rapidly strengthened its position in the global economy during the post- war period. Historically, the primary drivers of Japan’s strong economic growth have been high

10 www.japan.go.jp/abenomics/index.html 11 www.reuters.com/article/markets-debt-global-idUSL8N1G95BD 12 www.japan.go.jp/abenomics/index.html 13 Top 10 Most Competitive Global Economies, The Global Competitiveness Report 2016-2017 14 www.japan.go.jp/abenomics/index.html 15 www.japan.go.jp/abenomics/index.html 16 http://www.who.int/kobe_centre/mediacentre/whs/en/ 17 http://www.who.int/kobe_centre/mediacentre/whs/en/

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rates of investment in production plants and equipment, applications of industrial efficiency, high education standards, good relations between labour and management, ready access to leading technologies with significant investments in research and development, increasingly open world trade framework and a large domestic market of discerning consumers – all of which have given Japanese businesses an advantage in scale and operations effectiveness.

At the same time, the rapid ageing of the population has created tremendous structural implications on the future workforce, the savings rate of the working population, and hence, the government tax revenue budget.

Japan is a constitutional monarchy, with the Emperor as the symbolic head of state. The system is a parliamentary democracy with the as the sole legislative body. The Diet is composed of an Upper House (House of Councillors) and a Lower House (House of Representatives), and a Prime Minister, chosen by a Diet ballot, who appoints a cabinet, with a majority required to be Diet members.

Japan’s voting system is non-obligatory, and the voting age was lowered from 20 to 18 years in 2015, resulting in 104 million eligible voters.

The Liberal Democratic Party (LDP) has governed Japan for most of the last 70 years and was only out of power briefly in 1993-1994 and in 2009 when the Democratic Party of Japan (DPJ), led by Yukio Hatoyama, secured a historical victory that put the DPJ into governing powers.

Since then, following a landslide election victory by the Liberal Democratic Party (LDP), Prime Minister Shinzo Abe took office as Japan’s 57th re-elected Prime Minister in 2014. Since August 2016, Abe’s Cabinet has 20 ministers, including the Prime Minister himself. As a result, Japan’s economic and financial situations have undergone noticeable changes like the lowest unemployment rate of 2.8% for the past 23 years and increased tax revenues of JPY 15.4 trillion (EUR 118 billion) to JPY 57.7 trillion (EUR 443 billion) for FY2016 versus JPY 42.3 trillion (EUR 325 billion) in FY2013.18

18 https://www.japan.go.jp/abenomics/index.html

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2.2. Economic Overview

Today, aiming for a future GDP of JPY 600 trillion (EUR 4.61 trillion), Japan is still the 3rd largest global economy, after the US and China. Japan’s main industries are automotive, consumer electronics, computers, other electronics and pharmaceuticals. Services represent 75% of the GDP, industrial activities 23.5% and agriculture 1.5%.

Following the financial and real estate bubble bursting in the early 1990’s, and after more than two decades of economic stagnation, Prime Minister Shinzo Abe and his Cabinet unveiled a comprehensive economic policy package to revive and sustain the Japanese economy while maintaining fiscal discipline. This programme became known as Abenomics.

The centrepiece of Abenomics is the “Three Arrows Policy” targeted at an active monetary policy, a flexible and stimulant fiscal policy and a sustainable long-term growth strategy - all carried out through structural reforms to encourage private investments. The economic parameters focus mainly on boosting productivity, driving innovation and trade, and stimulating corporate activity.

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Three Arrows Policy of Abenomics

Figure 4: Three Arrow Policy of Abenomics

Internationally, the Brexit (UK) in July 201619 and the inauguration of US President Donald Trump in early 2017 had strong but temporary impact on the exchange rates between the JPY and the Euro. Since the middle of 2017, the rate is back to usual trade levels and has been hovering around JPY 130 for EUR 1.

Given the long-term low and negative interest rates by the Central , it is believed that the Japanese Yen will remain relatively strong for the near future against other global currencies, including the Euro, thus creating export business opportunities for overseas manufacturers and suppliers. In this report, all JPY-EUR exchange rates are calculated at JPY 130 for EUR 1.

In recent years, multinationals like Apple (US), Nokia (Finland), Continental (Germany) and BASF (Germany), have created major Research and Development (R&D) centres in Japan. Internet

19 http://www.reuters.com/article/us-global-forex/yen-advances-on-brexit-impact-fears-pound-plunges-to-31-year-low-idUSKCN0ZM00T

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companies like Facebook, Google and Amazon (all US) have also had presence in the country for some time now. Recently, however, newer internet companies like TripAdvisor, Airbnb, Uber, Netflix, Hulu and Spotify have established representative offices in Japan. For FY2020, Japan is targeting JPY 35 trillion (EUR 269 billion) of inbound Foreign Direct Investment (FDI).

Tokyo is and continues to be the favourite city to establish a presence (35%) in Japan, while Osaka represents 16% of total FDI value. Nagoya remains a popular destination for automotive manufacturing and related businesses, given Toyota Motors has its global headquarters there. Yokohama is especially popular for larger scaled R&D centres. Both cities have an FDI share of 11% each. These four major cities combined represent almost 75% of total FDI value in Japan. Across all foreign direct investments in Japan, Asia represents 40%, Europe 31% and the USA 29%.20

Since Prime Minister Abe took office in 2012, annual corporate profits have increased to JPY 75 trillion (EUR 576 billion) in March 2018. As an indicator, the Nikkei Index has remained in the JPY 20,000 range since the beginning of 2018. These results were mainly obtained through large-scale monetary easing policies, consecutive tax reforms (corporate tax ratio was 37% in 2013 and Abe’s cabinet is aiming for 29.74% by end of 2018).

2.3. Trade Overview between EU and Japan

2.3.1. EU and Japan Business in Figures

Japan is the EU’s 2nd biggest trading partner in Asia, after China and the 6th most important trading partner on a global scale, while the EU is Japan’s 2nd biggest trading partner worldwide.

20 JETRO, Invest Japan Report 2016

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EU-Japan Trade Figures for Goods 2015-201721

EU-Japan Trade Figures for Goods 2015-2017 Unit: EUR billions 80 70 60 50 40 66.7 68.9 30 59.8 56.5 58 60.5 20 10 0 -10 2015 -3.3 2016 -8.6 2017 -8.4 -20

EU Imports EU Exports Balance

Figure 5: EU-Japan Trade Figures for Goods 2015-2017

EU-Japan Trade Figures for Services 2014-201622

EU-Japan Trade Figures for Services 2014-2016 Unit: EUR billions 35 30 25 20 15 31 25 27.6 10 16.1 18 15.1 13.0 5 10.0 11.6 0 2014 2015 2016

EU Imports EU Exports Balance

Figure 6: EU-Japan Trade Figures for Services 2014-2016

21 http://ec.europa.eu/trade/policy/countries-and-regions/countries/japan/ 22 http://ec.europa.eu/trade/policy/countries-and-regions/countries/japan/

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Facts and Figures Economic Partnership Agreement (EPA)

Figure 7: Facts and Figures Economic Partnership Agreement (EPA)

2.3.2. EU-Japan Economic Partnership Agreement (EPA)

The EU and Japan together account for about 25% of the world’s GDP23 and have a combined population of 632 million people. On 6 July 2017, during the 24th EU-Japan Summit held in Brussels, the President of the European Commission Jean-Claude Juncker, the President of the European Council Donald Tusk and the Shinzo Abe announced the principle agreement of the Economic Partnership Agreement between the EU and Japan.

23 http://ec.europa.eu/trade/policy/countries-and-regions/countries/japan/

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EU Japan Summit: EPA Agreement

Figure 8: EU Japan Summit: EPA Agreement

Negotiations between both parties started back in 2013 and after 18 mutual meetings on technical and political levels, the most important bilateral trade deal ever was concluded. After ratification of the agreement, foreseen for 2019, predictions are that EU exports to Japan could increase by 34% while Japan’s exports to the EU are expected to grow 29%.24 The EPA is said to boost trade in goods and services, with an estimated GDP growth up to 0.8% for the EU and up to 1% for Japan, while creating investment opportunities for both economic blocks that might result in 420,000 new jobs.

It also includes the protection of EU standards and will further eliminate trade barriers and ease regulatory standards over the next decade. In addition, the EU will gain improved access to Japan’s public procurement systems at both government and private enterprise levels. In return, Japan will gain eased market entrance for automotive, pharmaceutical and home electronics industries.

24 European Commission, Trade Sustainability Impact Assessment of the Comprehensive Trade and Investment Agreement between the European Union and Japan, Final Report, http://trade.ec.europa.eu/doclib/docs/2016/may/tradoc_154522.pdf

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3. Market Overview and Business Opportunities

3.1. Japanese Construction & Building Technologies Market

3.1.1. Brief Historic Overview

The Japanese construction & building sector has traditionally been one of Japan’s core industries, especially, since the end of World War II, following large and long-term infrastructure works on a nationwide scale, ordered by the central and local governments.

Japan’s investments efforts in the construction market peaked in FY1992 valued at JPY 84 trillion (EUR 646 billion), which also marked the end of Japan’s bubble economy of the 1980’s. However, ever since then, the economy in general and the construction market have been contracting. Numerous economists often refer to this period as Japan’s 2nd lost decades. In FY2010, after the Lehmann shock, construction investments bottomed at JPY 42 trillion (EUR 323 billion), representing half of its peak in FY1992.25

In the last 50 years, the Japanese construction industry usually accounted for around 5% to 10% of the country’s Gross Domestic Product (GDP) on annual basis. In FY2016, the sector employed about 4.95 million people, equal to 7.7% of the total Japanese working population of 64.65 million. 26 Compared to the peak of 6.85 million employees during FY2016, this is a decline of about 28%.27

25 Trends of the Domestic Construction Machinery Industry, Sumitomo Mitsui Banking Corporation, 2018 26 Handbook 2017, Japan Federation of Construction Contractors 27 Japan Country Report, Research Institute of Construction and Economics 2017

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Comparison Global Construction Market in 2015 Japan USA UK France Germany Korea

GDP: JPY trillion 532.2 2,183.2 346.6 292.9 407.3 148.1 (EUR trillion) (4.09) (16.79) (2.66) (2.25) (3.13) (1.13) Construction Investments: JPY trillion 50.8 174.3 31.9 33.9 39.6 21.6 (EUR billion) (390) (1,340) (245) (260) (304) (166) Annual Growth (% vs FY2010) 4.0% 6.7% 6.6% 0.3% 4.5% 2.5%

Construction Companies (‘000s) 468 762 274 576 392 68 (FY’14) (FY’14) Construction Employees (‘000s) 5,020 9,935 2,265 1,651 2,723 1,823

Working Population (%) 7.8% 6.7% 7.2% 6.4% 6.8% 7.0%

Figure 9: Comparison Global Construction Market

However, since FY2011, an upward construction and infrastructure investment trend has been seen, due to rising demand induced by the disastrous Tohoku earthquake and accompanying tsunami and the 2016 Kumamoto M7.0 earthquake, on the southern island of Kyushu. Finally, all the public and private construction projects related to the upcoming Tokyo 2020 Summer Olympics and Paralympics are providing tailwind for the Japanese construction business.

According to the market report of the Research Institute of Construction and Economics, the Japanese construction market is predicted to grow slowly but steadily over the next decade, estimated to reach JPY 52.5 trillion (EUR 403 billion) by FY2020, JPY 54.4 trillion (EUR 418 billion) by FY2025 and JPY 56.4 trillion (EUR 433 billion) by FY2030.28

28 Policies for the Construction Industry 2017 + 10, MLIT

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3.1.2. Market Overview

In FY2016, Japan had approximately 465,000 registered construction companies nationwide, a decline of 22.6% from the peak in FY200029. Only 1,291 companies, a mere 0.3% of these 465,000 in total, are capitalised over JPY 1 billion (EUR 76.9 million) clearly showing that the Japanese construction sector mainly consists of local Small & Medium size Enterprises (SMEs) with less than 10 employees on their payroll.

According to the Construction Handbook 2017, issued by the Japan Federation of Construction Contractors, the estimated total construction investments for FY2017 was around JPY 54.96 trillion (EUR 422 billion), up 4.7% compared to the previous fiscal year. This makes Japan the 3rd largest construction market worldwide, accounting for a global market share of 6%.

Building construction investments will total about JPY 30.22 trillion (EUR 232 billion) in FY2017, up 1.9% from the previous fiscal year, while civil engineering works will amount to JPY 24.74 trillion (EUR 190 billion), representing an 6.3% increase from the previous fiscal year.

The FY2016 total floor space of new building construction starts stood at 132.96 million m2, up 2.7% from the previous year. The floor space of buildings for wholesale and retail trade use increased by 6.1% to 8.02 million m2, compared to the previous fiscal year.

In the same year, the total number of new housing construction30 starts increased, for owned and rented house and built-for-sale units, to a total of 970,000 housing units, up 6.4% from the previous year, an increase for the second consecutive year.31

29 Japan Country Report, Research Institute of Construction and Economics 2017 30 For condominium buildings, the number of units were counted 31 Statistical Handbook of Japan, Ministry of Internal Affairs and Communication, 2017

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The following table provides an overview of the construction value per geographic region over the last 3 fiscal years.

Construction Investment Value per Geographic Area Area (Major Cities) Investment Value JPY trillion (EUR billion) Growth Percentage (%)

FY2015 FY2016 FY2017 FY2016 FY2017

Hokkaido Island (Sapporo) 2.59 2.68 2.80 3.5% 4.5% (19.92) (20.61) (21.53) Tohoku region (Sendai) 6.71 7.00 7.17 4.3% 2.4% (51.61) (53.84) (55.15) Kanto region (Tokyo, Yokohama) 16.82 18.04 18.73 7.3% 3.8% (129.38) (138.76) (144.07) Hokuriku region (Kanazawa) 2.64 2.64 2.81 0.0% 6.4% (20.30) (20.30) (21.61) Chubu region (Nagoya) 5.91 6.09 6.37 3.0% 4.6% (45.46) (46.84) (49.00) Kinki region (Osaka, Kobe) 6.50 6.42 6.85 -1.2% 6.7% (50.00) (49.38) (52.69) Chugoku region (Hiroshima) 2.74 2.67 2.86 -2.6% 7.1% (21.07) (20.53) (22.00) Shikoku Island (Matsuyama) 1.40 1.45 1.54 3.6% 6.2% (10.76) (11.15) (11.84) Kyushu Island (Fukuoka) 4.81 4.67 5.00 -2.9% 7.1% (37.00) (35.92) (38.46) Okinawa Islands (Naha) 0.71 0.80 0.83 12.7% 3.8% (5.46) (6.15) (6.15) Figure 10: Construction Investment Value per Geographic Area

In terms of breakdown between public and private construction investments, private investment amounts stand at JPY 32.73 trillion (EUR 251 billion), up 4.3% from the previous FY2016, while public investment will total about JPY 22.23 trillion (EUR 171 billion), a growth of 5.4% versus last fiscal year 2016.32

32 http://www.nikkenren.com/publication/pdf/handbook/2017/2017_sankou.pdf

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Overview Breakdown Construction Investments in Japan: JPY trillion (EUR billion) FY2015 FY2016 FY2017 (est.)

Total Value Construction Investment 50.82 (390.92) 52.47 (403.61) 54.96 (422.76)

Total Value Buildings 27.33 (210.23) 29.20 (224.61) 30.22 (232.46)

Residential 15.49 (119.15) 16.42 (126.30) 16.73 (128.69)

Private 14.74 (113.38) 15.68 (120.61) 15.95 (122.69)

Public 0.75 (5.76) 0.74 (5.69) 0.78 (6.00)

Non-Residential 11.84 (91.07) 12.78 (98.30) 13.49 (103.76)

Private 10.00 (76.92) 10.60 (81.53) 11.19 (86.07)

Public 1.84 (14.15) 2.18 (16.76) 2.30 (17.69)

Total Value Civil Engineering 23.49 (180.69) 23.27 (179.00) 24.74 (190.30)

Private 4.96 (38.15) 5.10 (39.23) 5.59 (43.00)

Public 18.53 (142.53) 18.17 (139.76) 19.15 (147.30)

Figure 11: Overview Breakdown Construction Investments

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Construction Breakdown per Type FY2016: Private: 59.8%; Public: 40.2% Construction: 55.7%; Civil Engineering: 44.3%

Private Housing Public Civil 30% Engineering 35%

Public Building 4%

Public Housing 1% Private Building Private Civil Engineering 20% 10%

Figure 12: Construction Breakdown per Type FY2016

Evolution Total Annual Value of Public Infrastructure Works Unit: JPY 10 billion 1600 1,457 1,452 1,454 1400 1,397

1200 1,238 1,122 1000 1065 1061.4 1021.2 1062.8 800 904.9 820.1 600

400

200 391.9 390.5 391.1 301.8 333 375.7 0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Central Government Regional Governments Total

Figure 13: Evolution Total Annual Value of Public Infrastructure Works

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A brief overview of the presently ongoing major public infrastructure works in Japan are explained below.

Maglev Line Construction between Tokyo and Nagoya

The Maglev (Magnetic Levitation or Linear) Chuo Line between Tokyo and Nagoya, with expected operational speeds exceeding 500km/h, is scheduled to open in 2027, with a future extension to Osaka by FY2045. Given the high priority that Prime Minister Abe33 and Japan have placed on increasing inbound tourism to +40 million visitors annually by FY2020, ongoing and additional Shinkansen routes together with the continued Maglev construction investments are key cornerstones for sustainable economic growth in the long term.

Figure 14: Future Maglev Tracks

Different from the present Shinkansen tracks that run parallel with the coast line, 286 kilometres (equal to 86% underground tracks) of the new Maglev tracks will run through tunnels in the Japanese Southern Alps, resulting in a JPY 9 trillion (EUR 69.23 billion) construction budget for the entire project.

Japan Railways (JR) Central, the future operator of the Maglev Line, invested a total of JPY 423 billion (EUR 3.25 billion) in FY2016. Almost a quarter of that total budget, namely JPY 113 billion (EUR 869 million), was allocated to Maglev related construction works.

33 www.kantei.go.jp

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Infrastructure investments related to Maglev business will only but increase over the following years given the scheduled inauguration in 2027.

During initial testing’s recently, a Maglev test ride set a new world speed record of 603 km/h during a test run near mountain Fuji in October 2017. It goes without saying, with Japan being earthquake prone, the quality standards for the track construction works and environmental impact at these speed levels are extremely high and well-defined for the general contractors involved.

Continuous Land Development near Haneda International Airport in Tokyo

Following a significant increase of inbound tourism in recent years, including an anticipated boost related to the 2020 Tokyo Summer Olympics, several large parcels of land adjacent or in the immediate vicinity of Haneda International Airport in Tokyo are being developed at present by several major Japanese general contractors.

Two zones of land comprising some 15.3 hectares in total are sandwiched between Haneda International Airport and the Tama river. Haneda Zone 1 is about 11 hectares and owned by Ota Ward, one of the 23 wards of the Tokyo Metropolis. In May 2017, a consortium led by Kajima Corporation won the bid where they plan to build a multiplex project comprised of offices, an advanced medical research centre, conference facilities, exhibition space, entertainment space, restaurants and retail shops.

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Design Image Haneda Zone 1 by Kajima Corporation

Figure 15: Design Image Haneda Zone 1 by Kajima Corporation

The smaller 4.3 hectares Haneda Zone 2 is owned by the Japanese Government. In 2016, a group led by Sumitomo Realty & Development won this bid, being a lease of 50 years, bearing an annual rent of JPY 2.7 billion (EUR 207 million). The Sumitomo consortium will build 3 hotels comprising of 1,700 hotel rooms, as well as event spaces, conference rooms and even hot springs.

In the future, Haneda Zone 3, adjacent to Haneda International Airport, will also be put up for commercial development but no specifications available yet.

Lastly, a vast area of about 40 hectares situated in the City of Kawasaki, just across the Tama river, from Haneda International Airport, is being developed by Daiwa House under the project name of King SkyFront34. It will mainly be comprised of offices and laboratory/ research facilities as it has been designated as a national strategy zone by the Japanese government.

The project also includes an impressive construction of an 840-metre long bridge spanning the Tama river, connecting Haneda Zone 2 and King SkyFront, under the supervision of the Japanese

34 https://journal.accj.or.jp/king-skyfront/

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government. All aforesaid projects are scheduled to start commercial operations by the 2020 Tokyo Summer Olympics.

Figure 16: King SkyFront by Daiwa House and Connection Bridge by Cabinet Office

Redevelopment of Shibuya Station and Neighbourhood

The most visible ongoing large-scaled redevelopment and construction project at present is surely the Shibuya station and surrounding plot of lands totalling 5.5 hectares that have been under redevelopment since 2010. Shibuya station is the 4th busiest station in Japan, servicing 8 train and subway lines and a vast number of bus lines.

As the station has been in operation since 1885, including several expansions overtime, the layout became aged and too complex. Hence, the long-term master plan to upgrade the complete area between 2010 to 2026. At present, the station construction works are largely completed and the new shopping centre Hikarie opened in 2012.

The construction of the tallest building with 46-storeys with a height of 228.3 metres, started in 2014. This building is scheduled to begin operations before the 2020 Olympics for office use, including Google Japan’s new offices, and retail shopping malls.

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Figure 17: Shibuya Station Redevelopment Project

Redevelopment of the Toranomon Area

The Toranomon area, adjacent to Kasumigaseki, famous for its national government offices, has been under redevelopment in recent years by the Mori Building group. In 2014, the first tower of the multi-plex, a 52-storey high with offices, luxury private residences and a high-end new hotel Andaz on the top 6 floors, opened for business. The building was designed by Japan’s leading architecture agency Nihon Sekkei, developed by Mori Building and constructed by Obayashi, one of Japan’s largest general contractors.

Three more skyscrapers are currently under construction, including even a new subway station for the Hibiya line and are scheduled to be opened by the 2020 Tokyo Summer Olympics. Also, this Mori Building project, like the famous complex in Tokyo, faced several difficulties, spanning many years, in acquiring the necessary land rights from numerous owners.

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Figure 18: Toranomon Hills Multi-Use Complex with New Hibiya Subway Station

Toyosu Wholesale Market

As the Tsukiji central fish market, the largest wholesale market for fishery globally and nowadays also a popular sightseeing spot for overseas tourists, became outdated amongst others for hygienic fresh food transactions, the Tokyo Metropolitan Government decided to build a completely new and state-of-the-art facility in the Toyosu area, just across the Edo river, which was completed in 2016.

However, as the reclaimed plot of land for the new fish market contained unacceptable prominent levels of toxic waste, Ms. Yuriko Koike, the newly elected governor of Tokyo, decided to postpone the planned move to Toyosu and to completely re-examine the current environmental conditions. In August 2017, the green light was given to proceed with the move to the new facilities in Toyosu.

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The redevelopment details of the vast Tsukiji area, walking distance from Ginza, Japan’s most valuable land area, and the actual relocation schedule to the Toyosu facility have not been determined yet.

Figure 19: Aerial view of the new Toyosu Fish Market

New National Stadium

As aforesaid, the city of Tokyo will be hosting the upcoming 2020 Summer Olympics, so in February 2012, it was decided to build a completely new stadium on the former site of the 1964 Tokyo Olympics, to assure an appropriate venue with international allure. A competitive public tender for the new national stadium was launched, and the design submitted by the office of Zaha Hadid beat the competition.

However, as some reports emerged, stating that the projected construction costs of the new Olympic stadium, based on Ms Hadid's design would greatly exceed the budget, more and more people started to criticise the design itself, from a budget and sustainability perspective. As a consequence, Prime Minister Abe decided to cancel the award of the design to Hadid’s office.

In June 2015, the Olympic stadium project was awarded to a design-build proposal made by a consortium, including the office of the Japanese well-known architect Kengo Kuma and Taisei Corporation, one of Japan’s major general contractors. The demolition of the old stadium and the

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construction of the new national stadium already started in December 2016 and is planned to be completed by the end of 2019.35

Figure 20: New National Stadium in Tokyo by Architect Kengo Kuma

For large-scaled construction projects as aforesaid, usually one of Japan’s 5 major general contractors, being Shimizu, Obayashi, Taisei, Kajima and Takenaka, is involved, either on a stand-alone basis or via a consortium of several construction companies.

3.1.3. Market Challenges

Ageing Working Force

The construction business in Japan, has traditionally been referred to as a 3K sector, where each of the K’s stands for Kitsui (hard work), Kitanai (dirty work) and Kiken (dangerous work), making it a quite unpopular sector amongst younger Japanese people. According to the Japan Federation of Construction Contractors, the number of skilled construction workers in Japan, of whom there were 3.43 million in FY2014, is expected to decline by as many as 1.28 million by FY2025, mainly because of aging.

35 https://uk.practicallaw.thomsonreuters.com

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With the labour shortage expected to worsen further, attracting young, skilled workers, including women, is one of the biggest challenges of the sector at present.36 In FY2016, the total female construction workforce represented a mere 14.9% compared to an average of 43.5% in all other Japanese industries. As for skilled female construction workers this figure drops even to 1.8% in the total.

To counter this declining trend and to realise a rejuvenation, a new 3K version has popped up in recent years, standing for Kyuryo (remuneration), Kyuka (days off) and Kibo (hope). Hopefully, this awareness campaign will attract sufficient and capable young skilled workers that must steer the sector towards better automation and efficient robots in the (near) future.

Age Demographics Construction Workforce Unit: '000s

15-19 50

20-24 220

25-29 290

30-34 380

35-39 530

40-44 690

45-49 610

50-54 490

55-59 470

60-64 520

65+ 680

0 100 200 300 400 500 600 700 800

Workforce Number

Figure 21: Age Demographics Workforce in the Construction Industry

36 https://asia.nikkei.com/Japan-Update/Construction-workers-in-Japan-to-get-Saturdays-off

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On a positive note, this decreasing workforce trend is pushing up the basic monthly wages and hourly rates for construction workers and employees.

Long Working Hours

Directly related to the ageing and decreasing work force, combined with the old Japanese business habit of completing construction sites by either the end of September (marking the end of the first 6 business months of a typical fiscal year) or by the end of March (end of a typical Japanese fiscal year), these factors have put enormous strains on the complete construction workforce. In weeks leading up to these periods, Saturday work is de facto standard, even working on Sundays and National Holidays are common practices to meet these deadlines. On average, 49.4% of all construction workers have a mere 4 days off (33.5%) or even less (15.9%) every 4 weeks.37

For FY2016, the annual average working hours for the Japanese construction industry clocked in at 2,102 hours, being 300 hours longer than the average compared to all other Japanese industries, mostly all of which have adopted an actual five-day working week.

Annual Working Hours in the Construction Industry vs Average All Industries in Japan

Figure 22: Annual Working Hours in the Construction Industry vs Average All Industries

37 Handbook 2017 of Japan Federation of Construction Contractors

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This situation is pushing the sector hard to improve on working efficiency in the very near future. In recent years, more and more foreign workers from Asia, even Africa, have found their way to the construction business in Japan.

Material and Labour Cost Rising

Ever since the 2011 Tohoku earthquake and large-scaled reconstruction works, both the construction material and labour costs have been rising continuously. For FY2016, labour cost increased for 4 years in a row, but material costs remained flat.

Limited Share in Overseas Construction Projects

In recent years, the sales generated from overseas projects declined but it is estimated that FY2017 it will again be exceeding JPY 1.6 trillion (EUR 123.07 billion), putting it again at par with the sales turnover of FY2015. Given the total sales of the construction sector of JPY 52.47 trillion (EUR 403.61 billion) in FY2016, the share of the overseas JPY 1.55 trillion (EUR 119.23 billion) sales represents less than 3%, showing clearly the high dependency rate on the domestic market of the Japanese construction sector.

However, for the top 10 of the Big 50 general Japanese contractors, these large overseas projects are a key factor in their consolidated annual sales turnover. Together with the back-up of the Japanese government, they are targeting a bigger share of Asia’s Infrastructure Needs for 2016- 2030 estimated at USD 23 trillion, an equivalent exceeding USD 1.5 trillion on annual basis.

At the same time, as Japan’s annual ODA budget shrunk from JPY 729.3 billion (EUR 5.61 billion) in FY2007 to an average of JPY 550 billion (EUR 4.23 billion) in recent years, winning overseas projects, unrelated to Japan’s ODA projects, has become even more pressing for Japan’s major general contractors with overseas networks. However, global competition of Chinese, Korean and European competitors has proven to be fierce for Japanese contractors in foreign markets.38

38 Policies for the Construction Industry 2017 + 10, MLIT

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Evolution Overseas Construction Projects (unit: JPY 1 billion) 2000

1800

1600

779.9 1400 605.7 395.2

1200

1000

800

600 1151.1 1035.4 1076.8 400

200

0 FY2014 FY2015 FY2016

Local Japanese Company Contract Japanese Parent Company Contract

Figure 23: Evolution Overseas Construction Projects in Value

During FY2016, Japanese general contractors signed 85 new projects in Europe, valued at JPY 47.7 billion (EUR 366.92 million), almost exclusively for private-sector clients. Eastern Europe took the lion share of this amount with a value of JPY 39.1 billion (EUR 300.76 million).39

Asia is by far the leading region with a turnover share of +50%, while the US and Europe combined account for approximately 40%. In FY2016, the overseas daughter companies signed

39 Overseas Contracts FY2016, The Overseas Construction Association of Japan

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75% of all contracts, while the Japanese parent company oversaw the remaining 25% of the signed contracts.

Given the prominent dominance of domestic construction companies, Japan had only 137 registered foreign capital construction companies, which is nevertheless, a historical record high number. Europe was the largest region of origin with 70 companies, the US had 41 companies, while Asian headquartered construction companies came in 3rd with 22 companies.40

3.1.4. Market Trends

Outlook

During the forecast period (2017–2021), the construction industry is expected to expand gradually at an annual growth rate of 1.2%. The future growth rate is influenced by factors such as high public debt and deflation. However, spending efforts by the government, backed by the Liberal Democratic Party (LDP), to which also Prime Minister Abe belongs, are revitalising the economy by focusing on infrastructure development. This is expected to provide momentum for further construction industry’s growth in the years to come, especially in civil engineering works.

Infrastructure construction is expected to be the fastest-growing market in the industry over the forecast period, registering a nominal compound average growth rate (CAGR) of 3.29%, backed by the government’s effort to develop the transport infrastructure to improve regional connectivity leading up to the 2020 Olympic games.

The Summer Olympics and Paralympics, to be hosted by Tokyo, are expected to be another key driver of the industry’s expansion over the forecast period. The government estimates that JPY 898.8 billion (EUR 6.91 billion)41 is required to develop games-related infrastructure by 2020. At the same time, the total economic benefits are estimated at JPY 32.3 trillion (EUR 248 billion)

40 Ministry of Land, Infrastructure and Transport 2017 41 Construction in Japan: Key Trends and Opportunities to 2021, Report Buyer

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across Japan. The estimate covers 18 years starting from FY2013, the moment Tokyo was chosen as official host, till FY2030.42

Increased construction activity reflects the demand arising from the needs of:

 Preparation for the 2020 Summer Olympics

 Clean up and reconstructing the Tohoku region following the Great East Japan Earthquake of 11 March 2011

 Repair damaged infrastructure following a large earthquake in mid-April 2016 in Kumamoto and devastating mudslides in 2017 in parts of Kyushu, the southern island of the

 Respond to the steady demand for new buildings in Tokyo as land prices are expected to keep rising, while the interest rate at the Japanese banks on long-term mortgage loans remains historically low

 The after-care market for houses and structural maintenance projects of existing mansion projects and public buildings will also remain brisk over the coming years

Due to the aforesaid, manpower and construction materials have been in short supply, and the total construction costs have been increasing rapidly in recent years.

Private Finance Initiatives

The central government, lead by Prime Minister Abe and his Cabinet, has been implementing new measures to boost private investments for reconstruction and maintenance of public infrastructure. One of the measures implemented is the revision of the Public Private Partnerships (PPP) model, commonly known as Private Finance Initiative (PFI) in Japan.

The PFI Act of 1999 was enacted to actively promote private investment in the country. Initially, the act was based on the Build Operate Transfer (BOT) scheme where private entities undertook financing, designing, and construction of projects, which were then operated and managed by

42 https://www.marketopportunities.fi/demand-for-design-services-on-the-rise-in-major-construction-and-renovation-projects-in-japan

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public authorities. However, following the revised PFI Act in 2011, the private sector will not only be responsible for financing and construction but will also be entrusted with the maintenance, operation and management of the facility via long-term concession agreements.

To encourage participation by private investors in the construction market, the Japan Exchange Group is planning to create a new market to enlist funds from institutional investors, such as pension funds and insurance companies. These new measures undertaken by the present government will increase investment in the construction sector in Japan.

After-care and Maintenance Market

As land prices have been historically high in Japan, due to limited flat land only available in the major bay areas around Tokyo, Nagoya and Osaka, up till now the relative weight of high quality building materials were limited. On average, in the Tokyo area, the land cost will make up around 70%, while the actual house building cost will only be 30% in the total budget.43

The basic idea was “scrap and build”44 every 20-30 years, once the house or building was valued close to zero, from the perspective of financial depreciation. Different from Europe, Japanese consumers have a clear preference for newly build houses and condominiums compared to second-hand dwellings. During FY2016, only 579,000 dwellings, representing 37.4% of all sold units in Japan were second hand, where this figure stands at 66.4% in France and 88.8% in the UK. The average lifespan of a house in Japan is 26 years, while it is 44 years in France and even 75 years in the UK.45

Usually, this is also a normal lifespan that falls together with changing family situations, like children who leave the house or parents who need a simpler/smaller/more convenient dwelling for their older days. Hence that rebuilding, when you own the plot of land, being the biggest share out of the budget, did make sense in Japan. Also, the cash retirement lump sum, paid at once to the employee of a large Japanese company, is sufficient to build a new house.

43 http://japanpropertycentral.com/real-estate-faq/house-buying-guide/ 44 https://edition.cnn.com/style/article/how-japan-makes-houses/index.html 45 Sumitomo Real Estate Market Report 2017

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This scrap and build mindset is deeply rooted in the mindset of Japanese people, given the constant risks of natural disaster like typhoons, mudslides or torrential rains that can destroy a house or building, not even speaking about disastrous earthquakes, often followed by large fires, at any time.

Now that Japan is gradually becoming more environmental conscious and needs to reduce construction waste, larger buildings must remain functional longer, resulting in continuous annual growth for maintenance projects, both in absolute figures and in value.

After-care and Maintenance Market Unit: JPY 1 trillion 60

50 15.3 15.8 14.9 40 13.8 14.3

30

40.6 20 37.4 39.6 32.7 32.8

10

0 FY2011 FY2012 FY2013 FY2014 FY2015

New Projects Value Maintenance Value

Figure 24: After-care and Maintenance Market is Strong

During FY2015, maintenance projects were valued at JPY 15.8 trillion (EUR 121.53 billion), representing a 28% share in the total value of the construction sector during the same fiscal year. As for a breakdown, private residences (18.3%), private buildings (31.4%) and public civil engineering projects (15.6%) together have a volume share of +65%.

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Especially public civil engineering works show robust 4.6% ~ 5.5% growth potential per annum in the coming years 10-20 years as many were constructed during the 1970-80’s construction rush and are now in dire need of maintenance works. Japan’s public infrastructure is enormous with 400,000 bridges longer than 2 metres, 10,000 tunnels, 450,000 km of sewage, 10,000 waterworks facilities and 5,000 harbour walls.46

This creates export and business opportunities for European construction companies with competitive technology in sustainable renovation, insulating sashes with functional glass and deconstruction technologies for, but not limited to, public infrastructure works.

Environmental Factors

Following its recent commitment to the global COP21 Paris Agreement, Japan wants to become a low carbon society soon. The Japanese construction industry aims to reduce its CO2 emissions by 25% by FY2030, compared to 1990 levels. To realise this, the construction industry has launched a comprehensive voluntary action 2016-2020 plan, focusing on the following 4 pillars.47

Figure 25: Voluntary Action Plan of the Construction Industry: 6th Policy 2016-2020

More concretely, via this Voluntary Action Plan 2016-2020, the Japan Federation of Construction

Contractors aims to reduce its CO2 emissions by the following specific actions for each of the 4 pillars.

46 After-care and Maintenance Market is Strong, Handbook 2017 of Japan Federation of Construction Contractors, 2017 47 Voluntary Action Plan of the Construction Industry: 6th Policy 2016-2020, Japan Federation of Construction Contractors, 2016

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 Environmental Management (M):

. Revision ISO 14001

. Action Plan Global Warming 2050

 Low Carbon Society (C):

. Reduction CO2 emissions with 20% by 2020 compared to 1990 levels

. Reduction CO2 emissions with 25% by 2030 compared to 1990 levels

 Recycle Based Society (R):

. Re-use of Construction Sludge with +90% by FY2018

. Reduce Construction Waste below 10kg/m2 by FY2018

. Effective Usage Rate of Construction Soil over 80% by FY2018

 Nature-Harmonious Society (N):

. Protection of Diversity of Living Creatures

. Sustainable Development

In the energy field, the development of solar power plants is continuing, even though the Japanese Government decreased the procurement price of solar power. The development of other types of renewable energy, especially large-scaled wind power and bio power sites, has also been increasing in recent years.

Automation, Robots, ICT

The quickly declining number of skilled construction workers is shifting the industry to automation and robots but with the current technology, even widespread deployment of automation within the Japanese construction industry would still only account for 1% of labour. Within the Japanese construction sector, it is a rule of thumb that the construction of a typical 30 story office building requires about 500,000 man-days to construct.

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General contractor Shimizu, recently started to use robots that can weld beams, haul supplies and install ceiling panels. Masahiro Indo, general manager of Shimizu’s construction technology division was quoted “There will be more automation in the next few years, but most of it will happen off-site, we are still at the very beginning.”48

Shimizu is also developing a multipurpose lifting robot, an assisting aid, that will allow three people to lift 200kg, a task that would previously have required 6 workers.

Figure 26: Japan wants robots to help build its skyscrapers

Another major player, Daiwa House Industry developed a robotic system which main task will be spraying fireproof coating, said to be one of the most difficult construction operations. It hopes that the robots can save 30% compared to human labour cost. It is said that Daiwa invested

48 Japan wants robots to help build its skyscrapers, Bloomberg 2018

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almost EUR 1 million into the development of the system, that shows similarities with a system developed by European researchers from ETH in Zurich.49

Figure 27: Daiwa House unveils construction robot

Anticipated shortages on skilled and ageing workers, enhanced by recent innovative robotic systems have sharpened interest of Japanese contractors in overseas automated technologies with construction applications.

Other initiatives by the construction industry in Japan include the pre-casting of stairs and walls in the manufacturing plant, for larger commercial buildings to increase the productivity onsite. ICT

49 Japanese company unveils construction robot, Mai Tao, Robotics & Automation

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systems are also being implemented to improve 3M issues, standing for Muda (waste), Muri (impossible) and Mura (uneven) in Japanese.50

In 2015, the i-Construction campaign was launched by the Ministry of Land, Infrastructure and Transport (MLIT). It aims to promote automation at Japanese construction sites and the development of innovative technologies to improve productivity and to replace the retiring and ageing construction workforce by applying technologies related to the Internet of Things (IoT), Artificial Intelligence (AI), usage of drones for 3D measuring, Building Information Modelling (BIM) & Construction Information Modelling (CIM) systems and specific construction ICT applications.

Specifically, it aims to increase the construction productivity with 1.5 times, reduce the need of skilled workers with 1/3 and assure that smart construction machinery can complete 1,650 m2 compared to 1,100 m2 presently for basic land work.51

3.1.5. Market Players: Construction Companies

General Contractors and Construction Companies

The Big 50

Within the Big 50 Japanese construction companies, the premier league consists of 5 general contractors, namely Obayashi, Kajima, Shimizu, Taisei and Takenaka, with an annual sales turnover exceeding JPY 1 trillion (EUR 7.69 billion) via their global and domestic networks. The top 10 is completed with large constructors like Haseko, Penta-Ocean, Toda, Maeda, Toda and Ando Hazama, all with an annual turnover exceeding JPY 400 billion (EUR +3 billion).

These 10 together manage +20% of the total construction business in Japan and have internal overseas procurement departments, very open to direct imports of construction and building materials for larger projects under their management.

50 Status and Forecast of the Japanese Construction Industry, Cabinet Office 51 Outlook of the Japanese Construction Sector, Sumitomo Mitsui Banking Corporation

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The second league includes companies like Nishimatsu, Kumagaya, Tokyu, Fujita, Konoike, Mitsui Sumitomo and Okumura, too name only a few. Do bear in mind though that almost all of them have or have had major cash flow issues sometime during the past 3 decades, which resulted in mergers and/or acquisitions between these market players like Ando and Hazama, now called Ando Hazama, taking the 10th spot in scale.

Top 10 Japanese General Contractors FY2017: unit JPY billion (EUR billion) Rank Company Sales FY2017 Sales FY2016 Growth (%)

1 Obayashi 1,872 (14.40) 1,777 (13.66) 5.3%

2 Kajima 1,821 (14.00) 1,742 (13.40) 4.5%

3 Shimizu 1,567 (12.05) 1,664 (12.80) -5.9%

4 Taisei 1,487 (11.43) 1,545 (11.88) -3.8%

5 Takenaka 1,216 (9.35) 1,284 (2.18) -5.3%

6 Haseko 772 (5.93) 787 (6.05) -1.9%

7 Penta Ocean 500 (3.84) 491 (3.77) 1.8%

8 Toda 422 (3.24) 492 (3.78) -14.2%

9 Maeda 422 (3.24) 441 (3.39) -4.3%

10 Ando Hazama 407 (3.13) 379 (2.91) 7.6%

Figure 28: Top 10 Japanese General Contractors FY2017

Four out of Japan’s 5 largest general contractors, Obayashi, Shimizu, Taisei and Kajima have filed record profits for the fiscal year 2017, mainly due to a boom in building, infrastructure and reclaimed land projects, most of them in the Tokyo and Osaka area. They announced a combined total of JPY 550 billion (EUR 4.23 billion) in operating profits, beating the expectations of financial experts by 50%, according to a Nikkei Asian Review report.52

52 http://www.globalconstructionreview.com/companies/japans-top-four-contracto7rs-cas7h-oly7pic/

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470 Local Construction Companies

The Ministry of Land, Infrastructure and Transport (MLIT) uses this term to describe the top 10 construction companies in all 47 , excluding the aforesaid Big 50. Their combined market share is about 10% of the total construction market nationwide and is calculated based upon their completed construction works per fiscal year.

3100 Leading Construction Companies

MLIT uses this term to define 3,100 construction companies all over Japan sampled in terms of business categories per prefecture. These companies execute locally the actual work won by general construction companies or other specialised construction companies and operate both in the private and public construction sector. Their total market share is 60% of the total construction orders on annual basis in Japan.

Architectural Design Offices

Another important market, often overlooked, player, besides the above-mentioned house builders, mansion developers and construction companies, are the large Japanese architectural design offices. They are especially relevant for European companies exporting building and construction materials to Japan, as in most cases, they are key decision makers for specifying the building and construction materials, included imported materials, to be applied in their designs and projects.53

53 Sustainable Building and Construction Sector in Japan and Analysis of Opportunities for European Firms, EU-Japan Centre for Industrial Cooperation, 2015

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Decision Maker for Construction Materials Materials Decision Maker

Architects Contractors Owners Others

Tiles & Bricks 73.5% 4.9% 20.8% 0.8%

Clay or Ceramic Roof Tiles 57.0% 15.8% 25.9% 1.3%

Metallic Roofing 72.7% 19.8% 5.8% 1.7%

Cement Roof Tiles 74.0% 18.1% 8.2% 0.3%

Insulation 52.2% 38.6% 6.6% 2.6%

Wooden Exterior Insulation 67.5% 18.1% 10.5% 3.9%

Figure 29: Decision Maker for Construction Materials

Top 10 Architectural Design Offices in Japan: unit JPY million (EUR million) Rank Company Sales FY2016 Employees / 1st Specialties Class Architects 1 Nikken Sekkei 36,568 1,848/821 Office Buildings, (281.29) Overseas Projects 2 NTT Facilities 28,172 5,500/780 Facilities, Data Centres (216.70) 3 Mitsubishi Jisho Sekkei 16,969 644/340 Office Buildings, Urban (130.53) Landscaping 4 Nihon Sekkei 14,778 920/510 Urban Redevelopment, (113.67) Consulting 5 Kume Sekkei 10,602 600/335 Public Buildings (81.55) 6 JR East Design 9,658 553/283 Station Terminals, Public Corporation (74.29) Buildings 7 Yamashita Sekkei 9,183 457/286 Medical Facilities, (70.63) Universities 8 Azusa Sekkei 9,137 524/286 Airports, Sport Facilities (70.28)

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Top 10 Architectural Design Offices in Japan: unit JPY million (EUR million) 9 Ishimoto Architectural & 8,368 363/214 Public Buildings, Sports & Engineering Firm (64.36) Educational Facilities 10 AXS Satow 8,036 277/170 Public Infrastructure, (61.81) Museums, Exhibition Halls, Cultural Facilities Figure 30: Top 10 Architectural Design Offices in Japan

As a rule of thumb, it is prominent for European manufacturers and exporters of construction materials to Japan that architects and their team, tend to make their decision for selected materials based upon the following 4 parameters.

 Quality level (sustainability, functionality, durability, energy saving)

 Design aspect (uniqueness of design, variety/range of designs/products, ability for order- made finishing or not),

 Price tag (cost performance, purchasing price, variety)

 Technical support (accessibility to product information, availability of samples in Japan or not, after-service and maintenance)54

The below-mentioned projects prove that a team of talented foreign/Japanese architects and European construction companies can work efficiently together and achieve great aesthetical and technical achievements. All these famous projects use European glass of Saint-Gobain:

 Prada building designed by the Swiss architects Herzog and De Meuron  Chanel building in Ginza drawn by the American Peter Marino  Dentsu tower by Jean Nouvel  Gucci store in Ginza by John Carpenter  LVMH in Osaka by Kengo Kuma  Cartier in Minami Aoyama by Jin-Mitsui55

54 Sustainable Building and Construction Sector in Japan and Analysis of Opportunities for European Firms, EU-Japan Centre for Industrial Cooperation, 2015 55 Recent construction boom in Japan offers great business opportunities, European Business Council (EBC)

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House Builders

Historically, 1 million new house starts on yearly basis was considered as a prominent barometer for a healthy economic activity level of Japan but in recent years, only FY2013 and FY2016 had figures close to that index parameter.

Annual New House Starts (unit: '000s) 1200

1000

353 292 800 284 316 278 305 600 249 247 259 236 250 6 400 239 5 8 6 6 7 427 200 370 358 384 290 321

0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

For Rent Dormitories For Sale Homeowner

Figure 31: Annual New House Starts

In FY2016, 180 major housing constructors provided 300,390 units, of the total of 974,000 units, given them a combined market share of +30%. This figure includes both owned houses and rental units and represents a 5.1% increase versus last fiscal year 2015.56

56 Daito Kentaku, Japanese News Release 2017

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An average detached house in Tokyo is around 100m2 for habitable surface and usually is a 2 or 3 story structure, depending upon the size of the plot of the land. It typically contains a car space, sometimes a small lawn and the bathroom, as water pipes are cheapest and installation is easiest, on ground floor level. The living room, with dining room and kitchen adjacent to it and 2 or 3 bedrooms on 2nd or 3rd level.

Commonly used wood-framed houses will cost on average JPY 200,000/m2 (EUR 1,538/m2) to build. Reinforced-concrete houses, usually better earthquake resistant with a longer lifetime will start from JPY 450,000/m2 (EUR 3,461/m2). Final cost price will depend upon the design and finishing level with some luxury custom-build dwellings costing up to JPY 1,000,000/m2 (EUR 7,692/m2). Typical factors that push upwards the sales price for detached houses are corner plots, the plot shape, south-facing for Living/Dining/Kitchen (LDK) space and a wide street facing.57

Figure 32: Typical New Detached House for Sales in Tokyo Area

57 http://japanpropertycentral.com/real-estate-faq/house-buying-guide/

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Newly built detached houses as shown above, with an approximate surface of 100m2 and near Tokyo centre, usually come with a price tag between JPY 65~90 million (EUR 460,000~700,000).

The Japanese building market of detached houses is basically split up between 20 major companies with nationwide market coverage and numerous local home builders. Usually, the bigger brands provide better quality assurance, after-service and longevity but also come with higher price tags compared to the smaller local builders.

Top 8 Housing Construction Companies Sales Turnover FY2016: unit JPY billion (EUR billion) Rank Company Sales FY2016 Sales FY2015 Units FY2016

1 Daiwa House 3,512 (27.01) 3,192 (24.55) 52,714

2 Sekisui House 2,026 (15.58) 1,858 (14.29) 47,286

3 Asahi Kasei Homes 570 (4.38) 583 (4.48) 17,327

4 Sekisui Chemical House 485 (3.73) 473 (3.63) 13,620

5 Sumitomo Forestry 466 (3.58) 454 (3.49) 9,941

6 Misawa Home 399 (3.06) 399 (3.06) 12,061

7 Panahome 359 (2.76) 353 (2.71) 12,556

8 Mitsui Home 245 (1.88) 256 (1.96) 5,170

Figure 33: Top 8 Housing Construction Companies Sales Turnover FY2016

Condominium Developers

In the calendar year 2017, a total of 77,363 new condos were sold in Japan, an increase of 0.5% versus 2016, resulting in a total value of JPY 3.666 trillion (EUR 28.2 billion). The average sales price nationwide equalled JPY 47,39 million (EUR 364,538), an increase of 3.9% versus 2016. For 2018, the estimates are 78,500 units, an increase of 1.5% compared to the results of 2017.58

58 Japan’s Condominium Market 2017, Real Estate Research Institute

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Figure 34: Typical Larger Scaled Condominium Project developed by Mitsui Real Estate

Newly developed condominiums, with an average floorspace of 70~80m2, are put into the market with a target price between JPY 50~70 million (EUR 385,000~540,000) for the Tokyo region. Typical family-type layout is 2/3 LDK meaning 2 or 3 Bedrooms and Living/Dining/Kitchen space, usually facing south.

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Figure 35: Typical 3LDK Condominium Layout near Tokyo

Top 10 Condominium & Real Estate Developers Sales Turnover FY2016: unit JPY billion (EUR billion) Rank Company Sales FY2016 Sales FY2015 Units FY2016

1 Mitsui Real Estate 1,704 (13.10) 1,567 (12.05) 4,320

2 Daito Kentaku Group 1,497 (11.51) 774 (5.95) 5,790

3 Iida Group Holding 1,232 (9.47) 1,136 (8.73) 5,900

4 Mitsubishi Real Estate 1,125 (8.65) 1,009 (7.76) 3,215

5 Sumitomo Real Estate 925 (7.11) 854 (6.56) 6,034

6 Tokyu Real Estate Holding 808 (6.21) 815 (6.26) 1,551

7 Nomura Real Estate Holding 569 (4.37) 569 (4.37) 4,056

8 Leo Palace 21 520 (4.00) 511 (3.93) N/A

9 Hajime Construction 360 (2.76) 417 (3.20) 896

10 Daikyo 325 (2.50) 334 (2.56) 1,189

Figure 36: Top 10 Condominium Developers Sales Turnover FY2016

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For a correct interpreting of the aforesaid corporate construction and real estate development figures, it is important to bear in mind that usually, larger Japanese conglomerates like Mitsui, Mitsubishi and Sumitomo provide both housing and mansion development services but operate in separate corporate entities. Even nowadays, these industrial groups (zaibatsu in Japanese) still have strong and direct business ties with the related banks (keiretsu in Japanese), providing them easier financial support to the development of larger plot of lands.

However, after the economic bubble in the early ‘90s of last century, also other major groups like Tokyu and Nomura have become strong players in the high-end real estate market. Other groups like Iida and Hajime are more active in the suburbs of Tokyo but also in other larger Japanese cities like Osaka and Nagoya.

As a rule of thumb, the latter companies need to develop more units as their sales prices of completed dwellings is lower compared to the well-known brands. Figures sometimes include all units namely detached houses, condominium units for sales and for rent.

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3.2 Smart Grids

3.2.1 Market Overview

Historically, the electricity market in Japan was exclusively managed by the following 10 regional Electric Power (EPCO) companies controlling the complete supply chain from generation, transmission, distribution to retail. This monopolistic market situation has led to high electricity retail prices in Japan. In FY2016, the total Japanese retail electricity market was valued at approximately JPY 8 trillion (EUR 61.5 billion).59

 Hokkaido Electric Power Company (HEPCO): www.hepco.co.jp/english/

 Tohoku Electric Power Company: www.tohoku-epco.co.jp/english/index.html

 Hokuriku Electric Power Company (RIKUDEN): www.rikuden.co.jp/english/

 Tokyo Electric Power Company (TEPCO): www.tepco.co.jp/en/index-e.html

 Chubu Electric Power Company (CHUDEN): www.chuden.co.jp/english/

 Kansai Electric Power Company (KEPCO): www.kepco.co.jp/english/

 Shikoku Electric Power Company (YONDEN): www.yonden.co.jp/english/

 Chugoku Electric Power Company: www.energia.co.jp/e/index.html

 Kyushu Electric Power Company (KYUDEN): www.kyuden.co.jp/en_index.html

 Okinawa Electric Power Company (OKIDEN): www.okiden.co.jp/en/

Japan is also the only country in the world that does not have a single national grid. Instead it has two electricity frequencies divided into an eastern and western grid. The standard voltage at

59 Nikkei News Online 2017

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power outlets for both grids is 100V, but the grids itself operate at different frequencies, namely 50 Hz in Eastern Japan and 60 Hz in Western Japan.

Japan’s Electricity Market Outline: Two Frequencies, 50Hz and 60Hz

Figure 37: Japan’s Electricity Market Outline: 2 Frequencies 50Hz and 60Hz

Three EPCOs (TEPCO, Tohoku and Hokkaido) in East Japan run on 50Hz, whereas the seven EPCOs in West Japan run on 60Hz. The two grids are connected by Frequency Converter Facilities (FCFs).

Total liberalisation of the Japanese retail electricity market, including small shops and private households, started in April 2016. The final phase of market liberalisation is scheduled for April 2020, when also the electricity transmission segment will be legally opened for new 3rd party service providers.

By June 2016, only 3 months after the market liberalisation reforms, there were already over 300 new retail electricity providers nationwide. Together, the newcomers had a market share of 7.5%

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by the end of FY2016, but this is expected to grow further over the coming years. It is expected that also foreign electricity providers will enter the market in the future.

The global smart grid market is estimated to be worth USD 50.65 Billion by 2022.60 The Top Markets Report, issued by the International Trade Administration of the Department of Commerce of the US Government in 2017, ranks Japan 7th globally as a top market for smart grid products and services. In FY2012, the smart grid market in Japan represented JPY 1.47 trillion (EUR 113 billion) but is forecasted to grow quickly to reach JPY 3.8 trillion (EUR 292 billion) by FY2020.61

Image drawing of Smart Grid in Japan62

Figure 38: Image Drawing of Smart Grid in Japan

This prominent level of investment growth is expected to continue, backed by dedicated support of the Japanese government but with a shift towards distribution network, focusing on

60 Global Smart Grid Market, Markets and Markets 2017 61 Outlook on the Global Smart Grid Market, Fuji Research 2012 62 Smart Grid Market in Japan, Yasuhiro Hayashi, Waseda University, 2013

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3 sub-sectors namely transmission and distribution, smart grid ICT applications and energy- efficient storage.

Figure 39: Smart Grid Industry Taxonomy

In March 2017, TEPCO announced they had installed over 10 million smart meters, since April 2014 and is currently deploying 1 million new smart meters every 3 months. Within seven years from now, TEPCO will have 30 million utility and consumer devices operating on the network.63

These devices will be managed remotely and will send the actual electricity usage every 30 minutes to the central management unit of TEPCO. The final deadline for having all Japanese households linked to smart meters is set for 2025 and represents a total of nearly 80 million units. In FY2015, Japan surpassed China as the largest smart meter investor.64

63 10 million smart meters deployed in Japanese grid modernization project, Enterprise IoT Insights, 2017 64 2016 Top Markets Report Smart Grid, Country Case Study Japan, Department of Commerce USA, 2016

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Japanese Smart Grid Manufacturers65 Company Product/Service Company Product/Service

IHI IHI Lithium Ion Battery Systems Shimizu Smart BEMS Corporation Construction Eliiy Power Solar Power Hybrid Storage Systems, NEC Virtual Power Plant (VPP), Industrial Storage Systems, Large Resource Aggregation Storage Systems Business Osaki Smart Meters, Energy Saving Systems, Unisys Energy Management via IoT, Automatic Inspection Systems, Time Smart Meters, Electricity switch Consumption Management System GS Yuasa Industrial and automotive Lithium Ion Panasonic Residential Solar Panel Power batteries Generation and Storage System Toshiba Augmented Reality (AR), Virtual Reality Hitachi Gas Turbine generation Energy (VR), Mixed Reality (MR), Internet of equipment for cogeneration, Systems Things (IoT), Virtual Power Plant Hitachi Application (VPP), Independent Hydrogen Energy Framework/Event Driven Supply System (H2One), Pure Computing (HAF/EDC), EMS Hydrogen Fuel Storage System ePower Cloud, IoT platform (H2Rex) Lumada Sumitomo Redux flow batteries, Energy Fujitsu BEMS, HEMS, MEMS, VPP, Electric Management Systems (sEMSA), ICT/IoT Industries Concentrator Photovoltaic System (CPV), Power Line Communication (PLC) Daihen Energy Management System (EMS), Nichicon Tri-brid Electricity Storage Extraordinary Transformer (D-FIT) System, V2H System from EV to home, Mini Power Mover TDK Smart Power System with bi-directional Mitsubishi IoT Platform (Infoprism), Smart DC-DC converter and storage (HVDC) Electric Low Voltage Network (D- for ZEBs Smiree), ZEB system, Smart House Solution (Enedia)

Figure 40: Japanese Smart Grid Manufacturers

65 Smart Grid Market 2017, Japan Economic Centre and 8th International Smart Grid Expo

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3.2.2 EU Entry Opportunities

Japan ranks high amongst markets for near-term smart grid export growth and business potential, due in large part to electricity sector reforms combined with energy efficiency objectives, initiated by the central government, and active technology procurements by utilities.

Concretely, the following niche markets could be lucrative areas for European companies with state-of-the-art and innovative technologies and equipment for the smart grid sector.

 Integration of renewable resources into Japan’s grid will require investment in distributed energy management

 Meeting energy efficiency goals will require increased consumer engagement and improved data management

 Meeting grid reliability goals will require further investment in outage systems and microgrids

 Smart grid procurers in Japan include the established 10 utilities, but given the recent market liberalisation, especially the new awarded market entrants could be interesting clients

TEPCO, the electricity utility company in the Tokyo region and the largest of the 10, is moving ahead with actual business cases with overseas companies, amongst several European players like Moixa (UK), Conjoule (Germany) and Landis+Gyr (Switzerland). This surely creates business opportunities for European enterprises not only with the remaining 9 main EPCOs but also with the electricity retail newcomers in the market.

Showcases of European Smart Grid Companies in Japan

In July 2017, TEPCO announced a long-term business partnership with Conjoule GmbH from Germany, to develop together block-chain technologies that will enable Peer-to-Peer (P2P) marketplace for producers and consumers of renewable energy, owners of batteries to transact with each other without the need for traditional intermediaries.66

66 http://www.tepco.co.jp/en/press/corp-com/release/2017/1443967_10469.html

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Figure 41: Diagram of the P2P electricity purchasing platform

UK based smart grid company Moixa has signed a strategic partnership with Itochu Corporation, one of Japan’s largest trading companies, to take its Gridshare platform to Japan. Itochu will also invest GBP 5 million in the company. Moixa’s Gridshare software manages home energy storage systems. Itochu has sold thousands of home battery units in Japan and will install the software as default onwards.

Moixa has already received investment in the past from Japan’s largest utility company, TEPCO, which is also pro-actively investing in blockchain solutions. The firm is involved in UK smart grid trials and plans further trials in the US and Europe later this year, as well as with Japanese utilities and electric vehicle manufacturers.67

Skeleton Technologies, a young venture company from Estonia, announced in December 2017 that it reached a sales representative agreement with Sumitomo Europe, a 100% daughter company of Sumitomo Corporation, for the sales and distribution of their Skelcap Ultracapacitor batteries in the Japanese market.

67 Smart grid firm Moixa lands GBP 5 million investment, set to become big in Japan, The Energyst, 2018

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Figure 42: Skelcap Ultracapacitor Batteries

Skeleton’s patented technology enables batteries to be fully charged in a mere 2~3 seconds, while this charging process can be repeated over 1 million times without capacity loss. Their Skelcap batteries also have the double energy density level and 4 times the power density compared to similar competing products.

Sumitomo aims to apply this innovative technology and ultra-capacity batteries, together with existing Lithium-Ion batteries, into Plug-in Hybrid Electric Vehicles (PHEV) and Electric Vehicles (EV), developed by major Japanese automotive manufacturers.68

68 https://sgforum.impress.co.jp/news/4270, December 2017

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3.3 Smart and Green Buildings

3.3.1 Market Overview

The more Made-in-Japan household appliances were having clear and innovative energy saving features, the less Japanese houses were built in an energy-friendly manner. As aforesaid, Japan’s construction industry has been following the mindset of “scrap and build” 69 every 20-30 years, once the house or building was valued close to zero. Different from Europe, Japanese consumers have a clear preference for newly build houses and condominiums compared to second-hand dwellings.

During FY2016, only 579,000 dwellings, representing 37.4% of all sold units in Japan were second hand, where this figure stands at 66.4% in France and 88.8% in the UK. The average lifespan of a house in Japan is 26 years, while it is 44 years in France and even 75 years in the UK.70

As Japanese land prices tend to be high, due to scarcity of flat areas, the usage of high quality, energy-saving and sustainable building materials for new buildings was limited. On average, in the Tokyo area, the land cost will make up around 70%, while the actual house building will only be 30% in the total budget.71

However, following Japan’s signing of the COP21 Paris Agreement, a switch to renewable energy following the Fukushima Nuclear Accident in 2011 and sustainable development goals including reduction of construction waste, cleared the road for Smart and Green Buildings.

Zero Energy Houses (ZEH) and Zero Energy Buildings (ZEB)

From FY2010 on, the Japanese government started actively promoting Zero Energy Houses (ZEH) and Zero Energy Buildings, A ZEH-rated house has annual net energy consumption of zero (or less) and saves as much energy as possible while maintaining a comfortable living environment. This is mainly achieved through better heat insulation (both during winter and

69 https://edition.cnn.com/style/article/how-japan-makes-houses/index.html 70 Sumitomo Real Estate Market Report 2017 71 http://japanpropertycentral.com/real-estate-faq/house-buying-guide/

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summer), high-efficiency equipment for heating/cooling, smart ventilation, LED (light-emitting diode) lighting, hot water through cogeneration equipment like Enefarm, and off-grid electricity generation through rooftop photovoltaic (PV) panels.

When surplus PV electricity is generated, this can be sold back by individuals to utilities via the Feed-in-Tariff (FIT) system. Battery storage is also becoming popular for reserve power used during less sunny periods of the year.

Figure 43: Road Map Report ZEH by METI

Figure 44: ZEH example by METI

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Following Japan’s commitment in COP21 to curb their CO2 emissions, the domestic building and construction market forecasts increasing sales of ZEHs and ZEBs in the decade ahead. This momentum creates interesting export opportunities for European companies, experienced in manufacturing innovative energy-saving and insulating construction materials like sashes, glass and insulation products.

Domestic Market

According to the 2017 annual report of Sustainable open Innovation Initiative (SII), the domestic ZEH market had 6,081 registered ZEH builders in 2017, an increase with 445 companies compared to 2016. Together, they constructed a total of 25,639 new ZEHs in FY2016, representing approximately a 10% market share. ZEHS are forecasted to reach a market share of 45% by the end of FY2020.72

Sumitomo Realty & Development, one of Japan’s leading house builders, was the first to offer fully equipped ZEH houses that include PV panels on the roof, Home Energy Management Systems (HEMS), high-efficiency appliances, LED lighting and a complete Enefarm. Sales price is around JPY 630,000/3.3m2 (EUR 4,846/3.3m2) (3.3m2 is called ‘tsubo’ in Japanese), making the total price for a typical 30 tsubo house less than JPY 19 million (EUR 146,153). Bearing in mind that a typical 4x4 wood house usually retails between JPY 15-25 million (EUR 115,000~192,000) in the Tokyo region, this will kickstart successful sales of ZEH houses in the domestic housing market.

Other major house builders like Sekisui House, Daiwa House and Asahi Kasei have also offered similar ZEH- houses within their regular sales package for the last couple of years but less pro- actively compared to Sumitomo.

Another important incentive to purchase a ZEH house is their eligibility to receive a one-time financial support of JPY 1.25 million (EUR 9,615) at time of purchase from the Japanese government.

72 Net ZEH Support Business Market Results 2017, Sustainable open Innovative Initiative

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The same reasoning goes for Zero Energy Buildings (ZEB) but on a bigger scale using heavy duty installations for both energy generation and saving. ZEBs in Japan include offices, schools, hotels, hospitals and commercial shops.

Figure 45: Roadmap Report ZEB by METI

Policy Incentives for ZEHs and ZEBs

Japanʼs Strategic Energy Plan (adopted at the Cabinet Council in April 2014) sets the following goals to realise and promote ZEHs:

 Achieve zero emissions for standard-type newly-constructed houses by FY2020

 Achieve average zero emission for most newly-constructed houses by FY2030

The High Insulation Standard, also called the ZEH standard (insulation range of 0.4~0.6 from cold, Hokkaido to the warmer Kyushu) uses high-performance insulation like solar shadings and highly insulated windows that suppress UV rays and decrease dew condensation through a combination of low-E multi-layered glass, aluminium and resin sashes. This ZEH standard is 20% stricter than normal Energy Saving Standards in Japan.

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The technical definition of ZEB has been determined by the Agency for Natural Resources and Energy in February 2016, as follows:

 ZEB: 100% own energy generation by PV

 Nearly ZEB: +75% own energy generation by PV

 ZEB Ready: +50% own energy generation but must reduce energy consumption for airco, ventilation, lightning, hot water supply and elevators with 50%

The Promotion Project for the Introduction of Innovative Energy Saving Technology in Houses and Office Buildings had a total budget of JPY 11 billion (EUR 84.6 million) for FY2016. Grants for refurbishing existing houses with ZEH materials, allow for abatement at a fixed amount, usually varying from 1/3 to 2/3 of the total refurbishment costs.

Market Trends for ZEHs and ZEBs

The most recent revision of the Building Energy Efficiency Act (1979) in 2015, requires the following from Residential/ Buildings on the one hand and Factories on the other hand:

 Home Builders constructing +150 new houses per year are obligated to implement and enhance energy saving features in the supplied detached houses;

 Specific Buildings with +300m2 of surface are required to report and maintain the necessary energy saving countermeasures not only for the construction of new buildings but also for large scaled maintenance works at existing buildings;

 Non-residential buildings with +2,000m2 of surface, must comply and pass the energy consumption standard for new buildings, after which the Building-Housing Energy-efficiency Label System (BELS) Certificate is issued by the local authority. This document must contain the following items:

. Name of the Building

. Location of the Building

. Certificate Number

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. Date of the Certification

. Issuing Authority of the Certificate

. Applicable Energy Efficiency Standard

 Factories with an energy consumption of 1,500kl/year must select a person in charge of energy management, report periodically on their energy consumption status and create a medium/ long-term energy management plan.

For Building Assessments, Japan follows the Comprehensive Assessment System for Build Environmental Efficiency (CASBEE), measuring the Build Environmental Efficiency (BEE) by dividing the Quality (Q) level by the Load (L) level from an environmental burden aspect.

 Q = environmental quality and functions: Interior; Service functions; External Environment around the building (greenery)

 L = environmental load/ burden: Energy consumption level; Materials used; Environment in the neighbourhood of the building

 BEE scores, forming the CASBEE acronym:

. BEE 3.0: S (the S from Subarashii in Japanese, meaning excellent building)

. BEE 1.5~3.0: A (very good sustainable building)

. BEE 1.0~1.5: B+ (good building)

. BEE 0.5~1.0: B- (normal building)

. BEE below 0.5: C (inferior building)

The market trends in ZEH and ZEB follow the aforesaid guidelines, focusing on development of low cost ZEB technologies, improved design and layouts, enhanced branding image and increased sales to reach the FY2020 target of real first net ZEHs in the market.

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Japanese Players in the Smart and Green Building sector

Smart and Green Building Manufacturers (business focus) Company ZEH Sales Percentage Company ZEH Sales Percentage FY2016 FY2016 Sekisui House 74% Misawa 15% (Green First Zero ZEH) (Smart Lifestyle) Ichijo Komuten 53% Sweden House 15% (i-series Zero ZEH) Sumitomo Forestry 32% Asahi Kasei 12%

Sekisui Heim 28% Mitsubishi Jisho 9% (Storage batteries) Japan House Holdings 24% Mitsui Home 7% (Net Zero Energy House ZEH) Daiwa House 22% Toyota Home 7% (Storage batteries) Panahome 17% (Storage batteries) Figure 46: ZEH Sales Percentages of Major Home Builders FY2016

All the above-mentioned major Japanese home-builders are targeting over 50% sales percentage deriving from ZEHs by the end of FY2020. In FY2016, ZEHs represented 74%, equivalent to 7,686 units, in Sekisui House’s total sales of new detached houses, taking the 1st spot in ZEH sales for the 3rd year in a row.

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Visual of Sekisui House ‘Green First Zero’ ZEH

Figure 47: Visual of Sekisui House ‘Green First’ ZEH

When talking about sustainable smart and green buildings, top of mind are state-of-the-art building materials and equipment embedded with the latest technology, linked up to the internet backbone for monitoring purposes. However, various traditional Japanese building techniques can provide perfect eco-alternatives.

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 Insulation by using tatami mats: tatami mat flooring is typically used for sleeping on and provide that unique grassy smell. Made with a straw or polystyrene core and soft rush finish, they are quite durable, with a lifespan lasting 15 to 20 years, if cared for appropriately.

 Yakisugi: yakisugi literally means burnt cypress and is the centuries-old technique of charring the surface of indigenous Japanese cedar. The burning process improves the durability by making it both fire and insect resistant and authentic traditional look.

 Shikkui lime plastering: shikkui has a long history dating back over a thousand years in Japan and uses only natural ingredients. This results in a far lower polluting impact compared artificial plasters.

 Tsugite: often seen in shrines and temples all over Japan, the art of tsugite, a wood joinery technique, has long been admired as a skill of beauty, but it has sustainability benefits too. By using puzzle-like interlocking wooden joints, timber can be joined without nails, glue, metal braces or fasteners. At time of demolition, construction waste to be disposed is almost nihil and all used materials are degradable.73

These traditional methods are also seeing a revival at new dwellings where the owners and architects try to find a symbiosis between low energy usage and natural products.

3.3.2 EU Entry Opportunities

Japan is focusing its future energy saving and conservation policies mainly on zero-energy houses (ZEHs), zero-energy buildings (ZEBs) and energy saving manufacturing plants by using Factory Energy Management Systems (FEMS)74, as the construction business is one of the only remaining segments where Japan can still gain substantial energy savings.

As the sales prices for ZEHs are coming down at a fast pace, the sales volume is expected to double in the following years. The financial incentive of JPY 1.25 million (EUR 9,615) from the Japanese government for ZEHs is also not missing its effect.

73 Housing Research Institute, 2017 74 ANRE, http://www.enecho.meti.go.jp/en/category/brochures/pdf/energy_plan_2015.pdf

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In the ZEH segment, especially energy efficient and high-performance consumer electronics, together with advanced hot water supply systems are expected to be brisk business areas for overseas suppliers but the domestic competition is tough in this specific segment.

For commercial buildings (ZEBs), Japan is mainly looking for large scaled advanced air- conditioning systems, hot water supply systems via heat pumps and boilers, cooling storages and generic cogeneration systems. European manufacturers that can deliver directly or via their Japanese business partner similar equipment, will be able to enter this market segment, given the strong demand for the next couple of years.

In the industrial sector, companies will need to install more high performance industrial furnaces, advanced light-emitting diode (LED) systems, energy-efficient transformers and heat exhaust recovery boilers in the following years. These new investments will allow them to meet the energy saving standards, set forward by the Agency for Natural Resources and Energy (ANRE), part of the Ministry of Economy, Trade and Industry. This will create new and interesting market entrance opportunities for European companies in this segment.

Finally, any kind of equipment related to enhancing and improving the present Home Energy Management Systems (HEMS), Mansion Energy Management System (MEMS), Building Energy Management Systems (BEMS) and Factory Energy Management Systems (FEMS) is welcomed at present in Japan. A strong local business partner that can take care of the installation and after- service is key for this specific segment for any overseas manufacturer.

As Japan has always been a global forerunner on energy saving and conservation, the presence of European companies in this segment is very limited at present. However, as the Smart and Green Market is expected to double in market size by FY2020, any European company with innovative energy-saving and high-performance installations with superior quality at an affordable price range can expect potential business opportunities.

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European Companies in Japan

Schneider Electric Japan, a daughter company of the French Schneider group, has been active in the Japanese market for over 50 years. As a leading global company in energy management and automation, the recent changes in the Japanese energy landscape have been creating significant opportunities in the business development towards smart grids and smart cities.

In 2014, a new showroom was opened in the Schneider Electric Osaka Building, focusing on the public utility works in smart cities, smart grid management, smart buildings, renewable energy, solar energy and mega solar plants.75

Viessmann of Germany and Panasonic have been doing joint development on fuel cell heating systems for residential use, for sales in both the Japanese and the European market. One of their final product, the Viessmann Vitovalor 300-p, went on sale in Europe in April 2014. Panasonic and Viessmann of Germany have been doing joint development on fuel cell heating systems for residential use, for sales in both the Japanese and the European market. One of their final product, the Viessmann Vitovalor 300-p, went on sale in Europe in April 2014. A newer model that is gas-compatible has been sold in Europe since 2016.

BDR Thermea from the UK announced in March 2014 that its subsidiary, Baxi Innotech, entered into a partnership with Toshiba Fuel Cell Power Systems (TFCPS) of Japan for exclusive co- development and sales of fuel cell heating systems in the European market. Production, based upon the existing TFCPS product range, began in 2015. The new heating systems will create substantial energy savings and decreased environmental impact both at an affordable price tag for the complete unit.

75 Success Story: Voices of foreign company executives in Japan-Schneider Electric Japan, JETRO, 2014

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3.4 Machinery Sector

3.4.1 Market Overview

In FY2016, Japanese manufacturers of construction machinery sold a total value of JPY 1.943 trillion (EUR 14.94 billion). The majority of this, 55% respectively, was destined for export markets. For FY2017, the Japan Construction Equipment Manufacturers Association predicts a total sales turnover valued at JPY 2.116 trillion (EUR 16.22 billion), an almost double- digit increase of 9% versus FY2016.

For FY2018, estimates are slightly negative at -2% to reach JPY 2.078 trillion (EUR 15.98 billion), to balance out the brisk sales estimates for FY2017. However, the share of exports of Japanese construction machinery are expected to stay brisk in FY2018, to become 58%, equalling a 3% market share growth in 1 year.76 For new construction machinery, North-America and Europe are still the largest markets but demand from China and Asia has also been strong in the last decade.

Typical customers of construction machinery in Japan are large construction projects managed by general contractors or leading rental companies of construction machinery. In recent years, domestic demand has been strong given Tohoku reconstruction, large infrastructure projects nationwide, ordered by both the central government and the local administrations. Secondly, the market was strong with vast urban redevelopments and numerous private high-rise building projects, all over Japan. Finally, the upcoming Tokyo 2020 Summer Olympics and Paralympics are extra tailwind for the sector.

As for leading Japanese rental companies of construction machinery, the top 10 list would contain names like Aktio, Kanamoto, Nikken Rental, Nishio Rent-All, Taiyo Kenki Rental, Wakita, Hitachi Rental Japan, Komatsu Rental, Nagawa and Kyosei Rental. Given the high capital investments involved, this sector has been merging and acquiring amongst key players, at a fast pace in recent years to gain even larger scale merits and better network coverage through local subsidiaries.

76 Outlook and Forecast on Japanese Construction Machinery, Japan Construction Equipment Manufacturers Association (CEMA), 2017

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The second-hand market, given the high quality and long-life span of the Japanese machinery equipment, is very active both in the domestic and overseas market. Typical export markets include not only Asian, but also African and South-American countries.

The domestic Japanese market is centred around hydraulic excavator and construction cranes, together making up around 55% of the total market. When adding tractors and mini excavators, 77% of the market is covered, stressing the prominent oligopolistic market structure of this sector.

Domestic Market Share per Construction Machinery 2017 Concrete Machinery Hydraulic Breakers 4% 2% Road Machinery 4% Hydraulic Excavator Basic Machinery 30% 5%

Others 8%

Mini Excavator 9%

Tractor 13% Construction Cranes 25%

Figure 48: Domestic Market Share per Construction Machinery

Hydraulic excavators have the largest domestic market share, for which the big 5 being Komatsu, Hitachi, Caterpillar Japan, Kobelco and Sumitomo together have a controlling 90% share. Other key Japanese players in the construction machinery manufacturing sector are Kubota, Tadano and Takeuchi, all 3 which are also publicly listed on the Tokyo Stock Exchange.

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Domestic Market Share for Hydraulic Excavators FY2017

Others 10% Komatsu 28% Sumitomo Construction Machinery 7%

Kobelco Construction Machinery 14%

Caterpillar Japan Hitachi Construction 18% Machinery 23%

Figure 49: Domestic Market Share for Hydraulic Excavators

As for the total rental market value of construction machinery, it was JPY 1.35 trillion (EUR 10.38 billion) for FY2016, an increase of JPY 110 billion (EUR 846 million), mainly contributed to construction machinery rental needs for the Tokyo 2020 Olympics, Tohoku reconstruction and large scale urban redevelopment projects in the Kanto region.77

Japanese Market Players

In the last decades, Japan has been a prominent player in the global market segment of construction machinery with export sales exceeding their domestic market share.

Komatsu is the number 2 globally, following Caterpillar from the USA, but has the largest share in the Asian market. In April 2017, Komatsu acquired Joy Global, an American company

77 Construction Machinery Rental Market growing to JPY 1.3 trillion, Economic News 2017

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specialised in heavy equipment for mining. Construction machinery and equipment creates 90% of total turnover.

Hitachi Construction Machinery is the number 2 domestically with 89% of their sales generated by their core business of construction machinery. Acquired the mining service solution company H-E Parts (USA) in 2016, followed by the Australian Bradken, a global manufacturer of parts for industrial machinery.

Kubota, headquartered in Osaka, is the global leading company in mini-excavators and the leader domestically for agricultural equipment. 82% of sales turnover comes from construction machinery with strong market shares in North-America, Europe and China. Kubota acquired Great Plains Manufacturing, an American company focusing on agricultural implements in 2016.

Tadano is the number 2 globally for cranes, behind the German Liebherr Group. Core business is centred around mobile cranes and aerial work platforms, generating 81% of their complete turnover.

Major Japanese Construction Machinery Manufacturers78 Company Main Products Sales 2017 JPY (EUR) Komatsu Construction and Mining Equipment, JPY 2.5 trillion Forklift trucks, Forest machines and (EUR 19.2 billion) Recycling Equipment Hitachi Construction Machinery Mini/Medium/Large excavators, Wheel JPY 950 billion loaders, Demolition equipment, Forest (EUR 7.3 billion) Machines, Dump trucks Kobelco Construction Machinery Excavators, Cranes JPY 310.4 billion (FY’16) (Group) (EUR 2.38 billion) Sumitomo Construction Excavators, Forestry equipment, JPY172 billion Machinery Asphalt pavers (EUR 1.32 billion) Kubota Mini excavators, Compact track loader, JPY 1.75 trillion Wheel loader, Tractors, Harvesters, (EUR 13.4 billion) Transplanters

78 Construction Machinery Business in Japan, Okasan Online Securities, 2018

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Major Japanese Construction Machinery Manufacturers78 Tadano Mobile cranes, Truck cranes, Aerial JPY 173.7 billion work platforms, Telescopic boom (EUR 1.33 billion) crawler cranes Takeuchi Excavators, Track loaders JPY 94.34 billion (EUR 725 million)

Figure 50: Major Japanese Construction Machinery Manufacturers

3.4.2 EU Entry Opportunities

Exporting finished construction machinery to Japan is surely not easy given strong domestic brands and manufacturers that have nicely divided the domestic market amongst each other, while fighting for market share in overseas markets.

Caterpillar Japan though proves that market penetration is not impossible, on the contrary, they have been very successful in this saturated market segment for several decades now, assuring impeccable after-market support and maintenance services.

Hence, that market entry opportunities for European construction machinery related companies should be focused on niche markets within this sector like open-source productivity management systems of the machinery, especially for key players like rental companies, given their intensive capital investments. The major manufacturers have already launched their own resources.

 Komatsu has launched KOMTRAX

 Caterpillar Japan uses My.Cat.Com

 Hitachi has Global e-Service and ConSite

 Kobelco has MERIT and KCROSS

 Sumitomo relies on G@Navi

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Japan, through its i-Construction campaign, aims to increase productivity of construction machinery, currently at 1,110m2 to 1,650m2 per day for basic ground works, also trying to reduce manual labour in this process at the same time.

The current labour shortage in Japan is also tailwind for European companies with top-notch robotics technology that can operate construction machinery without any involvement of human labour.

Another promising niche market is related to Global Positioning System (GPS) location service systems, showing the exact location of each machine at any time, enabling optimised usage of the equipment. These systems are also providing the basic platform for IoT extensions to better support preventive maintenance actions, amongst others.

 Komatsu is using LANDLOG

 Hitachi relies on Solution Linkage

 Caterpillar Japan has CAT Connect

In FY2014, Japan issued stricter regulations for exhaust emissions like Particulate Matters (PM), Nitrogen Oxides (NOx) and Hydro Carbon (HC), also applicable for the diesel engines of construction machinery, to improve air quality in Japan. Any European company with innovative and effective exhaust filters, products and technologies to comply with this latest regulation, where Europe is more regulated from earlier days on compared to Japan.

European Players in Japan

 Since 1983 operational in Japan, Liebherr Japan, a daughter company of the multinational Liebherr group from Germany, has its office in Yokohama. It manages the domestic sales, distribution and customer service of Liebherr’s mobile and crawler cranes, construction machines and material handling technologies. www.liebherr.com

 MB Japan is active in Japan since 2010 and is the local entity of the Italian MB SPA company. MB specialises in hydraulic excavators, bucket crushers and screener buckets. All machinery is imported from Italy, while the Japanese entity manages the after-sales of

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their products and services towards the Japanese end-customers. The office of MB Japan is in Niiza-city, in Saitama prefecture, north of Tokyo. www.mbcrusher.jp

 Putzmeister Japan, part of the global German Putzmeister Group is headquartered in Tomisato-city in Chiba-prefecture and entered the Japanese market in 1992. It markets truck mounted concrete pumps, solid pumps, telescopic belt conveyors and floor screed and mortar machines amongst others. www.putzmeister.jp

 Volvo Construction Equipment from Sweden is present in the Japanese market since via their local agents and dealer network, covering Japan nationwide. Products range from several types of excavators, wheel loaders, rigid and articulated haulers, compact track loaders, asphalt machinery to soil compactors. www.volvoce.com/japan/ja-jp/

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3.5 Building Materials and Installations

3.5.1 Market Overview

For imports of Building and Construction Materials, Japan relies on neighbouring Asian countries for short delivery terms and American products given their very competitive price settings. However, since the 1990’s, high-quality and sustainable construction materials from Europe are increasing gradually on a yearly basis.

Typically imported building and construction materials from Europe are diverse types of stones, blocks, tiles, roofing materials, outer wall materials, decorative finishing materials, ceiling finishing materials, flooring finishing materials, entrance doors, windows, stairs, doors, insulation materials, building hardware, lighting equipment, interior fabrics, kitchen and bathroom equipment, too name only the biggest ones.

European Building and Construction Materials Exports to Japan FY2014 (unit: EUR ‘000) Product Top EU Exporter Export Value (share) FY2014 Raw Stone Italy (45.1%) 2,365.7

Processed Stone Italy (51.0%) 10,219.3

Prefabricated Buildings Sweden (51.3%) 34,825.9

Cement Block & Tiles UK (20.5%) 2,515.1

Ceramics & Tiles Italy (85.3%) 37,551.8

Wood Products (sawn wood, builders joinery, particle N/A 847,834.5 boards…) Glass Products N/A 18,482.9

Aluminium Products N/A 16,909.8

Figure 51: European Building and Construction Materials Exports to Japan

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Major Japanese Importers and Distributors of Construction and Building Materials Tiles & Bricks LIXIL, TOTO, Danto, ABC Trading, Advan, Nagoya Mosaic, Nittai Kogyo, Kunishiro Taika Kogyo-sho, Hirata Tile, KY Tile Clay Roof Tiles Sanshu Noyasu, Tsuruya, Maruei Togyo, Toyo Kawara, Shintou, Showa Yogyo, Ebisu Kawara Kogyo, Marushika Ceramics, Marusugi, Kawara Tora Kogyo, Kimura Yogyo-Jo Insulation Materials Asahi Kasei Kenzai, Asahi Fiber Glass, Achiles, Dow Chemical, Nichiasu, Sekisui Kagaku Kogyo, Kaneka, Japan Rockwall, ABC Trading, Mag Isover Wooden Structure Asahi Kasei Kenzai, Achiles, Dow Chemical, Asahi Fiber Glass, Kaneka, Sekisui Kaseihin Exterior Insulation Kogyo, Showa Denko Kenzai, Toho Leo, Mag Isover, Nohara Sangyo Materials

Figure 52: Major Japanese Importers and Distributors of Construction and Building Materials

Import and Domestic Supply Chain and Profit Margins

One of the major weaknesses of the Japanese imports of construction and building material industry is and remains its multi-layered domestic distribution and sales system, although recent years show more and more direct import routes for overseas building and construction materials.

Usually, a specialised trading or import company will take care of the overseas imports and the inventory management in Japan and will then sell their products to national or regional wholesalers (first or second tier), who will then supply the home builders or construction companies.

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Import and Domestic Supply Chains (SC) and Profit Margins (%) 120

100 10

80 15

15 10 60 20 15 15

40 10 15 20 5

20 30 30 30

0 Long SC Medium SC Short SC

Manufacturer Trader National Wholesaler Regional Wholesaler Retailer Builder End-User

Figure 53: Import and Domestic Supply Chains and Profit Margins

As a rule of thumb, for European construction materials exported under Free on Board (FOB) trade terms, end-user prices 3-times the FOB price are considered aggressive price setting, while 4 times the FOB price is a standard mark-up. However, 5 times or more are considered expensive end-user prices and will directly influence the total sold volume.

Expensive end-user prices are often caused by the above-mentioned multi-layered distribution channels, which can sometimes include 5 up to 7 domestic companies. However, in Japan the final decision for applying a product or service from an overseas manufacturer, is not only based upon commercial aspects as technical and evidence-based aspects combined with after-market support are as important.

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3.5.2 EU Entry Opportunities

Particularly, the following building and construction materials and ICT related systems are showing interesting business opportunities for European companies wishing to export or to increase their export volume to Japan. A strong local business partner, in the form of an importer, distributor or manufacturer will result in faster market penetration and brand recognition by professional clients like architects, house builders and condominium developers.

Keywords to bear in mind for imported building and construction materials can be summarised in sustainability, degree of innovativeness, value-added aspect compared to cheaper similar Asian products, energy-saving and efficiency, environmental-friendly and green aspects.

 Insulation Materials and Products: Given Europe’s advanced technology and manufacturing know-how, given hard winters in the North and hot summers in the South, combined with stringent building standards for insulation, makes these European products extremely wanted in Japan. Demand for these products is said to remain brisk, also the following 5-10 years given supporting government policies and ZEH/ZEB demand

 Glass products: Similar reasoning as for Insulation materials, typically high-functional glass to keeps heat inside and cold outside are needed as Japanese manufacturers are not price- competitive in the manufacturing of such products, given limited usage till date. In Tokyo, double glazing is only since very recent a standard product in newly build houses and buildings

 Window Sashes in Aluminium and Wood: Insulating glass only makes sense when used in combination with insulating window aluminium and wooden sashes. The quality of sashes in Japan, compared to Europe, are lagging on technology and are relatively expensive

 Wooden Products: Europe is highly regarded from a cost-quality aspect for wooden products, which are used in large volumes in Japan. A strong business tie with a local manufacturer could be beneficial for all parties involved

 Decorative Materials with Unique Designs: In this area, competition with Asian countries is strong but typical European designs, with products of a green origin and durable lifespan can be the necessary Unique Selling Propositions (USPs) to convince Japanese architects.

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Retrofit materials are a specific niche market where Japanese architects search for in Europe, often used in thematic restaurants

 Environmentally-friendly and Green Materials: A small but steadily growing group of Japanese pro-sumers are willing to pay an extra for environmental friendly and green materials. Especially made in Europe building materials are highly regarded in that aspect given the steps ahead in that area in recent years. These end-consumers will inform their architect they want that specific product to be used in their new home

European Building & Construction Companies in Japan

Gretsch-Unitas Japan (Germany)

For more than 100 years Gretsch-Unitas Japan has offered its customers a complete range of construction fittings and security equipment for windows and doors. Currently, the Gretsch-Unitas group contains renowned brands like BKS (locking technology), FERCO (hardware) and GU Automatic (automatic entrance systems). In Japan, Gretsch-Unitas is represented by MSH KK in Tokyo.

Häfele Japan K.K (Germany)

Häfele is a highly-regarded partner in architecture, woodworking and property development. Häfele's comprehensive hardware technology supply solutions include: furniture fittings, architectural hardware and Dialock, an electronic locking system. Häfele is well established in Japan, since 1992, through their headquarters in Yokohama with annex training center, an Osaka sales office and 2 showrooms.

Halfen GmbH (Germany)

With over 1,300 employees in 14 countries and more than 20,000 products HALFEN is one of the most successful concrete anchoring, façade fixing systems suppliers in the world. Halfen offers its customers the highest quality products for building pre-cast concrete elements, commercial and residential construction, as well as civil engineering and for transportation and infrastructure buildings. The Japan Representative Office of Halfen is located in Tokyo.

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Honka Japan (Finland)

Headquartered in Finland, Honkai is the undisputed world leader in log home production, with +50 years of experience and developments in log home manufacturing has made Honka a global brand name in the industry. With the establishment of Honka Japan in 1991 in Tokyo, combined with a Design Center in both Yamanakako (Yamanashi prefecture) Lake and Nasu Kogen Resort (Tochigi prefecture), the global appeal of Honka homes has also been welcomed with open arms in Japan.

Ove Arup & Partners Japan (UK)

With more than 25 years of experience in Japan, Arup has established itself as a thought leader in seismic engineering in the country. Established in 1989, our notable structures include the Nicolas G Hayak Center (HQ of Swatch Japan) which adopts a new self-mass damper system, Sony City, a massive 20-storey near-cube with base isolation in the basement, AIG Nagasaki Building and recently the eye-striking in Nishi- in Tokyo.

Permasteelisa Japan K.K. (Italy)

Permasteelisa Group is a worldwide leading Contractor in the engineering, project management, manufacturing and installation of architectural envelopes and interior systems. The group brings its know-how and expertise to all projects, in particular when dealing with Special Features Buildings, beginning with the design development phases all the way to the successful completion, achieving the customer's expectations. Tokyo office is located in the Yotsuya-area.

Saint-Gobain KK (France)

Saint-Gobain K.K. was established in 1975 as the representative business hub in Asia-Pacific area of Saint-Gobain group, known as the glass-products industry leader in the global marketplace.

They are the proud owner of their own headquarter building in Kojimachi, heart of Tokyo, known for its great glass exterior design. Currently, about 800 professional workers are working on building/auto/display glass, glass fibre, ceramics, plastics and abrasives as well as providing cutting-edge products and services.

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Schott Nippon K.K. (Germany)

Established in 1966, makes Schott Nippon KK, part of the SCHOTT multinational, technology- based group developing and manufacturing specialized glass and materials, components and systems for more than 125 years to improve how people live and work, one of the oldest European construction related companies in Japan.

Stone Tech Japan KK (Belgium)

StoneTech's core products include bluestones, which have a very small global output, and European antique paving stones (recycled from old stone pavement). StoneTech Japan imports and sells these products to Japanese construction companies, construction materials suppliers and similar businesses.

Some other success stories of European building and construction companies that have set up shop in Japan comprise independent architects, consulting experts in engineering like Arup, project managers like Bovis Lend Lease and elevator and escalator maker Schindler, too name only a few.

Also, European suppliers of construction materials, such as Lafarge who acquired the Japanese Aso Cement, the partition systems' provider Clestra have been successfully active in Japan for many years by now.79

79 Recent construction boom in Japan offers great business opportunities, European Business Council (EBC)

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4. Construction and Building Technology Regulations

As Japan is very prone to frequent, sometimes large earthquakes, often followed by devastating fires or in a rare case, even tsunami’s, the construction and building technology regulations are strict compared to other global standards. On top of that, Japan is also subject to natural disasters like typhoons, torrential rain and mudslides on a regular basis.

The key building and construction laws in Japan can be summarised as per below.

Key Building Regulation Laws Field Restrictive Laws (Mandatory) Promotional Laws (Optional)

Building Design Kenchikushi Law

Structural Safety Building Standard Law (BSL) Seismic Retrofitting Law

Fire Safety Building Standard Law (BSL)

Fire Safety Fire Service Law

Hygiene Building Standard Law (BSL) Building Management Law

Accessibility Barrier-Free Law

Energy Saving Energy-Saving Law

Figure 54: Key Building Regulation Laws

4.1. Building Standard Law

The primary and mandatory source of building construction regulations in Japan, is the Building Standard (BSL), revised for the last time in FY2014. The BSL is also available in English translation version, provided by the Building Center of Japan.

The BSL regulates the construction of buildings from inception and planning to demolition and is applicable nationwide. It contains important general provisions on enforcement, building and planning codes, amongst others.

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The building code provisions in the BSL have similarities with the Building Code of other countries.

 General Structure: Including lighting, ventilation, limitation of harmful emissions (chlorpyrifos and formaldehyde), damp-proofing and sound insulation

 Structural Safety: Including identifying construction methods for each structural method (for example, timber or reinforced concrete) and structural calculations which depend on building size and design

 Fire Safety: Including fire-resistive construction, evacuation facilities and interior finishes

 Building Equipment (services): Including plumbing and lifts too name only a few

All building and construction materials, exported to Japan, must comply and be conform with the BSL, which includes stringent regulatory requirements for earthquake resistance, fire safety and indoor air quality. Japan has 3 major earthquake proof systems namely earthquake resistance through the structure, absorption of the seismic activity through dampers and seismic isolation by using rubber bearings.

Other key regulations include the Fire Services Law, the Gas Utility Industry Law and the Water Works Law. Usually, the Japanese business partner will assist the overseas manufacturer and exporter in this approval process.

4.2. Building Energy Conservation Act

The last revision of the Building Energy Conservation came into effect in July 2015 for implementation from 2016 on, focuses on the following points:

 Regulation: adaptation measures for large-scale constructions and reporting requirements

 All buildings will receive guidance on special floor-area ratios

 Both new and old buildings need to follow the energy conservation labelling system with the Building-Housing Energy-efficiency Labelling System (BELS) certificate

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Building Energy Conservation Act

Figure 55: Building Energy Conservation Act, revision 2015

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Building-Housing Energy-efficiency Labelling System (BELS)

Figure 56: Building-Housing Energy-efficiency Labelling System (BELS)

4.3. Japan Industrial Standard (JIS) and Japan Agricultural Standard (JAS)

Basically, all Japanese standards are classified into two categories, the Japanese Industrial Standards (JIS) for manufactured products and the Japanese Agricultural Standards (JAS) for foods, agricultural and forest products. Most construction and building materials are covered by JIS, except for timber, plywood and structural panels, which are covered by JAS, though particle boards are again covered in JIS.

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JIS/JAS certification for exported building products creates extra commercial opportunities, especially towards smaller importers and house builders. The Ministry of Economy, Trade and Industry of Japan (METI) is responsible for JIS and the Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) is responsible for JAS. Similar to aforesaid, guidance and support from your Japanese business partner fastens profoundly this approval and certification process.

JIS JAS Logo

Figure 57: JIS JAS Logos

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5. Annexes

5.1. Bibliography

 Sustainable Building and Construction Sector in Japan and Analysis of Opportunities for European Firms, EU-Japan Centre for Industrial Cooperation, English, 264p, 2015

 International Construction Market Survey 2017, Turner & Townsend, English, 100p, 2017

 White Paper on Land, Infrastructure, Transport and Tourism in Japan, MLIT, English, 364p, 2016

 FY2018 Budget and Incentives for the Promotion of ZEHs, METI, Japanese, 34p, 2018

 Realizing the Asia Super Grid: Japan’s situation and challenges, Renewable Energy Institute, Per Christer Lund, English, 22p, 2016

 TEPCO: A quiet emergence of Smart-Grid in Japan (Digitization), Harvard Business School, English, 10p, 2017

 Opportunities and Challenges for Smart Grid in Japan, TEPCO Research Institute, English, 18p, 2016

 The Ways Forward for Japan EPCOs in the New Energy Paradigm, Renewable Energy Institute, English, 76p, 2017

 Smart Grid Implementations: Case of Japan, Hitachi, English, 30p, 2015

 Japan’s Four Major Smart Cities, Agentschap NL, Ministerie van Economische Zaken, English, 15p, 2015

 Statistical Handbook of Japan, Ministry of Internal Affairs and Communication, English, 213p, 2017

 Present Status and Future Insights on Effective Robot Usage in the Construction Business, Info Mart Corporation, Japanese, 8p, 2017

Construction & Building Technologies - Japan Market Study - Page 102 of 108

 Construction Economics Report, Construction Economics Research Center, Japanese, 19p, 2017

 Trends in the Domestic Construction Machinery, Sumitomo Mitsui Banking Corporation, Japanese, 19p, 2017

 Construction Business Handbook 2017, Nikkenren, Japanese, 36p, 2017

 Kitakei Report: House Manufacturers Ranking FY2016, Japanese, 4p, 2017

 House Buying Guide, Japan Property Central, English, 10p, 2017

 Yearbook of Current Production Statistics: Mineral Resources and Petroleum Products, Ceramics and Building Materials, METI, Japanese/English, 132p, 2017

 2016 Top Markets Reports Building Products and Sustainable Construction, Country Case Study Japan, International Trade Administration, English, 5p, 2016

 Voluntary Environmental Action Plan of the Construction Industry, Volume 6: 2016~2020, Japan Federation of Construction Contractors, Japanese, 23p, 2016

 Japan Wants Robots to Help Build Its Skyscrapers, Pavel Alpeyev, Bloomberg, English, 3p, 2018

 Japanese Company Unveils Construction Robot, Mai Tao, Robotics & Automation, English, 3p, 2018

 2017 Japan’s Condo Market, Real Estate Research Institute, Japanese, 7p, 2018

 The World of Japanese Construction Machinery, Okasan Online Securities, Japanese, 8p, 2018

 Japan Country Report, Research Institute of Construction and Economy, English, 16p, 2017

 Policies for the Construction Industry 2017 + 10, Ministry of Land, Infrastructure and Transport, Japanese, 42p, 2017

 Raze, rebuild, repeat: why Japan knocks down its houses after 30 year, Nate Berg, The Guardian, English, 11p, 2017

Construction & Building Technologies - Japan Market Study - Page 103 of 108

 Status and Forecast of Japanese Construction Industry, Cabinet Office, Japanese, 19p, 2018

 Construction Industry in Japan: Effective Usage of Technology to Increase Productivity, Mizuho Bank, Japanese, 13p, 2017

 Smart Grid Top Markets Report, International Trade Administration, US Department of Commerce, English, 9p, 2017

 Opportunities and Challenges for Smart Grid in Japan, Shuichi Ashidate, Tokyo Electric Power Corporation, English, 18p, 2016

 Conjoule closes Series A investment from Innovation Hub and TEPCO, TEPCO Press Release, English, 2p, 2017

 ZEB Trends in Japan, Masaya Okumiya, Nagoya University, Japanese, 50p, 2017

 Outlook and Forecast Japanese Construction Machinery, Japan Construction Equipment Manufacturers Association, Japanese, 17p, 2017

 Action Plan for Manufacturers of Construction Machinery, Japan Construction Equipment Manufacturers Association, Japanese, 15p, 2017

 Yokohama Smart City Project, Yokohama City Council, Japanese, 28p, 2017

 Japanese Energy Efficiency Improvement Achieved and Planned, Institute of Energy Economics Japan, English, 45p, 2016

 JETRO Success Story: Voices of Foreign Company Executives in Japan-Schneider Electric Japan-Philippe Bouchet, JETRO, English, 3p, 2014

 Market Trends of the Japanese Smart Grid, Yasuhiro Hayashi, Waseda University, Japanese, 8p, 2013

 Issues and Business Opportunities for Japanese Companies in the Smart Grid Business Field, Nomura Research Institute, Japanese, 33p, 2011

Construction & Building Technologies - Japan Market Study - Page 104 of 108

5.2. Construction and Building Technology Industry Associations

 Centre for Better Living

 Institute for Building Environment and Energy Conservation

 Japan Construction Material & Housing Equipment Industries Federation

 Japan Sustainable Building Consortium

 Building Centre of Japan

 Building Research Institute

 Imported House Industries Organization

 Japan Construction Information Centre

 Japan Construction Machinery and Construction Association

 Japan Construction Material & Housing Equipment Industries Federation

 Japan Federation of Construction Contractors

 Japan Prefabricated Construction Suppliers & Manufacturers Association

 Japan Testing Centre for Construction Materials

 Japan Two-by-Four Home Builders Association

 Japanese Federation of Architects & Building Engineers Associations

 Japanese Society of Steel Construction

 Japan Sustainable Building Consortium

 Japanese Wooden House Industry Association

 National Small and Medium-sized Construction Contractors Federation

 Overseas Construction Association of Japan

 Public Buildings Association

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5.3. Trade Fairs

 3rd Construction Material Tokyo, 18-20 July 2018, Tokyo Big Sight

 Japan Build 2018, 12-14 December 2018, Tokyo Big Sight

 9th International Grid Expo, 27 February - 1 March 2019, Tokyo Big Sight

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