Japan Mission Report October 2016


Mission Objectives:

  1. Attend the Japan Home Show Oct 26-28 Completed
  2. Research Japan Housing Agencies and Associations (see below)
  3. Confirm Forestry Details for Minister Bilious Japan (Made contact with Canada Wood and Alberta japan Office. Information passed onto AFPA delegates on Minister Bilious Delegation.
  4. Market Report (see below)

Japan Home Show


Attendance to 2016 show was up 12% compared to 2015 attendance. There were 107 visitors to the booth up 30% from last year. The number of foreign visitors were also up, especially from South Korea.



Overview of Japanese Housing Associations and Agencies

Japan has a large and varied number of organizations that influence Japan’s housing policy

The Japan Federation of Housing Organizations, Judanren, is the leading organization in the housing industry in Japan.

Authorized by the Ministry of Land, Infrastructure and Transport, Judanren was established in 1992 by housing and housing-related associations to serve its members, the housing industry, and the public at large.

Our activities focus primarily on the following field relative to the production and supply of homes:

  • 1.Coordination of and research on building systems
  • 2.Coordination among housing associations
  • 3.International exchanges
  • 4.Supply of information and submittal of proposals and recommendations
  • 5.All other related matters to carry out Judanren’s mission


JPA Purpose and History

The association was founded in January 1963 and in 1964 became incorporated under the jurisdiction of the Ministry of Land, Infrastructure, Transport and tourism (MILT) and the Ministry of Economy, Trade and Industry (METI).

In October 2013, the association refocused and changed direction and now focus development on prefab architecture as well as its construction and propagation.


  1. Independent certification activities related to prefab housing and construction (certifying precast concrete (PC) component quality, inspecting PC structures, certifying PC construction welding qualifications, certifying qualifications of PC building construction management engineers, certifying qualifications of prefab housing coordinators)
  2. Disaster countermeasures (support for construction of temporary emergency housing, and investigation and research into related technology)
  3. Public relations (publication of journals, and surveys of prefab housing sales results)


Warranties and insurance against defects

  1. Housing exhibition (discontinued from August 2013)
  2. Projects involving first-class architects’ offices
  3. Investigation and research into prefab housing and buildings
  4. Presentation of opinions and suggestions on measures involving housing and residential land

Organizational Structure


About Prefab Housing and Buildings

  • The “prefab” in prefab housing and buildings is abbreviated from “prefabricated,” and indicates a system of producing housing structural members, such as columns, beams, roof trusses and walls, in a factory and assembling them at the construction site.
  • In prefab housing and buildings, the main components are produced under thorough quality control, so there is no deviation in quality and a high degree of precision is achieved. In addition, less effort is required at the construction site and it is possible to greatly reduce the amount of time spent on construction.

Housing Committee


The Housing Committee comprises 20 prefab housing manufacturers.

Playing a leading role in the industry, it engages in activities with the aim of creating high-quality living spaces and residential environments and realizing a rich society full of vitality, through both construction and R&D of industrialized housing.

It also strives to create an axis for joint efforts among the member companies to quickly adapt to government policies and changes in the environment surrounding the housing industry.

Activities of the Housing Committee

Promoting the spread of advanced housing and technology, and coping with laws and standards

The Housing Committee aims to create new technology, cultivate new fields and promote a high-quality supply system in industrialized housingan area of expertiseand it is playing an active leading role in promoting and popularizing housing that can be actively utilized into the future. It is also striving for technological ways to meet the challenges of revisions in the Building Standards Act and certification regarding industrialized housing.

Pursuing a supply service system for highquality housing

The Housing Committee is working to raise the supply service level and quality of housing by drawing up supply service management standards for prefab housing. It is also drawing up a medium-term Customer Satisfaction (CS)/quality plan in order to achieve CS over the long term, and working to raise the CS/quality level further among each of its member companies.

Promoting the spread of good housing stock


The Housing Committee is promoting the creation of a market for good stock and aiming to introduce leading technology and high-quality supply systems into the field of housing stock through its efforts to promote the spread of long-term high-quality housing, favorable local environments and town planning.

Strengthening environmental measures

The Housing Committee is aiming for the realization and spread of netzero-energy housing. It is also drawing up an environmental action plan Eco-Action 2020 for the purpose of contributing to the realization of a sustainable society through efforts in consideration of preservation of biodiversity to promote sustainable wood sourcing and greening and to promote the reduction of waste and CO2 emissions throughout the housing life cycle. It is making steady progress toward achieving these goals.

Promoting educational activities for raising the level of housing life

In order to create better housing and an improved living environment, the Housing Committee is proactively providing appropriate information to residents, aiming for establishment of mechanisms for achieving safe and secure living over the long term. It is proactively holding lectures and symposiums, and releasing the results of its surveys and research.


1) Holding lectures and symposiums

  • Housing Committee seminars
  • Environmental symposiums
  • Household and town planning symposiums

2) Announcing survey and research results

  • Development and announcement of a method for determining earthquake resistance of industrialized housing
  • Announcement of achievements based on the environmental action plan, Eco-Action 2020, each fiscal year
  • Creation and announcement of supply service management standards
  • Creation and announcement of Housing Life Improvement Plan
  • Creation and announcement of maintenance guidelines
  • Formulation and announcement of design guidelines for a favorable housing environment
  • Formulation and announcement of “Proposal for townscape scenery appraisal”japan-2x4



“Japan Two-by-Four Home Builders Association” is the incorporated organization of wood frame building contractors, building materials suppliers and architect’s offices. It was established in 1976 and officially recognized by the Government to be of public interest, and now it consists of more than eight hundreds of member companies/professionals from almost everywhere in Japan. This association has a long history working with Canada Wood on the promotion of 2X4 house building, especially in Hokkaido Prefecture.


Regional Offices

Find your nearest regional office here.

Contact Us

The inquiry and the guide chart to the society secretariat are here.


Continuously striving to achieve quality homes and comfortable living.


japan-2x4-pamphlet   Pamphlet Download

The Machinami Foundation

(Machinami = townscape) was established in 1979, at a time when the focus of the government’s housing policy was shifting from quantity to quality. Its mission is to work toward improvement in the quality of housing and residential environments. (Ministry of Construction approval received on July 19, 1979)


Planning and administration are the core activities of the Machinami Foundation. The Foundation collaborates with and organizes housing-related organizations, including the Urban Renaissance Agency, regional housing supply corporations, rezoning associations, private sector developers and other residential land companies, housing manufacturers, home builders and general construction contractors, to supply high-quality housing and townscapes. To achieve these goals, they bring together experts and businesses with the necessary skills in such areas as planning, market research and technical expertise. The role of the Machinami Foundation is to coordinate these elements.

National Housing Industry Association

The National Housing Industry Association was founded in April 2013, when the Japan Housing Construction Industry Association and National Association of Housing Construction Industry Association were newly consolidated and established. The association has 1,500 companies concentrated in The Tokyo Metropolitan area, Okinawa and Hokkaido Prefectures. They plan to expand into the rest of the country overtime.

Goals of the Association:

  • Contribute to the sound development of the housing industry;
  • improvement of living standards of the citizen;
  • promotion of public welfare by promoting business development for the supply and distribution of houses and residential land,
  • and promotion of good living environment.

Association’s business:

  • Plan and promote adequate supply levels and distribution of housing and residential land;
    • Conduct research through surveys in order to achieve rationalization of business versus the environmental sustainable supply of housing and residential land;
    • Research problems between residential land development project and urban planning;
    • Survey and research technology and construction methods concerning leading to quality and functionality of housing;
    • Guidance and advice on quality assurance on housing projects;
    • Investigation and consultation service on housing consumer protection;
    • Public outreach through media and publications.


Wooden Home Building Association of Japan

Established by the Ministry of Construction (now the Ministry of Land, Infrastructure and Transport) in April 1986.

Association Functions:

  • Technological development and survey research on wooden post and beam assembly method;
  • R & D and public awareness for:
    • improvement of performance, quality etc. of wooden houses;
    • production technology and market distribution of wooden houses etc.
  • Build awareness leading to expanded demand for wooden houses;
  • Develop human resources wooden house construction and maintenance;
  • Survey and build awareness of housing defects and defect warranty responsibilities and defect insurance;
  • And build awareness of Government organizations, and sister building organizations that promote wooden building construction.

Association of Living Amenity

Living amenity association (ALIA) arose from the reorganizing the BL promotion council founded in 1976 to promote the development and dissemination of high quality residential parts (BL parts) in a progressive development in October 1990 , It became a general incorporated association corporation from April 2012.

The association objectives:

  • To improve comfortable housing life by dissemination of excellent housing components;
  • To promote housing comprised of functional and high quality housing components and to create a comfortable living spaces.
  • To promote research and information exchange. In example, that anticipates Japan’s aging population, declining birth rates, safety and security (earthquake resistance), energy efficiency, etc.;
  • To promote the revitalization of housing and living industries by transforming into a housing stock utilization type market.
  • Promote rigorous and standardized inspections focused on defects, deterioration and abnormalities. Repair and maintenance systems are evaluated for effectiveness.

The New Urban Housing Association

Founded in September 1996 with the aim of contributing to technology development, guidance and dissemination of CFT (Concrete Filled Steel Tube) construction and realization of a new urban apartment house It was.

Typical members of the association include; are general construction industry, design office, steel and steel frame processing, building materials / equipment, energy supply, and real estate., and companies of various industries cooperate, building ·

The association celebrated the 20th anniversary of establishment in September, 2016. In order to respond to the new era and to further develop, they changed our articles of incorporation and reviewed the “New City Housing Association Vision”.

Basic principle    The Association will organize groups and individuals that create safe, comfortable and sustainable urban residential environments, and work together to create richer and more vibrant cities, and fulfill a social mission as a public interest group.

Core Activities       (1) Research and Development of technology that:

  • Promotes research on technologies related to earthquake resistance, disaster prevention and energy conservation of high-rise, high-rise apartment houses.
  • Promotes technology development related to the improvement of performance of fire-resistant coating and fire-resistant coating made by CFT.
  • Promotes technological development such as pre-stressed concrete construction and building basic structure, and try to develop new design methods and improve longevity.



Today, in the Japanese housing market, the perception of “Imported Houses” is well recognized, and an increasing number of consumers are willing to take a closer look at the advantages of building or buying imported house. This trend is because more Japanese consumers are becoming familiar with the design concept of imported houses which are very different from traditional Japanese designs, and because more consumers understand the advantages in quality and performance of imported houses. In April 1995, companies and organizations that have a role in the imported housing business joined hands to establish a promotional organization, Imported House Industrial Organization (IHIO).


For future prosperity of the imported housing industry, it is essential to win consumer confidence in the quality of imported houses and to develop new markets for imported houses. The IHIO aggressively tackles obstacles hindering construction of more imported houses, and strives to contribute to the improvement of the housing industry in Japan.


For further development of imported housing industry and for the prosperity of the business, the IHIO is currently tackling the following challenges.

Deregulation (Relaxing of Regulations and Restrictions):

It is important to improve the market environment for healthy growth of the imported housing industry under the free market system. For example, relaxing of some regulations and restrictions will lead to freer and more practical economic activities. This will improve the competitiveness of imported housing. The IHIO promotes deregulation by lobbying governmental and municipal authorities.

Cost Reduction:

Also important is to reduce the cost of constructing imported houses to be competitive in the market place. In order to provide good quality imported houses at a reasonable price to homebuyers, the cost of imported building materials, the cost of ocean freight and local delivery, and the actual construction cost which weigh greatly in home building, need to be evaluated closely.

After-Construction Maintenance and Care:

Life of houses is long, and maintenance and care for the houses are required. Because of this the imported housing industry has to look at the maintenance and care of the imported houses thoroughly. The challenges are not limited to the above mentioned, and the IHIO aims to address each of these existing as well as future challenges in order to bring about healthy growth in the industry.

Public Relations and Promotion of Imported Houses:


For further development of the Imported Housing market, it is essential to let it be known about the advantages of living in imported houses. For this objective, the IHIO holds the following activities on a regular basis. Open House Events, Seminars and Symposium Active networking with overseas suppliers Publication of various books and booklets Management of a library dedicated to imported houses.

Promotion of Overseas Products and Suppliers:

As an important part of the IHIO, networking opportunities are held aiming to discover or develop excellent building materials suitable for the Japanese market. From time to time, such prospecting missions overseas are organized and carried out.

Information Source:

One of most important functions is to be the information source in the field of Imported Housing. For the members of IHIO, there is “I-House” magazine, that is filled with up to date and timely professional information and photos.

Promotion of Better Quality Products, Better House Building Technologies:

The constant improvement of the quality of products and services, as well as building skills and technologies is important. The IHIO is the leading organization in promoting these through numerous study and training sessions.

Research and Surveys


Up to date information on the market trend and governmental regulations is very important for the members of IHIO, as well as those in the housing industry. The IHIO conducts studies and surveys to maintain the latest data in the field and share them among the members and authorities.

Relations with Government Authorities:

The IHIO has been the key provider of opinions and feedbacks towards governmental policy changes and revisions in regulations.


Mandatory House Quality Assurance Insurance:

On the 1st of October, 2009, a law was enacted that all houses built and sold must be assured of minimum quality requirements. The IHIO provides insurance to guarantee that these requirements are met for homeowners who purchase houses built by the members of IHIO.

IHIO Residential Lot Security Insurance:

Although, the new regulation requires newly built houses to meet the minimum requirements, it does not apply when the problems lie in the performance of the residential lots. This insurance covers for damages in such cases.


The main body of the IHIO is the “GENERAL ASSEMBLY” by all members. The day-to-day operation of the organization is directed by “IHIO Steering Committee”, and conducted by various committees which report to the Steering Committee. Listed hereunder are committees that are currently active.

General Affairs Committee:

Manages overall activities of the IHIO, led by its committees, and plans annual activities, annual budgets and compiles reports

Planning & Public Relations Committee:

Plans and executes public relations activities in promoting imported houses in the market. Intelligence gathering and managing, research and development for the benefit of the imported housing business fall under this committee.

Quality Improvement Committee:

Plans and executes activities promoting proper interpretation and application of the laws and regulations relating to building of imported houses. Also this committee is responsible for planning and execution of quality assurance, maintenance of quality standards, and after-construction services by the members. Another important function of this committee is to plan and execute activities in acquiring higher standard of construction technologies.

Life Style Planner Committee:

Manages Life-Style Planner Certification Program to train human resources to promote benefits and advantages of living in imported houses. It also provides consultation to people in fulfilling their life style from a view point of house planning.

IHIO MEMBERSHIP (revised June 2002)

IHIO is made of the members in the following categories:

Regular Membership:

  1. Sweden House Co., Ltd. http://www.swedenhouse.co.jp/ 2. Hokuyo Koeki Co., Ltd. http://www.hokuyo-koeki.co.jp/ 3. Selco Home Inc. http://selcohome.jp/ 4. Machida Hiroko Interior Coordinator Academy http://www.machida-academy.co.jp/ 5. Fronville Home Chiba Co., Ltd. http://www.fronville.co.jp/ 6. Santa Tsusho Co., Ltd. http://www.santatsusho.co.jp/ 7. Fujino Home Co., Ltd. http://www.fujino-group.com/ 8. Tokyu Homes Corporation http://www.tokyu-homes.co.jp/ / http://www.millcreek.jp/ 9. Mitsubishi Corporation http://www.mitsubishicorp.com/jp/ja/ 10. Housing Yamachi Co., Ltd. http://www.housing-yamachi.com/ 11. Donna House Co., Ltd. http://www.donna-house.com/ 12. Bruce Japan Co., Ltd. http://www.bruce.co.jp/ 13. Kuroda House Co., Ltd. http://www.kurodahouse.jp/

Associate Membership:

Other Organizations


Japan Market Reports

From BC Investment and Innovations

Canada Wood Today | The Canada Wood Group

Japan Economy, Housing Starts & Lumber Shipments

By Shawn Lawlorshawn-lawlor

Director, Canada Wood Japan

December 8, 2016

Posted in: Japan

Japan Economic Update


Japan’s third quarter GDP beat expectations by registering a 2.2% increase on an annualized basis. So far this year Japan’s GDP expanded 0.5% between January and March and 0.2% April to June. Although consumer spending remained flat, third quarter GDP growth was boosted by an increase in exports. Meanwhile, Japanese equities and the yen exchange rate abruptly reversed trends after the surprising results of the U.S. presidential elections. The Japanese yen registered gains and equities fell on the political uncertainty leading up to the elections. However, in a post-election environment the Japanese weakened from 102yen to the dollar to 110 yen to the dollar. As a result the Nikkei 225 index surged from the low 16,000 level to over 18,000 in the past month.

Despite the results of the US election, the Japanese government continues to advocate implementation of the TPP agreement. Japan’s lower house passed the TPP in early November and ratification in the LDP majority upper house is merely a formality. Japanese officials also met with the 11 other TPP signatory nations in Lima, Peru to push for the formalization of the agreement. According to Japanese government estimates, the TPP would create 800,000 jobs and sustain GDP growth of 2.5%. Although the prospects for TPP remain uncertain given president elect Trump’s opposition, the Japanese government continues to advocate a pro-trade stance.

Japan Housing Starts Summary 

August total housing starts increased 2.5% to 82,242 units. Single family owner occupied housing registered growth of 4.3% for the 7th consecutive monthly gain. Rental housing posted strong growth of 9.9%. However, the mansion condominium market declined 12.7%.

Total wooden housing increased by 7.9% to 48,717 units. Post and beam starts improved 7.6% to 36,470 units. Wooden pre-fab starts were down 12.3% to 1,143 units. Two by four starts posted an 11.7% gain to 11,104 units. By housing type 2×4 custom ordered single family homes increased 8.1% to 3,110 units; rentals surged 16.0% to 6,877 units and built for sale 2×4 spec housing declined 4.4% to 1,086 units. 

BC Wood Exports Summary 

As of the end of September British Columbia year to date softwood lumber exports to Japan totaled 1,586,815m3: a decrease of 4.5% compared to year prior figures. By value year to date exports totaled $530.1 million – a decrease of 5.4%. By species groups, SPF shipments remained comparatively stable with a 0.1% decline to 1,150,578m3. In contrast between January and September Hemlock decreased 12.1% to 199,715m3, Douglas Fir fell 14.1% to 156,586m3 and Yellow Cedar fell 22.8% to 48,728m3. 

Canadian Lumber School Symposium Held in Nagoya

On November 10th Canada Wood held our second Canadian Lumber School Symposium for the year in Nagoya. A total of 52 participants from forest product trading and distribution companies, housing companies and lumber processing end user companies attended. All attendees found the event to be either useful or very useful according to participant survey responses. Four presentations were delivered over a half day event covering topics such as sustainable Canadian forest practices, forest product manufacturing as well as species and product specific discussions on Canadian SPF, Hem Fir (N) and Coastal species as well as OSB.  Participant survey responses included the following comments, “I was able to better understand about the history behind Canadian Wood and the changes in the Japanese market.” and “You conveyed the main points of Canadian Forestry in a very easy to understand manner”.

MLIT Officers Visit Wooden 6-Storey Residences in Vancouver


By Hidehiko Fumoto


Deputy Director and Manager Technical Services, Canada Wood Japan

October 11, 2016

Posted in: Japan


Building officials from Japan visit Wesbrook Village on the UBC campus.

To support the development of midrise wood construction in Japan, Canada Wood’s Fumoto-san led a group of building officials from Japan, who participated in the Canada-US-Japan trilateral meetings in Montreal September 26 to 28, on a recent visit to Wesbrook Village at the University of British Columbia campus – a typical wood 6-storey residential community.  Up until recently 6-storey wood buildings were impossible in Japan due to the 2-hour fire resistive performance requirement. But thanks to the joint efforts of COFI and the Japan 2×4 Home Builders Association conducting a series of fire testing, we have successfully obtained the 2-hour fire resistive approvals from Ministry of Land, Infrastructure, Transport and Tourism (MLIT). Now that the 2-hour fire resistive approvals have been obtained, it is extremely important to educate code and building officials on the popularity of midrise wood buildings in Canada. The visitors to Wesbrook Village included the Director of Wood Housing Promotion Office in MLIT and Chief Research Engineer of Department of Fire Engineering in Building Research Institute.


Updates from Ministry of Land, Infrastructure, Transport and Tourism

Outline of the Initiative promoting Time-Share Dwellings in Japan

  • While purchasing complete ownership of a dwelling might amount to several times one’s annual income, purchasing a real property right or any other right relating to the use of a specific time-share dwelling for a specified period of time each year could be quite affordable.
  • Time-share dwellings have become quite popular in foreign countries. For instance, around 4% of the households in the U.S. held a right-of-use of a time-share dwelling in 2007.
  • While the supply of time-share dwellings could promote multi-habitation, local tourism and housing-related investment, there are several problems related to consumer protection.
  • Therefore, in order to examine the need to promote time-share dwellings in Japan and to discover effective schemes to protect the rights of purchasers, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) initiated a Research Group on promoting the supply of time-share dwellings in May 2008.
  • In August 2008, MLIT issued a report summarizing the work of the Research Group (please refer to <http://www.mlit.go.jp/report/press/house03_hh_000004.html> for the report (only available in Japanese).
  • In fiscal year 2009, MLIT earmarked 15 million yen to support those who develop effective schemes for the provision of time-share dwellings, and called for proposals from May 20th to June 19th. Among the five proposals forthcoming, three were chosen by the evaluating committee.
  • The sponsors of the three proposals chosen developed model schemes to supply time-share dwellings and submitted their results at the end of fiscal year 2009. The main reports, model contracts, etc., which were submitted by these companies, as well as the evaluation of the results by the committee, can be downloaded from the MLIT homepage.
  • Moreover, one of the companies has proposed a model contract in English, which is intended to expand the marketing scope to foreign consumers, investors, etc., and to mitigating the seasonality impact of the domestic tourism market. For this model contract in English by Reproject Partners Co, Ltd, please refer to: http://www.mlit.go.jp/common/000113429.doc


Third Quarter 2016 Economic and Wood Product News



Japan’s Prime Minister and leader of the ruling Liberal Democratic Party (LDP) Shinzo Abe attends a debate with rival party leaders ahead of July 10 upper house election in Tokyo, Japan, June 21, 2016. (THOMAS PETER/REUTERS)

Japan’s cabinet launches stimulus package to boost growth

Tetsushi Kajimoto

TOKYO — Reuters

Published Tuesday, Aug. 02, 2016 5:31AM EDT

Last updated Tuesday, Aug. 02, 2016 7:59AM EDT

Japanese Prime Minister Shinzo Abe’s cabinet approved 13.5 trillion yen ($132.04-billion) in fiscal measures on Tuesday as part of efforts to revive the flagging economy, with cash payouts to low-income earners and infrastructure spending.

The package includes 7.5 trillion yen in spending by the national and local governments, and earmarks 6 trillion yen from the Fiscal Investment and Loan Program, which is not included in the government’s general budget.

Japan cabinet approves $132-billion spending boost (Reuters)

The stimulus spending is part of a renewed government effort to coordinate its policy with the Bank of Japan, but growing concerns that the BOJ policy has reached its limit triggered the worst sell-off in government bonds in three years.

“We compiled today a strong economic package draft aimed at carrying out investment for the future,” Abe told a meeting of cabinet ministers and ruling party executives on Tuesday morning.

“With this package, we’ll proceed to not just stimulate demand but also achieve sustainable economic growth led by private demand.”

The headline figure for the package totals 28.1 trillion yen, but it includes public-private partnerships and other amounts that are not direct government outlays and thus may not give an immediate boost to growth.

Abe ordered his government last month to craft a stimulus plan to revive an economy dogged by weak consumption, despite three years of his “Abenomics” mix of extremely accommodative monetary policy, flexible spending and structural reform promises.

The package comes days after the Bank of Japan eased policy again and announced a plan to review its monetary stimulus program in September, which has kept alive expectations for “helicopter money,” printing money for government debt.

The review has spooked investors, who are unsure how BOJ policy will change in the future. The price of 10-year JGB futures closed down 0.91 point on Tuesday to 151.33, having fallen 2.47 points in the last three sessions, their biggest three-day fall since May 2013.

The expected appointment of Toshihiro Nikai, an advocate of big public works spending, to the No. 2 post of Abe’s ruling party in tandem with a cabinet reshuffle on Wednesday underscores Abe’s shift toward his “second arrow” of fiscal policy amid concerns monetary easing is reaching its limits.

Precisely how the spending will be financed is unclear, although the government is considering issuing construction bonds when compiling a supplementary budget later this year. The stress on fiscal steps is raising doubts about Japan’s ability to fix its already massive debt.

The government estimates the stimulus would push up real gross domestic product (GDP) by around 1.3 per cent in the near term. The package will be implemented over several years, officials added.

SMBC Nikko Securities’ analysts expect the package will push up real GDP growth by just 0.4 percentage point this fiscal year to March 2017 and 0.04 percentage point next year.

“As effects of public works and cash payouts fade later in fiscal 2017, Japan will likely face a fiscal cliff,” said Koya Miyamae, senior economist at SMBC Nikko Securities, referring to the contraction in spending after the package wears off.

“To prevent a fiscal cliff, the government will likely repeat large-scale stimulus. Considering that a general election must be held by late 2018, direct government spending would become larger, which could further delay Japan’s fiscal consolidation goal.”



A currency dealer smiles in front of an electronic board showing the exchange rates between Euro and Japanese yen at Ueda Harlow, a foreign exchange trading company in Tokyo June 29, 2016.

(Shuji Kajiyama/AP)

Bonds shaken by BOJ stimulus doubts; dollar in decline

Wayne Cole

SYDNEY — Reuters

Published Tuesday, Aug. 02, 2016 8:59PM EDT

Last updated Tuesday, Aug. 02, 2016 9:05PM EDT

Asian shares bowed lower on Wednesday while the yen lorded over a weakened U.S dollar as talk the Bank of Japan may retreat from its massive bond-buying campaign twigged a shakeout in debt markets globally.

Worryingly for energy shares, the broad-based decline in the dollar was still not enough to spare U.S. crude oil from its first finish under $40 a barrel since April.

Adding to the jittery mood was a renewed selloff in bank stocks following stress-tests in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 percent, backing away from its recent one-year peak. Japan’s Nikkei lost 1.4 percent as the rising yen pressured exporter stocks while financials slid 2.7 percent.

The sharpest moves were in sovereign bond markets where a sudden spike in yields stirred speculation that a multi-year bull run in prices might finally be nearing its end.

Japanese bonds have suffered their worst sell-off in more than three years as investors feared the BoJ was out of easing ammunition and might leave it to fiscal policy to stimulate the economy.

Tokyo on Tuesday approved 13.5 trillion yen ($132 billion) in fiscal measures and the IMF urged Japan to better coordinate fiscal stimulus with central bank action.

Bond bulls were now worried the Bank of England might also under-deliver at its policy meeting on Thursday, putting the onus on debt-funded government spending to support growth.

“With Japan and the UK set to ease fiscal policy, it will be important to watch whether we are at the beginning of a global policy re-pivot away from monetary easing,” wrote analysts at ANZ in a note.

The ripples spread all the way to U.S. Treasuries where 30-year yields hit their highest since July 21 even though domestic data were generally soft.

Disappointing auto sales slugged shares in Ford and General Motors, which both dropped more than 4 percent.

The Dow Jones Industrial Average fell 0.49 percent, while the S&P 500 lost 0.64 percent and the NASDAQ 0.9 percent.

The recent spate of weaker U.S. data has further pushed back expectations for when the Federal Reserve might hike its rates — the market is not fully priced for a move until 2018 — and taken a heavy toll on the dollar.

The dollar touched a five-week trough against a basket of currencies, while the euro reached its highest since mid-July around $1.1230.

Against the yen, the dollar fell to 101.16 yen having fled from 105.33 in just four sessions.

In commodity markets, oil prices were undermined by worries about a glut in both crude and refined product.

Brent crude was near four-month lows on Wednesday at $41.86 a barrel. NYMEX crude edged up 15 cents but at $39.66 was still under the psychological $40 level.


Japan household spending stubbornly weak even as jobless rate hits 21-year low


Shoppers line up in front of cashiers at the Don Quixote’s central branch store in Tokyo May 28, 2014. REUTERS/Yuya Shino/File Photo

By Sumio Ito and Leika Kihara | TOKYO

TOKYO Japanese household spending fell less than expected in July and the jobless rate hit a two-decade low, offering some hope for policymakers battling to pull the world’s third-largest economy out of stagnation.

But with the economy barely growing and inflation sliding further away from the Bank of Japan’s 2 percent target, a majority of economists expect the bank to ease further next month, when it conducts a comprehensive review of the effects of its existing stimulus program.

Household spending fell 0.5 percent in July from a year earlier, less than a median market forecast for a 0.9 percent drop and much smaller than a 2.3 percent decline in June, data from the Internal Affairs Ministry showed on Tuesday.

Separate data showed retail sales slid 0.2 percent in July from a year earlier, less than a median market forecast for a 0.9 percent drop.

The jobless rate fell to 3.0 percent in July from 3.1 percent in June, hitting the lowest rate in more than 21 years and hovering near levels considered to be full employment.

“Consumption is showing signs of a pickup, though it’s too early to judge whether the trend has changed,” said Yoshika Shinke, chief economist at Dai-ichi Life Research Institute.

“While today’s data may encouraging for the BOJ, that doesn’t necessarily mean it can stand pat as inflation remains weak,” he said.

Japan’s economy ground to a halt in April-June and analysts expect any rebound in the current quarter to be modest as weak global growth and the yen’s 20 percent rise against the dollar this year hurt exports and capital expenditure.

Consumption has stagnated even as a shrinking working-age population and gradual improvements in the economy led to a tightening job market, as companies remain wary of boosting wages for permanent workers for fear of irreversibly increasing fixed costs.

That reluctance has proved a hindrance for policymakers struggling to end two decades of deflation with aggressive monetary and fiscal stimulus measures, hoping these policies would spur expectations of future inflation and prompt households to spend more now rather than save.

Despite three years of heavy money printing by the BOJ, soft household spending and a strong yen pushing down import costs have kept inflation distant from the bank’s 2 percent target.

Core consumer prices fell in July by the most in more than three years as more firms delayed price hikes due to weak consumption, keeping the BOJ under pressure to expand an already massive stimulus program.

(Additional reporting by Izumi Nakagawa, Editing by Chang-Ran Kim; Editing by Shri Navaratnam and Eric Meijer)

By afp

Published: 13:14 GMT, 4 October 2016 | Updated: 13:14 GMT, 4 October 2016

The International Monetary Fund Tuesday lifted its outlook for Japan’s economy this year and in 2017, pointing to huge government stimulus spending, but warned the country’s longer-term prospects were bleak.

The Washington-based IMF upgraded its growth projections for the world’s number three economy to 0.5 percent in 2016 and 0.6 percent next year, up from a July forecast of 0.3 percent and 0.1 percent, respectively.

But the upgrade was largely due to an expected shot in the arm from a whopping 28-trillion yen ($273 billion) government spending package announced in August, as well as a decision to delay a consumption tax hike, the Fund said.


Business District Tokyo

The International Monetary Fund has lifted its outlook for Japan’s economy this year and in 2017 but warns the country’s longer-term prospects are bleak

©Kazuhiro Nogi (AFP/File)

“Japan’s medium-term prospects remain weak, primarily reflecting a shrinking population,” the IMF said in its latest World Economic Outlook.

“The probability of deflation has increased in Japan owing to weak momentum in consumer prices and the recent appreciation of the yen,” it added.

Officials are under intense pressure to deliver a boost to the economy as economists increasingly write off Prime Minister Shinzo Abe’s spend-for-growth policies, dubbed Abenomics.

Weakness in economies overseas and a strong yen, which is bad for Japan’s exporters, are weighing down growth, the Fund said.

The Bank of Japan’s huge monetary easing — a cornerstone of Abenomics — will help prop up growth for now, but would do little to fix broader problems, it added.

Among them, Japan is grappling with low birthrates and a shrinking labour force while a soaring population of old people squeezes the public purse.

Wages are stagnant, spending is faltering, and consumer prices are way below the central bank’s two-percent inflation target.

The Fund said it expected consumer prices to stay “well below” the BoJ’s inflation target for the time being.

It repeated calls for reforms including bringing more women into the workforce, boosting near-zero immigration, and trying to convince cautious firms to start spending their massive cash piles.

The Fund also called for Tokyo to rein in a national debt that is now more than two times the size of the economy — one of the world’s biggest debt loads.


A stronger yen could make emerging Asian assets relatively less attractive

© Bloomberg

October 3, 2016

Anyone who believes that the rower of the boat cannot rock it as well has not met those who run Japanese shipbuilder Kawasaki Heavy Industries.

Late last week, as part of a sharp downward revision in future earnings, the company hinted that it would shut its offshore vessels division. This would be big news — Shozo Kawasaki founded KHI 138 years ago to build ships — but it will not make a big difference. Moving more operations outside of Japan will.

KHI makes not just ships but machinery such as aerospace equipment, gas turbines and motorcycles. More than half of profits come from aerospace; shipbuilding was expected to lose money this year.

Looking at the revision — operating profits cut in half from ¥70bn — the damage from a stronger yen represents the primary cause. Almost 60 per cent of revenues come from outside Japan. Those from the US and Europe have been rising at mid-teen percentage rates annually, far better than the 1 per cent KHI gets from its home country.

KHI does make some of its goods abroad, such as rolling stock and jet skis, but it needs to do more to balance its currency risks. To be fair, its joint venture in Brazil to produce offshore drilling equipment may have been agreed with this goal in mind. Instead, a global depression for oil services coupled with the Petrobras corruption scandal killed off any hopes for a profitable business.

The Japan-based offshore marine division has become the target for change, even though the unit’s drag on profits is small. Decade-high profits in shipbuilding evaporated in 2013. Group profits, driven by aerospace, have doubled since then. Even so there is little love for KHI. That is partly because of its shipbuilding unit, which on Nomura’s forecasts will lose money until at least March 2019.

Whether KHI scuttles its offshore division is unimportant. What it really needs is to diversify its manufacturing base to more overseas locations.



Abe vows economic support to Russia; Putin to visit Japan Dec 15

Politics Sep. 03, 2016 – 06:30AM JST ( 26 )

Russian President Vladimir Putin, right, and Japanese Prime Minister Shinzo Abe shake hands as they pose for a photo during their meeting in Vladivostok, Russia, Friday. Kremlin Pool Photo via AP


Japanese Prime Minister Shinzo Abe vowed economic support to Russian President Vladimir Putin on Friday, in the hope of advancing a decades-old territorial dispute that has prevented the two countries from signing a post-World War II peace treaty.

Putin will make an official visit to western Japan’s Yamaguchi, Abe’s home prefecture, on Dec 15, Abe told reporters following his meeting with Putin on the sidelines of the Eastern Economic Forum in the Russian Far East port city of Vladivostok.

Abe, seeing his talks with Putin as the only way to achieve any breakthrough in the isles row, added they plan to meet again on the sidelines of the Asia-Pacific Economic Cooperation summit in November in Peru.

“I had substantially deep discussions about a peace treaty (with Putin),” Abe said. “To achieve a breakthrough in the abnormal situation where a peace treaty has never been concluded for over 70 years, there is no other way than finding a solution based on the leaders’ trust.”

Abe’s trip to Vladivostok was a rare visit to Russia by a leader from the Group of Seven economies, which continue to impose sanctions on Moscow, condemning Russia’s annexation of Crimea and its military intervention in the eastern part of Ukraine.

Putin’s visit to Japan was initially eyed for 2014 but was postponed after Russia’s annexation of Crimea, deteriorating ties with Western countries and Japan.

With Tokyo hoping an economic cooperation offer will prompt the Kremlin to soften its stance in the dispute over a group of Russian-controlled isles off Japan’s main northernmost island of Hokkaido, Abe laid out details of the eight-point Japanese economic cooperation plan he presented to Putin in May in the Russian Black Sea resort city of Sochi.

“I believe the development of the Far East region with big potential is Russia’s top priority issue,” Abe said at the outset of his meeting with Putin. “The growth of the Asia-Pacific leads the global economy. Japan, as Russia’s neighbor, will promote Japan-Russia cooperation in the region strongly.”

Putin said, “It is important that the governments support the initiatives of the private sector.”

The plan focuses on Japanese assistance in developing the Russian Far East, a resource-rich but underdeveloped region to which Putin attaches importance to spur growth. The Russian economy has been sluggish, hit by sanctions by Western countries and falling oil prices.

As part of the Abe government’s initiative for economic cooperation, the government-backed Japan Bank for International Cooperation and Japanese trading house Mitsui & Co signed a memorandum of understanding on Friday to acquire a 4.88% stake in Russia’s state-owned power utility RusHydro.

The move is hoped to expand opportunities for Japanese firms to make infrastructure and other deals with the Russian power sector.

In their previous meeting in Sochi, Abe said he and Putin agreed on achieving a peace treaty with a “new approach, free of any past ideas.” He did not, however, reveal any specifics regarding the path ahead.

Japanese officials said the “new approach” did not mean a change in Tokyo’s stance of claiming all of the disputed isles—Etorofu, Kunashiri, Shikotan and the Habomai islet group. The isles are called the Northern Territories in Japan and the Southern Kirill’s in Russia.

Putin has previously admitted the validity of the 1956 Japan-Soviet Joint Declaration that says Russia will return the two islands—Shikotan and the Habomai—after concluding a peace treaty with Japan.

Japan and Russia are far apart over the territorial issue. Tokyo maintains that ownership of the isles must be resolved before a peace treaty can be concluded.

Russia says the territorial and peace treaty issues are not directly connected and that it took control of the isles legitimately at the end of World War II. Moscow has strengthened its control of the islands and developed their infrastructure.

In April 2013, Abe, who took office in December 2012, became the first Japanese prime minister to officially visit Russia in 10 years, agreeing with Putin to revive territorial talks.

Since then, while Abe has made several trips to Russia, there has been no reciprocal visit by the Russian leader to Japan.

Among other matters, the two leaders also discussed issues related to the humanitarian crisis in Syria, implementation of a cease-fire agreement in Ukraine and North Korea’s missile and nuclear threats, according to a Japanese government official.


And when it all falls apart, some creative finger-pointing will take place. Abe can just shrug and cite sanctions if he does not get everything he wants and at bargain prices. Unless Putin does something truly daring, he will come out of this looking worse. But hey, at least he can keep hopes up through December by doing absolutely nothing. That is good work for a politician, if you can get it, and I would imagine that things have been getting a little uncomfortable for Putin lately.

Putin’s best move? Give back Habomai and Shikotan to Japan unconditionally, for free. No strings. No explanation. Just as a grand gesture of goodwill and friendship. It would literally change the world and improve EVERY SINGLE dispute and problem that Russia has today. It would literally be a new beginning for Russia.

Japan Economy, Housing Starts & Lumber Shipments


By Shawn Lawlor

Director, Canada Wood Japan

October 11, 2016

Posted in: Japan


Japan Economic Update

On the surface, with 1.37 jobs available for every worker and an unemployment rate of 3.1%, Japan’s labour market is in a relatively sweet spot globally. But the growth of temporary non-regular employment since the end of the “salaryman” lifetime employment model in the early 1990s is one of the key factors in explaining chronic sluggishness in Japanese consumption. Despite government efforts to spur growth, household consumption fell 4.6% in August – for the sixth consecutive month.

Today part-timers and non-regular contract workers represent 40% of Japan’s workforce. While average wages for private sector regular workers average 4.8 million yen annually, part-time and contract non-regular annual wages average 1.7 million. Remediating the gap in regular versus non-regular employment is key to rebuilding Japanese consumer confidence. A government panel of labour reforms is now looking at drafting recommendations for labour market reform to address this gap in benefits as well as measures to increase workforce participation of women, the elderly as well as skilled foreign laborers such as nurses and construction workers. The panel tabled its recommendations to the end of the fiscal year.

Japan Housing Starts Summary 




In July, total housing starts increased 8.9% to 85,208 units. Single family owner occupied housing increased 6.0% and rental housing jumped 11.1%. The mansion condominium market improved 5.9%.

Total wood housing increased by 11% to 48,693 units. Post and beam starts improved 10.9% to 36,206 units. Wood pre-fab starts were up 11.4% to 1,383 units. Thanks to particular strength in multi-family, platform frame starts posted an 11.3% gain to 11,104 units. By housing type 2×4 custom ordered single family homes edged up 2.2% to 2,945 units; rentals surged 18.3% to 6,956 units and built for sale 2×4 spec housing declined 0.3% to 1,192 units.

BC Wood Exports Summary BC Investment and Innovation



As of the end of August, British Columbia year to date softwood lumber exports to Japan totaled 1,389,931m3: an increase of just under 1%. By value, year to date exports totaled $465.1 million – a decrease of 2.14% compared to year prior results. By species groups, SPF fared comparatively well. Between January and August, SPF shipments increased 6.2% to 1,088,275m3; Hemlock decreased 4.1% to 174,098m3, Douglas Fir fell 15.6% to 138,184m3 and Yellow Cedar fell 22.1% to 41,474m3.


China’s Macroeconomy: Time Series Data from Center for Quantitative Research


Federal Bank of Atlanta https://www.frbatlanta.org/cqer/research/china-macroeconomy.aspx?panel=1

Since the late 1990s, China’s investment share of gross domestic product (GDP) has increased while the corresponding shares for consumption and both labor and household income have declined (Chart 1). These changes in trends have been accompanied by sharp changes in cyclical patterns as well; as shown in Chart 2, the strong positive correlation between investment and household consumption broke down in the late 1990s. The model laid out in “Trends and Cycles in China’s Macroeconomy,” by Chun Chang, Kaiji Chen, Daniel F. Waggoner, and Tao Zha, can account for these facts. The authors argue that these changes began in March 1996, when the Eighth National People’s Congress passed a historic long-term plan to adjust the industrial structure for the next 15 years in favor of strengthening heavy industries. Preferential credit policies to heavy industries—where local governments have made implicit guarantees of long-term bank loans to that sector—have crowded out short-term loans to smaller firms. Consistent with this crowding-out effect, Chart 3 shows that the correlation between short-term loans and medium- and long-term loans as shares of GDP has been negative since the early 1990s.

This webpage hosts the annual and quarterly macroeconomic datasets for China used by Chang, Chen, Waggoner, and Zha. Technical details on sources and methods used to construct the datasets are described in the manuscript “China’s Macroeconomic Time Series: Methods and Implications,” by Patrick Higgins and Tao Zha. A readme file includes variable names and descriptions as well as instructions on how to use the datasets. We plan to make regular semi-annual updates to the datasets and maintain earlier vintages.

Related Resources







Bad loan growth slows at China banks as write-offs accelerate

Big lenders brace for fallout from government efforts to rein in debt


August 30, 2016

by: Gabriel Wildau in Shanghai

Growth in bad loans slowed at Chinese banks in the second quarter as lenders stepped up writedowns and the economy of the country’s prosperous east coast showed signs of stabilising.

After years of fast profit rises driven by aggressive lending in support of China’s manufacturing and construction booms, the big four lenders are pulling in their horns as they brace for fallout from government efforts to rein in debt and cut rampant overcapacity in basic material sectors.

Industrial & Commercial Bank of China, the country’s largest lender by assets, on Tuesday reported net profit growth of 1 per cent for the second quarter, little changed from 0.6 per cent growth in the first quarter.

Industry-wide profits fell 0.1 per cent in the second quarter from a year earlier, compared with 6.3 per cent growth in the first quarter and 2.4 per cent in 2015. Small banks have maintained fast profit growth as they expand assets more aggressively than larger rivals.

But growth in non-performing loans moderated. The NPL ratio for China’s commercial banking system was 1.75 per cent at the end of June, unchanged from three months earlier, while ICBC’s ratio actually fell to 1.55 per cent from 1.66 per cent three months earlier. (A nonperforming loan (NPL) is the sum of borrowed money upon which the debtor has not made his scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default.)

China’s three other largest banks — Bank of China, Agricultural Bank of China and China Construction Bank — each reported NPL ratios at end-June that were little changed from three months earlier. Bad loans continued to rise in volume terms, hitting 1.44tn ($215bn) for all commercial banks at end-June, up by Rmb44bn since March.

“The NPL formation rate was slower than people thought. That’s the biggest surprise in these figures,” said Ma Kunping, banks analyst at China Merchants Securities in Shanghai. “The economy in the east coast has basically hit bottom. Most of the problem companies have already been exposed.”

Banks’ net interest margin — which measures the difference between what lenders pay for deposits and what they collect on loans — fell to the lowest on record in the second quarter at 2.27 per cent. China’s benchmark lending rate is at an all-time low of 4.35 per cent for one-year loans, and interest rate deregulation has also forced lenders to compete with each other on deposit and loan pricing.


Analysts warn that NPLs will probably resume rising in the coming quarters, with north-east China’s coal and steel industries a major source of delinquencies. That will show up not only in rising NPLs, but also in loan restructurings and debt-for-equity swaps that will help troubled companies but impair bank balance sheets.

In addition to slower NPL formation, lenders have become more aggressive in writing down and selling off bad loans.

AgBank, the country’s third-largest, said on Friday that it had disposed of Rmb60bn in bad loans in the first half, which is equivalent to 28 per cent of the bank’s outstanding NPLs at the end of 2015.

“Though credit quality pressure is likely to persist for some time … [AgBank’s] strong capacity in NPL digestion should help to alleviate concerns about book impact from NPLs,” Richard Xu, China financials analyst at Morgan Stanley, said in a note.


Investors remain concerned about a further rise in NPLs, with shares of all of the big four banks currently trading below book value in both Hong Kong and Shanghai, reflecting scepticism about the reported numbers.

Regulators are preparing new rules to curb banks’ ability to package loans into wealth management products, which will help to reduce systemic risk but add to pressure on bank profits.


NSG, China-Pakistan economic corridor on table during Narendra Modi-Xi Jinping meeting

By IANS | Sep 03, 2016, 01.41 PM IST

Narendra Modi will once again try to persuade Xi Jinping to back India for membership of the 48-member NSG — an exclusive grouping that controls global nuclear trade.

HANGZHOU: India’s entry into the Nuclear Suppliers Group (NSG) and its concern over the China-Pakistan Economic Corridor (CPEC) are expected to be raised by Prime Minister Narendra Modi when he meets with Chinese President Xi Jinping on the sidelines of the G20 Summit in Hangzhou here on Sunday. Though India is set to push for structural reforms to shore up the flagging global economy, poverty and green finance among others in the forum of the world’s largest 20 economies, Modi will once again try to persuade Xi to back India for membership of the 48-member NSG — an exclusive grouping that controls global nuclear trade. In June, Modi had, during a meeting with Xi in Tashkent on the sidelines of the Shanghai Cooperation Organisation summit, asked for China’s backing for India’s NSG membership. But China, leading a group of 10 countries, blocked India’s entry at the plenary of the NSG in Seoul in June, citing New Delhi’s non-signatory status to the Nuclear Proliferation Treaty. Beijing has, however, been a keen backer of Islamabad’s entry to the bloc. Intransigent then, Beijing now looks amenable to India’s admission into the elite grouping. Modi is to reach Hangzhou, the capital and most populous city of Zhejiang Province in east China, on Saturday evening to attend the two-day summit that begins on Sunday.

Chinese experts hope the meeting between the two leaders would be “good”. “We are not against India’s entry into the NSG. After the Chinese Foreign Minister’s (Wang Yi) visit to India (in August), the two sides have agreed to establish a new channel to touch upon all these kind of issues,” Hu Shisheng, director, Institute of South and Southeast Asian and Oceanian Studies at the China Institute of Contemporary International Relations, a government think tank, told IANS. He was referring to the new “mechanism” between India and China under which Joint Secretary of Disarmament Division Amandeep Singh Gill and Ambassador Wang Qun, Director-General of the Arms Control Division of the Chinese Foreign Ministry, will discuss the NSG issue. “It’s because not to let these issues bother the top leaders (Modi and Xi). Earlier, they could not reach understanding because of lack of information. I hope the meeting would be good,” he added. Asked if China would be more open to India’s admission to the NSG, Hu said: “Of course”. The change in Beijing’s stance may also have to do with a UN court ruling on the South China Sea dispute in July. The rejection of Beijing’s claims over the so-called Nine Dash line — almost 90 per cent of the disputed South China Sea — was a blow to China in its dispute with the Philippines, as also Vietnam, Malaysia, Taiwan and Brunei. China has rejected The Hague Court’s ruling. India asking the “parties concerned to show utmost respect to the UN Convention on the Law of the Sea (UNCLOS) has sort of miffed China”, which is worried about its image being sullied in the world. It has been suggested that Chinese Foreign Minister Wang Yi’s visit to India last month was to ensure that New Delhi does not raise the South China Sea issue at the G20, in a sort of quid pro quo deal — which could see Beijing giving its backing for the NSG membership. However, even if India keeps quiet on the issue, the US and Japan are highly likely to bring it up, much to the embarrassment of China which has said an emphatic no to “political discussion” at the G20. The $46 billion China-Pakistan Economic Corridor is also likely to figure in the meeting between the two leaders. India has strongly opposed the proposed economic corridor which will pass through Pakistan-held Kashmir and Gilgit-Baltistan, which New Delhi claims as its own. Modi’s reference to the two regions, as well as Baluchistan, in his Independence Day speech has Beijing worried. Beijing fears New Delhi’s tacit support to the separatist sentiment in the region — a charged levelled by Islamabad and denied by New Delhi — may hit the already-delayed project. Chinese experts have warned that China may come to Pakistan’s aid if India creates trouble in these regions. Besides, global structural reforms, inclusive growth and climate financing will be the major issues to be brought up by India at the summit. “There will be emphasis on appealing to the countries to carry forward the commitment to the issue of climate change and climate change finance. There was a $100 billion commitment which has been made by developed countries — that $100 billion is nowhere near sight. We would like to again stress the importance of developed nations making available that $100 billion,” Shakitanka Das Economic Affairs Secretary told IANS earlier.


China’s Southern Megacities Roll Out Measures to Cool the Property Market

China’s southern megacities of Guangzhou and Shenzhen are the latest centers to impose new measures to cool their overheated real estate markets, including higher mortgage down payments and home purchase restrictions.

A property boom has given a welcome boost to China’s economy this year, fueling demand for everything from construction materials to furniture, but a growing buying frenzy is adding to worries about ever-rising debt and risks to the banking system.

The new measures are the latest steps to tighten credit flowing into the property sector as the government tries to balance the need to prevent bubbles while stimulating economic growth.

Prices for new homes in the booming tech centre of Shenzhen rose 36.8% from a year ago in August, while Guangzhou’s new home prices rose 21.1% over that period, National Bureau of Statistics (NBS) data showed.

Other cities including Chengdu, Jinan, Wuhan and Zhengzhou have already announced new restrictions on property purchases as the government tries to dampen prices stoked by property speculators in second- and third-tier cities across the country.

The average new home price in 70 major cities climbed an annual 9.2% in August, up from 7.9% in July, according to the National Bureau of Statistics.

Nomura analysts said the new measures were expected to help cool frothy prices in the biggest cities and should prevent the market frenzy from spilling over into smaller cities.

“We also believe it unlikely that the latest tightening measures will cause the bubble to burst, sparking a collapse of home prices. We envision a more likely scenario to be a mild retreat or prolonged flattening of home prices in tier-1 cities,” they said in a note on Tuesday.

First-time home buyers in Shenzhen will face minimum down payments of 30%, but deposits for others will be raised to no less than 50%, state news agency Xinhua quoted a government document as saying.

Down payments for second-home buyers in China’s southern Guangdong province near Hong Kong will be increased to no less than 70%, Xinhua said without giving further details.

For more on real estate, watch Fortune’s video:

China’s southern city of Guangzhou has limited local residents to purchasing a maximum of two properties, according to a statement posted late on Tuesday on the Guangzhou government’s website.

Non-local residents will be allowed to buy one property, if they can prove they have paid appropriate levels of tax or social security.


Risk of hard landing persists


By Brad Spencer

Senior Director, Support Services

October 13, 2016

Posted in: China

Economic forecasting is a challenging task at the best of times. For a non-standard economy like China, it is even more difficult; the government has more levers of influence, policy changes are not part of the public dialogue and indicators are less transparent.

Some of the best insights we have available come from the Economist Corporate Network and the affiliated Economist Intelligence Network. We recently attended several events in Shanghai, where analysts from the Economist explained their views on China’s GDP growth, the property markets and exchange rates.

GDP Growth

The Economist trimmed their prediction for 2016 from 6.7% to 6.6%. They see growth slowing further in 2017 and again in 2018. The reason for this pessimistic forecast is that China has not implemented the promised economic or political reforms. These reforms are necessary to buoy productivity. In particular, reform of state owned enterprise (SOE) has not taken place nor is it likely to happen with so many political obstacles. SOE’s control and limit the opportunities for private investment. Private investment always has better ROI than government investment. Debt is another factor, and over investment in property and in steel are yet another factor.



China’s economy is growing at two speeds: the manufacturing sector is struggling to expand, but the consumer driven services sector is thriving. As the engine of growth shifts from manufacturing to services further periods of volatility are certain. The Economist puts the risk of a hard landing at some point in the next five years at 40%. A hard landing is defined as a drop of 2 + percentage points in annual economic growth compared to the previous year.

Economic activity so far in 2016 has been driven by strong housing market activity and investments in SOE’s, but neither driver is expected to perform strongly in the second half of the year.


Top tier cities continue to boom while smaller cities are flat. Rising values in Shanghai and Beijing are driven by demand for investments, not demand for accommodation. This is not a new trend, but the trend has continued beyond what was expected.

Bank lending is increasing, as is the level of speculation and risk. Some analysts are expecting government intervention to calm the over-heated markets. In the meantime, this investment is driving property development growth in select cities.

Exchange rate

The RMB is expected to weaken between now and 2020. There are interesting forces at play with new policies in place to prevent currency from flowing out of the country, and resourceful investors constantly seek loopholes. The government aims to maintain a stable currency, but the forces of gravity are pulling at the RMB.

2016 forecast RMB/USD 6.55

2017 forecast RMB/USD 6.76

China just made a key preparation for disaster in its economy

September 23, 2016


china bunker

(Reuters) China has given its bond traders the go-ahead to begin trading credit default swaps, an indication that the government is preparing for more big corporate bankruptcies, Bloomberg reports.

Credit default swaps allow investors to insure themselves against the default of a given security.

Earlier this month, the government for the first time allowed a major state-owned organization, Guangxi Nonferrous Metals Group, to make preparations for bankruptcy.

It was a special moment. Never before had the country allowed a big, state-run industrial company to go bust. Past bankruptcies involved only bank or corporate debt — this one involves 108 creditors.

That news, combined with the trading of credit default swaps, has analysts believing that many so-called zombies — China’s unproductive, massive industrial companies that need debt to survive — may soon be put out of their misery.

Credit default swaps “will help investors mitigate the risk and alleviate market sentiment if investors face more defaults or suffer more losses after defaults,” Ivan Chung, head of Greater China credit research at Moody’s Investors Service, told Bloomberg.

In other words, investors can now bet on whether a zombie is about to go bankrupt, giving themselves a little extra protection if a company fails. And the government opening up the market for credit default swaps suggests more willingness to let zombies die.

China has had the zombies in its crosshairs for some time now. In 2015, the government said supply-side reform would become central to its economic policy. This is because China is trying to take its economy through the delicate transition from one based on industry and manufacturing sectors to one based on domestic consumption and services like banking and retail.

That means indebted companies in flailing industries like coal and steel must be restructured and their overcapacity dealt with. Unleashing a market for credit default swaps means that investors can hedge this transition and better navigate a world of rapidly deteriorating corporate credit quality.

We might be about to see some real winners and losers here, people.

 China economy, construction & lumber shipments


By Eric Wong

Managing Director, Canada Wood China

November 9, 2016

Posted in: China


September economic highlights

  • China’s economy remained steady in September
  • Real estate investments up compared to same period last year
  • In September, China’s overall wood imports increased compared to the same period last year, but Canadian imports fell.

China economic overview

The Chinese GDP growth rate in Q3 2016 remained at 6.7%, meeting market expectations, which pegged GDP growth at 6.6%. Analysts believe steady growth was spurred by increased government spending (12.5% growth year-on-year), larger asset investments (8.2% growth year-on-year) and an increase in retail sales (10.7% growth year-on-year).[i]

China Caixin PMI increased to 51.2 in October 2016 compared to 50.1 in September, marking the fourth consecutive month of growth and the highest number since July 2014[ii]; this was also the fastest improvement since March 2011. The government’s official services PMI reached 54.0 in October, showing a steady increase compared to September (53.7) and August (53.5). It appears China’s economic performance is currently surpassing expectations.


China exports declined 10% year-on-year to USD 184.51 billion[iii] and imports fell 1.9%; this set the September trade surplus at USD 41.99 million. In Yuan terms exports declined 5.6% compared to the same period last year and imports were up 2.2%. “Domestic demand is equally weak as global demand,” said Yifan Hu the chief investment officer at UBS Wealth Management, mentioned without the increase in the price of oil from USD 30 a barrel in September 2015 to USD 50 last month imports could be even weaker, and a small depreciation does not help China’s exports.[iv]

China’s September Consumer Price Index (CPI) bounced back to average levels at 101.90 Index Points after August (101.30), which marked the lowest in a year.

The USD exchange rate against the RMB decreased 0.08% to 6.7673 on November 4th 2016 from 6.7729 in the previous trading session. Overall USD/CNY increased steadily this year, starting from 6.58 (January) and decreased slowly to 6.47 (April) and then brought back to 6.77 (October)[v], it added 6.82% during the last year.[vi] On the other hand in 2016 CADCNY kicked off by 4.71 (January) and reached all the way to 5.16 (April) but then dropped almost continuously to 5.09 (July and August) and 5.05 (October)[vii].


The first three quarters of 2016 reached RMB 7,460 billion, marking a 5.8% growth (year-on-year) in real estate investments. Investments in residential were RMB 4,993 billion (+5.1% year-on-year), accounting for 66.9% of total real estate investments. In September 2016, RMB 1,021 billion was invested in national real estate industry including RMB 686 billion for residential sector.

Construction: floor area started


From January to September 2016 floor area of newly built buildings (floor area started) reached 1.23 billion m2 (+6.8% year-on-year), of which 847 million m2 was in residential sector (+6.7% year-on-year).[viii] In the same period, total floor area of finished buildings grew to 571.12 million m2 (+12.1% year-on-year), of which 420.68 million m2 was in the residential sector (+11.3% growth year-on-year).

In September floor area of newly built buildings (floor area started) nationwide reached 158 million m2 including 111 million m2 for residential buildings. In the same month floor area of finished buildings nationwide increased to 65 million m2 including 48 million m2 for residential buildings.


Policy developments

China’s housing frenzy is still on, concluded by Business Insider in September 2016. Even though 53.7% respondents in a survey conducted by People’s Bank of China believed home prices in China are “high and hard to accept” the percentage of residents willing to buy a place in the next three months still increased 1.3% from the third quarter and reached 16.3%.[ix] The property price of China’s 100 major cities rises 14% year-on-year which is above GDP growth or urban income growth in the past 12 months, not all of those cities have many new migrants to consume new housings either.[x]


China’s Central Economic Work Conference will hold a meeting in December 2016 to provide further signal of policy direction, may be an answer to the extent China can tolerate continuously rising housing prices. There might not be any major intervention in the property market in the next several months until the late 2017 when the 19th Party Congress Session begins. The plan drafted by policy makers from Beijing to expand investment channels to transfer investment away from property market may not work because hard correction could cause a major financial crisis. The Economist Intelligence Unit predicts China property market will grow much slower in 2018 declining to 4.2%.[xi]

Building material prices

Regarding common building materials, price for cement in China increased 2.32% from RMB 279.83 per metric ton on October 1st to RMB 286.33 per metric ton on October 31st [xii]; rebar steel was worth RMB 2,336 per metric ton on October 1st and then increased 4.08% to RMB 2,431.33 per metric ton on October 31st [xiii].


In September, China’s wood imports increased compared to the same period last year, including:

  • In September log imports were 4.26 million m3 (+15.41% year-on-year); the total for January to September was 36.59 m3, which marks a 6.95% increase compared to the same period last year.
  • September imports of lumber amounted to 2.53 million m3 (+17.4% year-on-year). Total imports of lumber January to September amounted to 23.73 million m3, marking a 19.43% increase compared to the same period last year. However, imports of Canadian softwood lumber are down 10.99%.[xiv]

WOOD MARKETS predicts that the total volume of China softwood lumber imports will be 14,098,000 m3 in 2016 with 20.2% change YTD; 42.4% change YTD for Russian softwood lumber and -11.6% change YTD for Canadian softwood lumber. Regarding the price of SPF lumber (S4S, KD) CIF Taicang (Shanghai), #2 grade in 2X4 stays at $201/ m3 to $206/ m3 for over 4 months but Utility grade (#3) and #2 grade both in 2X6 increased $17/ m3 and $20/ m3 to $187/ m3 and $216/ m3 respectively dramatically in just one month.[xv]


[i] Trading Economics (October 2016). China GDP Annual Growth Rate

[ii] Trading Economics (October 2016). China Caixin Manufacturing PMI

[iii] Trading Economics (October 2016). China Exports

[iv] Leslie Shaffer (October 12th, 2016). China’s September exports and imports tumble amid weak demand, yuan decline.

[v] Finance Sina (October 2016). USDCNY

[vi] Trading Ecnomics (October 2016). Chinese Yuan

[vii] Finance Sina (October 2016). CADCNY

[viii] National Bureau of Statistics ( October 19th, 2016)

[ix] Business Insider (September 25th, 2016). China’s housing frenzy is still on.

[x] Economist Corporate Network 2016 (October, 2016). Up in the air, China’s property market

[xi] Economist Corporate Network 2016 (October, 2016). Up in the air, China’s property market

[xii] Sunsirs (October 2016). Spot Price: Monthly for Cement

[xiii] Sunsirs (October 2016). Spot Price: Monthly for Rebar

[xiv] BOABC (November 4th, 2016). China Wood and its products market monthly report Issue 213

[xv] WOOD MARKETS (October 2016). China Bulletin

BC Forest Investment and Innovation China Data to September 2016 compared to 2014, 2015 1nd 2016



IMF cuts GDP growth forecast for Taiwan

2016/10/04 22:33:09


CNA file photo

Washington, Oct. 4 (CNA) The International Monetary Fund (IMF) has adjusted downward its economic growth forecast for Taiwan for this year and next, to 1.0 percent and 1.7 percent, respectively. In its World Economic Outlook (WEO) released Tuesday, the IMF cut its 2016 and 2017 forecast for Taiwan by 0.5 percent from its previous respective forecasts of 1.5 percent and 2.2 percent, which was released in April. With such lackluster performance, Taiwan’s economy will do better than only Japan and Macau in Asia, while lagging behind its former “Asian Dragon” rivals — South Korea, Hong Kong and Singapore. The IMF’s forecasts for these Asian Dragons this year and next are 2.7 percent and 3 percent for South Korea, 1.4 percent and 1.9 percent for Hong Kong, and 1.7 percent and 2.2 percent for Singapore. Japan’s economy will grow only 0.5 percent and 0.6 percent this year and in 2017 mainly because of its shrinking population, according to the IMF. The WEO report noted that the Philippines will outshine its Association of Southeast Asian Nations partners by achieving growth of 6.4 percent and 6.7 percent in 2016 and 2017, outdoing Indonesia, Thailand, Malaysia and Vietnam. (By Rita Cheng and S.C. Chang) ENDITEM/J

Australia’s economy

Good on you

Australia has weathered the China slowdown and commodities slump well. What has it done right?


Sep 3rd 2016 | SYDNEY | From the print edition

Girder on you, too

THE last time Australia was in recession, Mikhail Gorbachev led the Soviet Union and Donald Trump had filed for Chapter 11 only once. Barring unforeseen catastrophe, late next year Australia will pass the Netherlands’ modern record of 26 years of consecutive growth—despite the slowdown of its biggest trading partner, China. Unlike most of the rich world, it sailed through the global financial crisis, and unlike most commodity exporters, it has weathered the raw-materials price slump. Its GDP growth rate of 3.1% dwarfs that of America and the euro zone.

Australia is often called “the lucky country”, and luck, particularly in geology and geography, has played a part in its success. But it has deftly played both sides of the China boom: the surging demand for raw-material imports while that lasted; more recently, the desire of the Chinese middle-class to eat well, travel and educate their children in English. Yet every silver lining has a cloud. Not only does Australia have one of the most expensive housing markets in the world, it remains overexposed to the fortunes of China.

The story of Australia’s success starts with what its government did not do: spend beyond its means. Tight budgets in the late 1990s and early 2000s, combined with improving terms of trade, meant that when the financial crisis hit, the government was running budget surpluses (though the country as a whole has a long-running current-account deficit). It could thus afford stimulus packages in late 2008 and early 2009 worth more than A$56.6 billion ($42.8 billion). Only China provided greater stimulus as a share of GDP.

Australia was then in the middle of the biggest mining boom in its history, stemming from increased demand in China. In the decade to 2012, the value of its mined exports tripled; mining investment rose from 2% of GDP to 8%. From January 2003 to February 2011 the price of iron ore, which these days comprises 17% of Australia’s exports by value, rose from $13.8 to $187.2 a tonne. Australian thermal coal, which accounts for 12% of its exports, rose from $26.7 to $141.9 (down from a peak in 2008 of $192.9).

The Reserve Bank of Australia (RBA) estimates that, during that period, mining raised real disposable household income by 13% and wages by 6%, boosting domestic purchasing power. Saul Eslake, an independent economist, argues that “except for the Chinese people, no country derived more benefit from the growth and industrialization of China” than Australia. The value of the Australian dollar also rose, which dented non-mining exports. But since demand from Asia kept prices high for Australia’s agricultural commodities (such as beef and wheat), and because it exports relatively few manufactured goods, the damage was contained.

As China rebalanced and commodity prices tumbled, other exporters such as Russia, South Africa and Brazil fell into recession. In Australia, although business investment has fallen sharply, GDP growth remains near its 25-year average of 3% (and as a side benefit, the commodity-price fall quelled rising inflation).

For that, thank two factors. First, the rise in mining investment during the fat years led to increased production. Commodity exports have continued to grow (albeit modestly and less profitably). Though prices of iron ore and coal are well below the past decade’s peaks, they remain above pre-boom levels.

More important, Australia let the dollar depreciate, which made its exports more appealing. Today Australia benefits from a growing number of Chinese consumers, who buy Australian food products that are widely seen as safer than their home-grown equivalents.

Middle-class Asian students have been flocking for English-language education to Australian universities, which are closer and cheaper than their American and British counterparts. Between June 2015 and June 2016 the number of international students enrolled in Australian colleges and universities rose by 11%, and the number of international visitors rose by 13.7%. Today education and tourism together account for 14% of Australia’s export value. Graduates are eligible to work for up to four years, and some stay longer, giving Australia a relatively young, well-educated, multicultural workforce.

Those workers will need places to live, which has helped increase house construction. According to Paul Bloxham, the chief Australia and New Zealand economist at HSBC, Australian builders completed almost 200,000 new dwellings last year, and will probably do the same this year and next. Construction has absorbed some of the employment losses as mining investment has waned (building a mine requires more people than running one).

Yet that has failed to stop an alarming rise in house prices, particularly on Australia’s east coast. In 2015 the median house price in Sydney was 12.2 times the median income, up from 9.8 in 2014. Melbourne’s multiple rose from 8.7 to 9.7 in that period. Some argue that house prices have peaked, and that as residential construction continues prices will moderate (except perhaps in central Sydney). But if prices collapse, that could not just harm Australia’s otherwise healthy banks, but also dampen domestic consumption for years.

Some argue that government debt, which has hit a record 36.8% of GDP, up from a low of 9.7% in 2007, is another worry, because it provides less policy room to deal with the next crisis. It remains lower than in most developed countries. But given the risks of a housing bust or deeper slowdown in China, such worries reflect a healthy lack of complacency. After all, one day the luck will run out.

y, local media reported on Tuesday that Suzhou in China’s eastern Jiangsu province had unveiled fresh measures steps, including higher down payment requirements, to cool the housing market.

Hanjin Shipping: decked


Even state-backed lenders are now wary of the container shipper

© Getty

August 30, 2016

It is quite a moment. Korea’s state-backed development bank has declined to support the restructuring plan of the country’s biggest shipping company. Bankruptcy looms. Anyone hoping this heralds an outbreak of common sense in the oversupplied container shipping market will be disappointed.

Korea Development Bank said on Tuesday that Hanjin Shipping’s restructuring plan would not solve its cash crunch. Hanjin’s shares shed another quarter before being suspended. It now has until September 4 to get its finances in order or enter creditor protection.

Hanjin could yet be salvaged. Smaller rival Hyundai Merchant Marine is already in the process of a debt-for-equity swap, and shipping is a politically important industry in Korea. But Hanjin’s predicament is arguably worse than Hyundai’s. The former has not made a net profit (after minority interests) since 2010 and debt — much of which falls due in the coming year — is more than seven times its equity. Shaky finances mean Hanjin could be excluded from THE Alliance, a new group of shipping lines set to form next March, which wants to share vessels and cut costs. Ideally, Hanjin would be allowed to fail and many of its ships would be scrapped.

That is unlikely, even if it does go bust. About half of its fleet is chartered, according to Alphaliner, so the owners of those ships will simply offer them elsewhere, even if that means accepting lower rates. And in the global pecking order Hanjin is low with just 3 per cent of global capacity — small on the surplus deck space of the wider industry.

Consolidation is unlikely to help either. The recent combinations of Hapag-Lloyd with UASC and CMA CGM with Neptune Orient were more about bigger fleets and lower costs than reducing tonnage.

That leaves the industry waiting for demand to catch up with supply, which could take several years. Three crumbs of comfort: there has been a slight improvement in rates, fuel costs remain subdued, and the supply of ultra-cheap money that financed frantic overbuilding has finally been curtailed — as Hanjin may now discover to its cost.

South Korea Injects 65 Trillion Won To Revitalize Economy in 2017

by Karen Lydelle Linaja / Sep 03, 2016 09:21 AM EDT


South Korea Injects 65 Trillion Won To Revitalize Economy in 2017

South Korea will inject more than 65 trillion won to revitalize the momentum of the economy in 2017 due to rising uncertainties and faltering exports in the global market.

The Korean government set aside more than 16 percent of the total budget of 400.7 trillion won to revitalize the economy, boost exports and support small- and mid-sized enterprises (SMEs).

Some of the 600 billion won which increased by 42.5 percent from the previous year was assigned for boosting exports according to the ministry of Trade, Industry and Energy.


There is a record of 19 consecutive months of losing streak in January last year. However, the outbound shipments of South Korea increased a 2.6 percent in August.

Because of the slowdown of the world economy and financial turmoil appeared in a US rate hike, experts remained alarmed in the situation. The South Korean government plans to create an export voucher program worth 177.8 billion won that will give consulting services and other benefits to the troubled local exporters in the country.

Moreover, a total of 8.1 trillion won will be set aside to foster SMEs in 2017 with 2.4 trillion won for the start-ups and venture firms. Some of the 15 billion won will be used to advertise exports of potential sectors like fashion, cosmetics, and pharmaceutical.

Hyundai Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co., who are the industry leaders, will lead the local shipbuilding sector with a budget of 1.7 trillion won that faces massive layoffs and contracted demand.

The bulk of the 2017 budget will be spend on expanding the transportation network, providing jobs, and creating urban re-development projects.

IMF: S. Korean Economy to Grow 3% Next Year


The International Monetary Fund (IMF) has predicted that South Korea will recover to the three percent economic growth level next year. In its latest World Economic Outlook report released on Tuesday, the IMF said the South Korean economy will grow two-point-seven percent this year and three percent next year. They are the same figures suggested for the country in an IMF report released in July ahead of the G-20 Finance Ministers and Central Bank Governors’ Meetings. The South Korean government also forecast earlier that its economy will grow three percent next year, although it is more positive about this year’s expansion than the IMF, offering a two-point-eight percent growth target. The Organization for Economic Cooperation and Development (OECD) also predicted an expansion of three percent for South Korea next year.

Korean Economy, Housing Starts & Lumber Shipments


By Tai Jeong

Technical Director, Canada Wood Korea

November 17, 2016

Posted in: Korea

Economic Update

The South Korean economy, internally constrained by sluggish consumption and investment, is also surrounded by growing external risks.  The export-driven economy, in particular, is significantly dependent on its two biggest trading partners, the US and China.  The most immediate point of uncertainty for the Korean economy, especially on trade, is the US presidential election.

South Korea posted a trade surplus for 57 straight months in October as imports fell at a faster pace than exports.  Exports fell 3.2% on-year to US$42 billion in October, while imports retreated 4.8% to US$35 billion resulting in a US$7 billion trade surplus, up 5.7% from a year earlier.


South Korea’s consumer prices rose 1.3% on-year in October, marking the highest monthly gain since February amid concerns over potential deflation.

South Korea’s unemployment rate rose 3.4%, the highest for the month since 2005, in October from a year earlier, with the unemployment for young people still remaining high on a lingering economic slump.

The exchange rate for Canadian Dollar averaged at 849.90 won in October, 2016, down by 3.14% from 877.42 in October, 2015 and slightly up by 0.32 % from 847.18 in one month earlier.


Housing Starts

South Korea’s housing starts in year-to-date September of 2016 increased 3.7% to 86,726 buildings from a year earlier 83,640 buildings.  Housing permits in the same period also increased 7.1% to 98,123 buildings from a year earlier 91,613 buildings, amid the South Korean government’s continuous efforts to prop up the local real estate market.

The number of wood building permits and wood building starts year-to-date September of 2016 also increased 10.6% to 12,517 buildings and 11.5% to 11,116 buildings, respectively, compared with those in 2015. The noticeable things are both total floor areas of wood building permits and starts in the same period of 2016, remarkably increased to 14.8% and 16.1% to 1,108,219 m2 and 1,000,772 m2, respectively, from a year earlier.

South Korea’s home transactions gained 2.2% from a year earlier in October amid an apparent rise in demand triggered by a government plan to limit the supply of new homes.

The number of home transactions came to 108,601 in October, compared with 106,274 in the same month last year.

By housing type, home transactions involving apartment units gained 5.8% on-year to 74,208, while those involving row houses slipped 1.6% to 20,202, with transactions involving detached houses plunging 9.1% to 14,191.


Lumber Shipments

BC softwood lumber export volume to South Korea for the first nine months of 2016 increased 6% to 212,602 cubic meters as compared to 200,468 cubic meters for the same period of 2015.

Export value for the same period of 2016 also increased 2.8% to CAD$55.847 million as compared to CAD$54.342 million in 2015.

For the year-to-date to September of 2016, BC’s SPF shipment to South Korea increased 7% to 202,322 cubic meters while shipments of Hemlock, Western Red Cedar and Douglas-Fir plunged 27.8%, 55.8% and 68.6% to 4,985m3, 862m3 and 657m3, respectively.



Indian schoolchildren stand in front of a store window offering discounts in Mumbai on August 3, 2016. (INDRANIL MUKHERJEE/AFP/Getty Images)

Indian parliament passes GST law, causing companies to panic


NEW DELHI — Reuters

Published Wednesday, Aug. 03, 2016 4:57PM EDT

Last updated Wednesday, Aug. 03, 2016 5:00PM EDT

Throughout years of political gridlock, the risk that India might pass its biggest tax reform since independence appeared reassuringly remote for many businesses.

Until now.

Suddenly, the prospect that a new Goods and Services Tax (GST) could enter force next year has bosses panicking at the likely impact and seeking advice on how to cope.

The passage by parliament on Wednesday of a key constitutional amendment would resolve crucial issues needed to transform India’s $2-trillion economy and 1.3 billion consumers into a single market for the first time.

Yet the vote will only fire the starting gun in a legislative marathon in which the national parliament and India’s 29 federal states have to pass further laws determining the – still unknown – rate and scope of the tax.

At the same time, a huge IT system needs to be set up, tax collectors trained and companies brought up to speed on a levy that experts say will force them to overhaul business processes from front to back.

One boss who isn’t ready is G.R. Ralhan, head of Roamer Woollen Mills in the northern city of Ludhiana.

“Companies, particularly smaller ones, are apprehensive,” Mr. Ralhan told Reuters, calling for more time to adjust and saying a high rate of GST could put his firm out of business.

Countries that have introduced GST in the past have often faced a relative economic slowdown before the benefits of a unified tax regime feed through.

India is already the world’s fastest growing large economy, expanding by 7.9 per cent year on year in the March quarter. Economists at HSBC forecast a boost of 0.8 percentage points from the GST within three to five years.

Tax experts say that only 20 per cent of – mostly big – firms are getting ready for the GST. The rest are taking things as they come in a country where coping with a changing tax regime has been a way of life for decades.

Yet even those actively preparing must contend with a series of unknowns as the national and state parliaments tackle the task of transforming a “model” GST law into the real thing.

The first hurdle will be for a majority of state parliaments to pass the GST amendment, which would establish a GST Council to finalize key terms of the new tax.

That could take until November and mean that the legislation to put the GST into force would only come before the national parliament’s winter session.

Hitting the government’s target launch date of next April 1, the start of the fiscal year, looks ambitious. Slippage to July or October, 2017, is increasingly likely, say experts.

Mr. Modi’s government favours a GST rate of 18 per cent but states are lobbying for more. While goods producers have become inured to high tax rates, service companies now paying 15 per cent would take a hit that they would either have to absorb or pass on to customers.

“I don’t think a rate beyond 20 per cent would fly politically – if they do that it would be inflationary,” said Harishankar Subramanian, head of indirect tax at EY India.

Add to that a lack of clarity on where deals are transacted for tax purposes and telecoms, financial services and e-commerce players are worried.

“Services companies are looking at the GST as you would look at a snake,” said Amit Kumar Sarkar, head of indirect tax at Grant Thornton.

The question for Mr. Modi will be whether the boost to economic growth materializes in time for his expected bid for a second term.

“If the tax regime stabilizes, Mr. Modi can stand up in 2019 and say: ‘I’ve passed the biggest tax reform in Indian history,’” said EY’s Mr. Subramanian.



India’s economy

One nation, one tax

A tax overhaul will have welcome, if unpredictable, consequences

Aug 6th 2016 | MUMBAI | From the print edition


Time to lighten the load

GIVEN how few voters enjoy paying them, politicians rarely trumpet the advent of new taxes. But the passage of a new goods-and-services tax (GST) in India’s upper house on August 3rd is a deserved exception. Well over a decade in the making, the new value-added tax promises to subsume India’s miasma of local and national levies into a single payment, thus unifying the country’s 29 states and 1.3 billion people into a common market for the first time. The government of Narendra Modi, never averse to over-hyping what turn out to be modest policy tweaks, has enacted its most important reform to date.

Few countries are fiddlier than India when it comes to paying taxes; the World Bank ranks it 157th out of 189 for simplicity. Both the central government and powerful state legislatures impose a dizzying array of charges. Because the rates differ between states, making stuff in one and selling it in another is often harder within India than it is in trade blocs such as NAFTA or the European Union. Queues of lorries idle at India’s state boundaries much in the same way they do at international borders.

That should change with the GST, essentially an agreement among all states to charge the same (still to be decided) indirect tax rates. Businesses are thrilled at the idea of being able to distribute their products from a single warehouse, say, rather than replicating supply chains in each state. Thick, exception-riddled tax codes—car sales are liable to six different levies at various rates, depending on the length of the vehicle, engine size and ground clearance, for example—are to be replaced with a single GST rate to be applied to all goods and services.

Better yet, the GST will be due on the basis of value added. That avoids businesses being thwacked by taxes on the entire value of the products they buy and sell rather than just the value they create—a situation that often made it cheaper to import stuff rather than make it locally. Just as importantly, by requiring businesses to document the prices at which they buy inputs and sell products (unless they wish to pay higher taxes), it will force vast swathes of the economy into the reach of the taxman.

Economists and technocrats have long backed the GST, which they think could boost economic output by 1-2 percentage points a year. Their calls were insufficient to overcome India’s petty politics: GST proposals stalled under governments of left and right since it was first mooted in 2000. Mr Modi, as chief minister of Gujarat state until 2014, helped thwart the previous government’s GST plans and has faced retaliatory obstructionism since. A committee of various states’ finance ministers helped convince regional parties in the upper house, which Mr Modi’s government does not control, to clear the blockage.

Because the tax overhaul requires a new amendment to the constitution, and therefore the backing of at least 15 state legislatures, it will take several months to enact. Few expect it to be derailed, but a deadline of April 2017 seems unlikely to be met. Though efforts to water down the bill (for example by exempting petrol) appear to have been overcome, its precise workings remain undecided. Even the GST rate is unknown; a government study mooted 17-18% but some states (which will receive the cash raised) would like it to be higher.

Such nitty-gritty will be fought over in the “GST council”, a novel body which will represent both state and federal executive branches but looks likely to be dominated by ministers sitting in New Delhi. Arvind Subramanian, the government’s chief economic adviser, calls the whole construct “a voluntary pooling of sovereignty in the name of co-operative federalism”, borrowing freely from the lexicon once used by the builders of the EU’s common market a generation ago. Such projects do occasionally run into bouts of difficulty.

Indeed, the new council and the tax it will administer go against a recent trend for decentralising power from New Delhi to the various state capitals. Powerful chief ministers sitting in the provinces will be more dependent on revenue collected federally and less on purse-strings they control themselves. Money will shift from (richer) states that make things towards (poorer) ones that consume them, too. The advent of a single tax to rule them all may come to shape Indian politics as much as it does the economy. 

India’s central bank

Reserve player

Will the new governor be a clone of the old one?

Aug 27th 2016 | MUMBAI | From the print edition



Patel-tale signs of orthodoxy

CENTRAL banks need the confidence of investors to function well, so questions about their leadership and independence are seldom welcome. On August 20th Narendra Modi, India’s prime minister, belatedly appointed a new head of the Reserve Bank of India (RBI), nine weeks after Raghuram Rajan, the incumbent, and surprised everyone by announcing he was stepping down. The new man, Urjit Patel, was an understudy to Mr. Rajan—prompting plenty to wonder why the original cast member was, in effect, forced out.

Beyond the usual way stations for central bankers—Yale, Oxford, a period at the IMF—Mr. Patel was once a management consultant and an executive at Reliance Industries, a group headed by Mukesh Ambani, India’s richest man. He has been a deputy governor of the RBI since 2013.

India’s newish inflation-targeting framework, which has been successful in stemming rising prices (helped by outside factors such as falling oil prices), is as much his as Mr. Rajan’s. So is the upcoming arrangement whereby interest rates will be set by a panel comprising government and RBI appointees, rather than the governor alone. Though he lacks the stature of Mr. Rajan, a former IMF chief economist, his hawkish credentials will help fend off calls for lower rates from ministers and industrialists.

His appointment should alleviate fears that Mr. Rajan’s untimely exit—all recent RBI governors have served more than a single three-year term—was a ploy by Mr. Modi to hobble the central bank’s independence. Insiders suspect that it was Mr. Rajan’s sideline as a public intellectual, pontificating on matters far removed from economics that undermined him in Mr. Modi’s eyes. Mr. Patel is unlikely to stray so far from his bailiwick.

If monetary policy is expected to remain unchanged, the regulation of banks, the RBI’s other main remit, is a more open question. The state-owned lenders, some 70% of the industry, are struggling with dud loans they extended to industry and infrastructure firms five years ago. Mr. Rajan had forced the banks to recognize the holes in their balance-sheets, indirectly taking on the tycoons who had benefited from the forbearance of bank bosses.

Mr. Patel’s views on bank regulation are not known. Some of the sensible stuff enacted in recent years, such as making it easier for newcomers to obtain banking licenses, will surely stay in place. But whether Mr. Patel keeps up the same pressure on the banks will be a big test in the early stages of his three-year mandate. Many hope the new governor will be a clone of the man he replaces—while wondering why Mr. Modi didn’t just stick with the original.

BC Forest Investment and Innovation Data for India Comparing 2014, 2015 and 2016



PM Modi ‘to boost economic ties’ with Vietnam

Sep 03, 2016 |


Prime Minister Narendra Modi (Photo: PTI)

Prime Minister Narendra Modi on Friday said India will engage constructively on all pressing international priorities and challenges with world leaders as he looks forward to “a productive and outcome-oriented” G20 Summit in China’s Hangzhou that begins from Sunday. The Prime Minister, left for Vietnam on Friday evening before he heads for China after that, said his government attaches a high priority to bilateral relations with Vietnam and the partnership between the two countries will benefit Asia and the rest of the world. PM Modi will be in Vietnam till Saturday after which he will be in China on Sunday and Monday before returning to India later that day. Vietnam is a strategic partner of India in Southeast Asia and is said to be keen on acquiring the 290 km-range BrahMos supersonic cruise missile from India.

“Today evening, I will reach Hanoi in Vietnam, marking the start of a very important visit that will further cement the close bond between India and Vietnam,” Modi said. “We wish to forge a strong economic relationship with Vietnam that can mutually benefit our citizens. Strengthening the people-to-people ties will also be one of my endeavors during the Vietnam visit,” he said in a Facebook post.

During the Vietnam visit, Modi will hold extensive discussions with Vietnam’s Prime Minister Nguyen Xuan Phuc. “We will review complete spectrum of our bilateral relationship,” he said. According to news agency reports, he will also meet the President of Vietnam, Tran Dai Quang, and the General Secretary of the Communist Party of Vietnam, Nguyen Phu Trong; and the Chairperson of the National Assembly of Vietnam, Nguyen Thi Kim Ngan.

“In Vietnam, I will have the opportunity to pay homage to Ho Chi Minh, one of 20th century’s tallest leaders. I will lay a wreath at the Monument of National Heroes and Martyrs as well as visit the Quan Su Pagoda,” the Prime Minister said.

He also greeted people Vietnam on their National Day today. “Vietnam is a friendly nation with whom we cherish our relationship,” Modi said.

India’s ONGC Videsh Limited is engaged in oil exploration projects in Vietnam for over three decades and there may be announcements about new projects in the sector during the bilateral visit, which is taking place after a gap of 15 years. Modi will leave for Hangzhou from Vietnam tomorrow.

Modi said he will have an opportunity to engage with other world leaders on pressing international priorities and challenges during the G20 Summit. “We will discuss putting the global economy on the track of sustainable steady growth and responding to emerging and entrenched social, security and economic challenges. India will engage constructively on all the issues before us and work towards finding solutions and taking forward the agenda for a robust, inclusive and sustainable international economic order that uplifts the socio-economic conditions of people across the world, especially those who need it most in developing countries,” the Prime Minister said. Modi said he looks forward “to a productive and outcome oriented Summit”.

At the G20 Summit, India is likely to raise a host of issues ranging from choking terror funding and checking tax evasion to cutting cost of remittances and market access for key drugs. “I will visit Hangzhou, China … for the Annual G-20 Leaders Summit. I will arrive in Hangzhou from Vietnam where I would have concluded an important bilateral visit,” he said in another Facebook post.


Cut or thrust: India’s economy

Few doubt that interest rates in India will be cut soon—either today or at the central bank’s next policy meeting, scheduled for December. The interest-rate decision is the first under the Reserve Bank of India’s new governor, Urjit Patel. It is also, coincidentally, the first taken by a six-strong monetary-policy committee which the governor chairs but does not control. A decision to keep rates steady at 6.5% would signal continuity at a central bank with a strong recent record for taming inflation. A cut would be interpreted by some as a sign that Mr Patel or the committee members are less hawkish than his recently departed predecessor, Raghuram Rajan. Given regular demands by ministers and industrialists for lower interest rates, a cut would also raise questions about whether the central bank had lost some of its prized independence in the transition.



Does India’s booming economy need a rate cut?

Reserve Bank of India cut rates Tuesday



Posted: 7:19 AM, October 04, 2016Updated: 8:26 AM, October 04, 2016

HONG KONG (CNNMoney) – India cut interest rates Tuesday, citing growing risks to the world’s fastest growing major economy.

The surprise move by the Reserve Bank of India left some experts worrying that cheaper money could make it harder to bring inflation down. The RBI cut rates to 6.25%, their lowest level in nearly six years.

India’s economy grew by just over 7% in the quarter to June. That was slower than the previous quarter, but still much faster than China and other leading economies.

But the central bank’s six-member Monetary Policy Committee, newly instituted under Governor Urjit Patel after he took the helm in September, appears to have decided not to take any chances with growth.

It warned that the outlook for the economy was darkening due to a slump in global trade, rising protectionism, banking stress in Europe and the risks associated with Britain’s exit from the European Union.

At the same time, inflation — it argued — was under control, and would be helped by a good monsoon season that should result in a record harvest.

However, by stoking demand in the economy the central bank could be making it harder to achieve its 4% inflation target. Consumer price inflation stood just above 5% in August.

The policy statement “seems to be supporting growth even at the risk of missing targets for inflation,” wrote Shilan Shah, India Economist at Capital Economics.

He said it suggested that Patel was taking a more “dovish” stance on inflation than his “rock star” predecessor Raghuram Rajan.

“This suggests that we could see further modest, loosening over the coming months,” Shah said. “But the scope for aggressive rate cuts is limited.”

Most-Improved Bond Risk as Vietnam Defies Region’s Slowdown

Y-Sing Liau

Nguyen Dieu Tu Uyen ndt_uyen


October 4, 2016 — 1:00 PM EDT Updated on October 5, 2016 — 5:04 AM EDT

Nation’s exports have increased every month since March 2015

  • Fitch says there remain threats to the nation’s credit rating

Vietnam’s bond risk is falling at the fastest pace in Asia as buoyant exports and rising foreign direct investment bolster Southeast Asia’s second-best performing economy.

The cost of insuring the nation’s five-year notes using credit default swaps has dropped one percentage point since the end of December and shrank to 1.5 percentage points last month, the least since before the global financial crisis in 2008. That compares with declines of 81 basis points in Indonesia and 61 basis points in Malaysia.

Vietnam’s exports are rising amid a regional slump as the nation’s diverse export base, which ranges from textiles to mobile phones and coffee, enables it to weather global weakness in manufacturing and commodities. While Fitch Ratings says there remains risks to Vietnam’s credit rating, the country’s gross domestic product has grown at least 5 percent each year since the start of the millennium, while foreign direct investment rose to a record in 2015.

“The decline in bond risk reflects improving macroeconomic fundamentals,” said Trinh Nguyen, senior economist for emerging-market Asia at Natixis SA in Hong Kong. “Vietnam’s credit cycle is on the upswing, exports are expanding and GDP improving. All this means that its likelihood of default has been reduced according to the markets’ perception.”

Quicker Growth

Vietnam’s annual economic growth accelerated to 6.4 percent last quarter, from 5.78 percent in the previous three months, the General Statistics Office said Sept. 29, behind only the Philippines in Southeast Asia. The government has forecast the GDP to expand between 6.3 and 6.5 percent in 2016. Exports have climbed every month since March 2015, advancing 8.6 percent in September from a year earlier.

“Having the most diversified export production base, Vietnam continues to buck the regional contraction in exports,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. “Vietnam’s economy has improved remarkably over the past three years. Yet, it was only in the past 12 to 18 months that the market has taken notice of the sustainability of the improvements in its macro environment.”

Record Investment

Foreign direct investment climbed to $14.5 billion in 2015 as companies such as South Korea’s Samsung Electronics Co. and LG Electronics Inc. shifted smartphone and television manufacturing to Vietnam to take advantage of competitive labor costs. Total disbursed investments in 2016 are likely to surpass last year’s level based on pledged projects, state-owned Dau Tu newspaper reported Sept. 21.

“To maximize the economic benefits from a large and skilled workforce, Vietnam has been highly open to foreign investment,” said Donghyun Park, a principal economist at the Asian Development Bank in Manila. “The combination of structural advantages and a government with a clear and sensible long-term economic strategy largely explains the optimism of many foreign investors that Vietnam will be the next Asian tiger.”

Vietnam’s five-year credit default swaps declined 40 basis points in the three months through September and were at 185 basis points Tuesday, according to prices from CMA. The yield on the government’s 10-year bonds fell to 6.46 percent Monday, the lowest level since March 2015. The VN Index of the nation’s shares has jumped 19 percent this year.

Challenges Remain

Fitch sees threats to Vietnam’s BB- credit rating, the third-highest junk grade, after the National Assembly said public debt may breach the government’s ceiling of 65 percent of GDP in the second half of the year.

“Challenges to Vietnam’s rating profile remain, and include a rapid re-acceleration in credit growth and rising public debt, which is already higher than the median of ‘BB’ Fitch-rated sovereigns,” said Andrew Fennell, a director at Fitch Ratings in Hong Kong.

Official data show banks in Vietnam have recorded lending growth of 11 percent this year through September, below the government’s goal of as much as 20 percent. The share prices of most Vietnamese lenders have dropped in 2016 amid concern they are undercapitalized and have substantial bad loans on their books. The economy is overly dependent on unsustainable loan growth, Credit Suisse Group AG said in an Aug. 31 research note.

State Sector

The current positive picture is very different from the aftermath of the global financial crisis, when Vietnam lagged behind its peers, held back by an inefficient state-controlled sector.

Vietnam embarked on a drive in the 1990s to cut holdings in state-owned firms to bolster economic growth. The government’s privatization plan fell short of its target in 2015, with 289 state-owned companies selling stakes compared with a goal of 514.

“While the rest of the region enjoyed cheap capital inflows post the financial crisis, Vietnam went through a severe economic slowdown in which it was forced to deal with the inefficiency of its state-owned sector,” Natixis’s Trinh said. “There is still a lot of work to be done, but it has made progress.”

Photographer: Luong Thai Linh/Bloomberg

Vietnam’s Economy Remains Outperformer as GDP Climbs 6.4%

Nguyen Dieu Tu Uyen ndt_uyen

September 28, 2016 — 8:01 PM MDT Updated on September 28, 2016 — 10:09 PM MDT

Manufacturing surges on the back of electronic exports

  • Nation recovering from drought with farm output rising

Vietnam’s economic growth accelerated this quarter, boosted by foreign investments and rising exports.

Key Points

  • Gross domestic product rose 6.4 percent in the third quarter from a year earlier, up from 5.78 percent in the previous three months, the General Statistics Office said in Hanoi Thursday.
  • In the nine months through September, the economy grew 5.93 percent, compared with the median estimate of 5.83 percent in a Bloomberg survey of four economists.


Big Picture

Growth is being buoyed by rising foreign direct investment and exports, stronger credit demand and a slight recovery in agriculture following a crippling drought. Vietnam’s economy has benefited in the past five years from companies such as Samsung Electronics Co. setting up plants in the country, transforming it into a manufacturing hub for electronics goods, including smartphones.

Economist Takeaways

  • “We expect Vietnam to remain a growth outperformer, bucking regional weakness in trade,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. “Reforms are slowly instituted which should prop up potential growth further in the medium term.”
  • “The jump comes from a rebound of the agriculture sector after a drought suppressed growth,” said Trinh Nguyen, a senior economist for emerging-market Asia at Natixis SA in Hong Kong. “The industrial sector remains a key bright spot, with construction, manufacturing and electricity pulling through. Vietnam manufacturing is indeed a regional bright spots – exports are expanding despite the regional and global gloom. Wage cost competitiveness is the key region that it is attracting capital from countries that have worsening demographic transitions in East Asia.

Other Details

  • Manufacturing rose 11 percent in January to September from a year earlier, while agriculture rose 0.05 percent. In the first half of the year, farm output shrank
  • Disbursed foreign direct investment rose 12 percent in January to September from a year earlier
  • Exports increased 9 percent in September from a year earlier, with sales of electronics surging 29 percent
  • Vietnam posted a trade deficit of $100 million for September. For the first nine months of the year, it had a trade surplus of $2.77 billion

G20 GDP and Trade Data



From The Economist December 5 2016

Third Quarter 2016 North American Housing

Canada’s Housing Markets A Dichotomy of Messy Extremes


Canada Housing News


Canada’s largest banks warm to sharing mortgage risks

Tim Kiladze and Tamsin McMahon

The Globe and Mail

Published Thursday, Oct. 06, 2016 6:00AM EDT

Last updated Thursday, Oct. 06, 2016 10:07AM EDT

Canada’s largest banks are quietly embracing Ottawa’s new mantra to share some risk in the country’s mortgage system, a fundamental shift that would alter the way the country’s $1.4-trillion mortgage market operates.

This week, federal Finance Minister Bill Morneau said he would begin discussions with the financial industry on a government plan to introduce risk-sharing into the taxpayer-backed insurance market that covers mortgages when the customer does not have a down payment of at least 20 per cent.

Canada is unique among advanced economies in that a large share of its mortgage market is covered by government-backed insurance, meaning taxpayers could have to cover the banks’ losses for large-scale mortgage defaults during a housing crash. Risk-sharing would reduce the amount of public money that the Canada Mortgage and House Corp. and other institutions could have to pay to the lenders.

Read more: Canada’s banks brace for mortgage overhaul

Related: Ottawa’s housing reforms target foreign buyers, mortgage debt

Related: Alternative lenders face ‘major changes’ in wake of new housing rules

Publicly, the banking community’s message is that risk-sharing is unnecessary because there is no indication that a crisis would overwhelm the mortgage insurance system. They also say a change could severely damage the big banks’ profits by forcing them to devote more capital to their mortgage portfolios. “We have concerns that it could have negative side effects on a housing finance system that has worked smoothly, simply and efficiently and served Canada’s economy well,” the Canadian Bankers Association said in a statement.

But in private, many banks have embraced the idea, according to conversations with people familiar with the evolution. “Philosophically, people aren’t all that fussed,” one executive said.

The banks’ change of heart comes amid growing worries about elevated levels of household debt in Canada and soaring prices for homes in Toronto and Vancouver. “All lenders concern themselves when they see eye-watering [price] increases in urban markets,” said John Webster, head of real-estate-secured lending at Bank of Nova Scotia, because they force buyers to borrow more.

The announcement from the Liberal government is a marked departure from the Conservative government’s position that risk-sharing would be too “dramatic” a change to Canada’s housing finance system.

Federal officials held informal talks with the financial industry on risk-sharing at the start of the year, but announced their intentions only this week. Ottawa now appears intent on enacting a plan to reduce taxpayers’ exposure to the housing market, and make the banks pick up some of the slack.

Internal documents from the Department of Finance obtained by The Globe and Mail under Access to Information show that Ottawa has been considering a variety of approaches.

Government officials are studying three scenarios, according to the heavily redacted draft report of a meeting involving Finance officials in July, 2015. The first is a system where lenders would absorb a fixed percentage of the value of a defaulted loan, known as “first loss.”

Another option is a “split loss,” in which lenders pay a percentage of the total losses associated with a defaulted mortgage.

The third is “fee-based approach” in which insurers cover the full claim on mortgage defaults and charge lenders a fee. The fee option is one way the government has sought to address concerns that lender risk-sharing would affect CMHC’s $426-billion mortgage-backed securities programs, which the government also guarantees.

The document also outlines “key considerations” the government is studying, including how risk-sharing might affect competition and pricing in the mortgage market, and capital requirements for lenders.

“We must recognize that lender risk sharing would represent a fundamental reorientation of Canada’s housing finance framework, a framework that has served us very well for decades, with potential consequences that we need to fully understand,” the document states.

The Department of Finance is set to release the consultation paper in coming weeks that will more directly detail how Ottawa hopes to implement risk-sharing in the mortgage market.

Finance officials declined to discuss the options until then. “It would be inappropriate to speculate on the content before the paper is released and accessible to all stakeholders,” the department said in an e-mail.

Another proposal is putting a time limit on mortgage insurance. Currently, insurance backed by Ottawa lasts for a loan’s entire lifetime – up to 25 years on new mortgages. One option is for government backing to end at a fixed point – maybe 15 years. That could reduce taxpayers’ current exposure by 20 to 40 per cent.

As it stands, a large portion of the Big Six banks’ portfolios of insured mortgages are deemed risk-free by the Office of the Superintendent of Financial Institutions, their federal watchdog. These comprise about 70 per cent of the total market, which means taxpayers are on the hook for a large share in the event of a decline in housing prices due to a recession. The CMHC and its two private sector competitors, Genworth and Canada Guaranty, have insured more than $900-billion worth of mortgage debt as of the second quarter.

In an interview Monday, Mr. Morneau said Ottawa is committed to a gradual and modest approach to moves that could disrupt the country’s housing-finance system.

“Any changes we’ll make will be in consultation with the financial institutions,” he said. “But I think it would be fair to say that we think that we need to look at where the risk is placed in the market and do it in a way that acknowledges how well the market has worked, acknowledges how sound our housing market has been for the long-term and also recognizes that you’ve constantly got to stay on top of it.”

Stuart Levings, CEO of Genworth, CMHC’s the largest private-sector competitor, was not surprised the government is going ahead with formal consultations. But he said risk-sharing is not needed because current stringent regulations have kept mortgage defaults low and prevented the kind of bad loans that hurt the mortgage insurance industry. “There’s nobody just throwing a loan at the wall and seeing if it sticks so to speak,” he said.

People in the financial industry say Ottawa seems sincere about wanting a constructive dialogue rather than pushing a particular proposal, and that banks would not tolerate a heavy-handed shift in the mortgage market.

In the same way that they discourage sudden Bank of Canada interest rate hikes, they fear too strong an approach could harm the housing sector, which is crucial to the Canadian economy, and to the banks’ and the governments’ finances.

There is also still some frustration in the bank corner. The lenders have said they are willing to be proactive, but they still expect a bit of a game to be played before a final proposal is drafted, with each side staking out their territory. What’s become clear, however, is that multiple proposals are floating around, many of which are much more nuanced than the widespread assumption that any risk sharing would come in the form of a deductible on mortgage insurance.

Mr. Levings has suggested to Ottawa that it implement a two-tiered system for risk-sharing, requiring a higher deductible for CMHC mortgage insurance than what lenders would pay if they insured their mortgages with the private sector. “That would automatically shift a little more risk over to the private sector,” he said.

Still, he said, any shift toward risk-sharing might make lenders less likely to lend to home buyers in riskier housing markets such as remote and rural communities and those that are highly dependent on the fortunes of a single industry, such as oil or forestry.

“I don’t think we’ve really put a lot more thought into what we would prefer to see,” he said, “just because we’re still hoping that this would never need to be done.”


Housing market sees third-largest August gain since 1999

Canada’s home prices rose 1.5 per cent in August, marking the third-largest gain for that month since the index series launched in 1999.

Toronto led the way in month-over-month increases, according to new data from the Teranet-National Bank House Price Index. Seven of the 11 metropolitan markets surveyed experienced month-over-month price gains.

— Brent Jang


Go to this hyperlink (IF YOU SUBSCRIBE..)  http://www.theglobeandmail.com/real-estate/house-price-data-centre-march-surge-largest-in-8-years/article29697029/



Calgary’s real estate picture continues to diverge from the hot markets in Toronto and Vancouver with a 20th consecutive month of declining home sales in July. (Jonathan Hayward/THE CANADIAN PRESS)

What real estate boom? Calgary home sales drop to 1996 levels


The Globe and Mail

Published Tuesday, Aug. 02, 2016 6:40PM EDT

Last updated Wednesday, Aug. 03, 2016 8:24AM EDT

Calgary’s housing market is bracing for more pain as persistently weak oil prices, mounting layoffs and slowing population growth continue to keep buyers on the sidelines.

Home resales in the city fell 12.6 per cent in July from the same time last year, the Calgary Real Estate Board reported. It was the 20th consecutive month of annualized sales declines as purchases of detached homes dropped to their lowest level since 1996.

“We’ve certainly got a softer market than we did a year ago,” said Diane Scott, a broker with Royal LePage.

Benchmark resale prices dropped 4.2 per cent from last July and were down more than 5 per cent from their peak in October, 2014. Detached home prices fell 3.4 per cent from last year to $502,300.

ANALYSIS: Out of Alberta, a look at the trend that is reshaping the geography of Canada’s labour force (Subscribers)

Among condos, a surge of new listings has left the market with more than six months’ worth of supply, pushing the benchmark price down 6.6 per cent from a year earlier to $277,000. Condo sales were down 21 per cent from a year earlier and were 53 per cent below peak levels in 2014. Properties in the city centre have been hit the hardest, the real estate board said, with overall benchmark price declines of 5.1 per cent, compared to 0.8 per cent for the city’s more affordable northeast quadrant.

Signs of continued slowdown in the housing market come as the City of Calgary released updated census data showing that net migration dropped in the last 12 months ended in April.

It was a sharp reversal of long-term trends that saw workers from Canada and abroad flock to jobs in Alberta.

Net migration – the difference between the number of people who moved to Calgary and the number who left – fell by more than 6,500 in April from the same time last year, the city’s figures show, mirroring the population plunge seen during the region’s last recession in 2010.

Census figures show there are now more than 20,800 vacant homes in the city, an 8,300 increase from the previous year, as the epicentre of Canada’s oil industry grapples with a recession that economists at Toronto-Dominion Bank said recently “is likely to go down in history as one of the most severe.” The bank predicted that average household disposable income in Alberta, a measure of living standards, would fall 5 per cent this year, a fact that is also weighing on Calgary’s housing market.

“The number of unemployed workers keeps rising and when you combine job losses with declining net migration, the result is going to be weaker housing demand,” said the real estate board’s chief economist, Ann-Marie Lurie.

The exodus of workers from Calgary has meant fewer new buyers in the city’s housing market and those who are shopping for homes are taking longer to make an offer, said Royal LePage’s Ms. Scott. “There are fewer buyers to start with and those that would be in the market are sitting on the fence, waiting for the prices to come down some more,” she said.

RELATED: Heritage Beltline house could be saved or sunk by unique zoning

Where buyers might have previously looked at a handful of listings before purchasing a home, many are now looking at 14 to 15 properties, she said. “They look an awful lot more than they buy these days.”

The market for more affordable detached houses and townhouses, those priced below $500,000, as well as the luxury housing market above $1-million have fared relatively well, Ms. Scott said. But the market for mid-priced homes, those between $600,000 and $800,000, has suffered from a lack of move-up buyers, while rising vacancy rates have scared off many investors who would normally have purchased condos.

In one bit of good news, the number of listings on the resale market dropped more than 10 per cent from a year earlier, led by a near 14-per-cent drop in listings of detached houses. That has helped ease pressure on prices, the real estate board said.





For years, workers from coast to coast flocked to Alberta to cash in on the province’s oil boom. Now, with crude prices languishing, labourers are on their way out. As Canadians embrace a new willingness to move for work, Kelly Cryderman and Brent Jang report on a trend that is reshaping the geography of Canada’s labour force.

Kelly Cryderman AND Brent Jang

CALGARY AND SURREY, B.C. The Globe and Mail Last updated: Friday, Jul. 15, 2016 7:11PM EDT

This is part of an occasional series on Canada’s economy and its shift away from resources.

Lee Cronin saw the end of his time in Alberta coming. In 2015, he made a base wage of $42 an hour on the rigs, but the lucrative overtime pay he collected as a derrickhand started to dry up as the lower oil price became more entrenched.

After spending the better part of seven years flying from his home in British Columbia to his jobs in the oil patch, Mr. Cronin, 42, saw his hours dwindle and the frequency of his flights significantly decrease.

The pickup truck he kept at the airport park-and-ride in Edmonton was suddenly doing little more than racking up parking fees. After one particularly long spell away from Alberta, he recalls paying more than $800. Then, in January, the work came to a halt altogether.

“It’s feast or famine out there. I knew that,” Mr. Cronin said during a break from his new job in B.C. “We were making very good money. Then things slowed right down to a snail’s pace.”


Mr. Cronin has left Alberta for work in Surrey, B.C.

Darryl Dyck for The Globe and Mail

Now Mr. Cronin works at the Teal-Jones lumber mill in the Vancouver suburb of Surrey, along with others who have left Alberta’s oil bust. But he makes less than half of the base wage he earned on the rigs.

He and his co-workers are part of a small but growing contingent who are leaving Alberta for other, more economically robust provinces. The low price of crude and the resulting loss of tens of thousands of oil-patch jobs has now set off a new wave of interprovincial migration that is reshaping the configuration of Canada’s labour force.

“We’re right at the turning point now,” as Canadians uproot in search of work wherever they can find it, said BMO Nesbitt Burns senior economist Robert Kavcic.

“You tend to see changes like this happen about six months to a year after you see big shifts in the labour market,” such as the extensive job cuts in Alberta, he said.

The current migration from Alberta is part of a broader trend of Canadians becoming increasingly mobile in the search for work, according to the Bank of Canada.

“Labour is being more efficiently reallocated to the regions of the country that have the tightest labour markets and away from those with excess labour supply,” said the central bank’s recent report, Canadian Labour Market Dispersion: Mind the (Shrinking) Gap.

The excess labour supply is currently concentrated in Alberta, where long-time residents are contemplating packing up and moving out – sometimes back to hometowns they haven’t lived in for decades. Fly-in/fly-out workers from B.C., Saskatchewan and Atlantic Canada who once earned big Alberta paycheques are setting aside their nomadic lifestyle to find what often more modest-paying jobs are closer to home. Some are just waiting until their children finish school or they sell their home before heading to strong labour markets in British Columbia and Ontario.

While the province once attracted migrants from across the country, and immigrants from around the world, economic heft has – at least for the time being – shifted elsewhere.

“It’s just a complete turnaround from what we’ve been used to over the past decade or so,” Mr. Kavcic said.

Alberta today is a province humbled by low global commodity prices – particularly for oil, which began its price slide in mid-2014. The Conference Board of Canada says the price slump means the province will remain in recession this year, with its economy contracting by 2 per cent in 2016. The wildfires that hit the Fort McMurray region in May could add to the economic woes of the province. Longer term, concerns about the ability to build new pipelines, having access to international crude and natural gas markets beyond the United States, and the restraint that could be placed on the energy industry in an increasingly low-carbon world, also weigh on the province.

People have voted with their feet. Alberta’s long-standing status as a net gainer of people from other provinces officially ended late last year.

According to Statistics Canada, Alberta had a net loss of 977 people to all the other provinces in late 2015, and another 1,788 in the first three months of this year. This is the first time the province has been a net loser in recent memory, save for several months during the global financial crisis in 2009 – and that was really just a blip in the long-term trend of people moving to Alberta. When it comes to significant numbers, Alberta hasn’t lost people to other parts of the country since the early 1990s, a time when energy prices just started to rise out of the deep hole of the previous decade. Alberta was a net loser of tens of thousands of people between 1983 and 1988.

Booms, busts and migration

Alberta’s migration patterns are inextricably linked to the oil industry’s fortunes. During boom times, thousands of Canadians pile into the province in search of jobs, but the population rush often slows or reverses after crude prices drop. Typically, shifts in migration lag changes in the jobs market.


But now that the province has seen two years of lower energy prices, the question is whether this is the thin edge of a wedge, and the beginning of a larger movement of people to other provinces.

British Columbia, with jobs in forestry, construction, transportation and real estate, is becoming a destination of choice, and employment statistics show why. B.C.’s unemployment rate is 5.9 per cent, the lowest provincially. In June, the number of people employed grew by 70,000, or a 3-per-cent increase, the fastest growth among the provinces.

More B.C. residents moved to Alberta than the other way around from 2011 to 2013, but the trend began reversing in the third quarter of 2014 as the B.C. economy stayed steady. Last year, as Alberta’s economy slumped, British Columbia saw a net gain of about 5,400 people from its next-door neighbour.


In many Alberta communities with strong ties to the resource sector, there are significant numbers of relative newcomers – drawn to the province for work during the boom years. For those without strong ties to the province, the end of their employment could mean there’s nothing to keep them in Alberta. “People will head back to where they came from,” said University of Western Ontario sociologist Michael Haan, who studies migration.

“It’s not just about oil. Because some of the biggest movements in and out of Alberta were not necessarily oil workers – they were people who were working in construction,” Prof. Haan said.

Work of all sorts has dried up. In Statistics Canada’s Wood Buffalo-Cold Lake region, which includes Fort McMurray and oil sands production, the unemployment rate for all of 2015 was 7.9 per cent, compared with 4.7 per cent in 2014. Alberta as a whole has continued to see its unemployment rate creep up, going to 7.9 per cent in June from the 5.8 per cent registered one year earlier.


Layoffs have become a weekly norm. The provincial government, which requires Alberta-based companies to report plans to lay off 50 or more employees at once, says the number of group termination notices was 27 in 2013, 35 in 2014, and hit 116 in 2015. So far in 2016, there have been 50 notices. May was an especially brutal month, with 2,460 Alberta workers laid off in just nine group terminations.

For Alberta’s energy sector, and those industries reliant on it, there might be some light at the end of the tunnel. The Conference Board says the slow recovery in oil prices should ease the number of layoffs and cuts to capital budgets in the oil and gas sectors in the coming months. The wildfire that burned a tenth of Fort McMurray and temporarily shuttered oil sands operations in the region could add to the march out of Alberta as some people choose not to go back to the region. However, the rebuilding effort will likely boost the number of jobs available in the province, and help with the modest economic recovery predicted for 2017, if commodity prices stabilize or rise.

But interprovincial migration numbers reported by Statistics Canada likely understate the magnitude of the shift taking place.

During the boom years, Alberta’s work force included a sizable “shadow population” of people living in camps or in other temporary accommodation while working long hours in energy sector jobs. Like Mr. Cronin, after days or weeks of work, they would fly back home for a break at their primary residences in other provinces.


Mr. Cronin was among many “interprovincial employees” affected by the oil crash.

Darryl Dyck for The Globe and Mail

Frequent flights, including charters, between Atlantic Canada and Fort McMurray – the fly-in/fly-out capital of Canada – made a mobile work force possible. But now those trips have plummeted. For instance, Fort McMurray’s international airport reported a 62-per-cent decrease in charter flights between March 2015 and February 2016.

“People were doing the three weeks on, one week off. Well, they’re just not going out any more,” says New Brunswick Premier Brian Gallant, whose province’s unemployment rate has gone up to about 10 per cent in recent months – a trend he attributes in part to some of his province’s residents losing their Alberta-based jobs.

This year has also seen reports about a seemingly inexplicable jump in Kelowna, B.C.’s unemployment rate, while building permits, housing starts and other economic indicators are up. The Okanagan Lake city’s unemployment rate sat at 7.5 per cent in June but earlier in the year had topped Edmonton and Calgary.

Kelowna’s mayor and others say the uptick in unemployment is due at least in part to the downturn in Alberta, and the potentially thousands of B.C. southern interior residents who lost their commuter jobs in the oil patch.

Statistics Canada says the number of “interprovincial employees” working in Canada (those who live in one province but work in another) at any given time is directly linked to the price of oil. In 2011, the most recent year that numbers are available, Statistics Canada reported that about three per cent of Canada’s paid work force were interprovincial employees, with more than a quarter of those at work in Alberta.

Alberta’s unemployed now includes another restless group: Those who have lost their jobs and want to leave but have to wait. Some don’t want to leave the home they know, some can’t sell their house for a price they like and some wanted to see their children finish the school year.

For most of the seven years that Grande Prairie, Alta. was her home, Crystal-Dawn Dolen, 34, had never had trouble finding work. She worked as a pit boss at a casino and then was a sales rep for a company that provides car breathalyzers. But in January she was laid off. A few months later, still unable to find steady work, she and her 13-year-old son packed up and moved to her brother’s home in Edmonton.


Crystal-Dawn Dolen, 34, is hoping to find stable work outside Alberta.

Kelly Cryderman/The Globe and Mail

There, Ms. Dolen has found a part-time retail job. But the situation isn’t permanent. With her son done the school year in Alberta, she is preparing to move next month to the Langley area in British Columbia – to stay with a friend until they get settled.

She knows housing costs are significantly higher in the Lower Mainland, but she believes with B.C.’s strong economy she will be able to find some kind of customer service-oriented job.

“Working and not getting laid off – and being stable – that’s what I’m looking for.”

Just a couple of decades ago, the country saw big differences between employment rates in different provinces. These differences between regions and jurisdictions were more pronounced here than they were in other countries, such as the United States.

But according to a March report from the Bank of Canada, differences between provincial labour markets have levelled. And the central bank said it’s not about stronger employment growth in previously weak regions of the country; it’s because regional population growth has increasingly taken place in response to labour market conditions.

“Despite the impacts of commodity price booms from 2003 to 2008 and 2010 to 2014, the 2008 Great Recession, and the recent sharp decline in commodity prices on the Canadian economy, Canada’s provincial labour markets are less dissimilar today than at any point in at least the past 35 years,” said the report by Bank of Canada economists David Amirault and Naveen Rai.

In London, Ont., Prof. Haan notes that while most people prefer to remain in the province of their birth, there are a number of factors that make moving away, or travelling regularly for work in another province, more palatable today.

Flights are significantly less expensive, when adjusted for inflation, than they were in past decades. Technology allows people to easily research job postings on the other side of the country, as well as keep in touch with family members and friends living far away. These considerations are especially relevant for younger workers, whose roots might not be as deep as those of older workers, he said.

While that labour mobility once saw Alberta gaining people at the expense of other provinces, economic forces are now pushing people toward Ontario and B.C. – the provinces that will lead Canada’s economic growth this year.

Ian Pohanke, 31, graduated from high school in Surrey in 2003 before he moved to Alberta and worked his way up and ran his own welding business based in Calgary.

“Never been so rich, never been so broke,” he said. “I had this dream of chasing the oil money in Alberta. I have some older cousins and family that live up in northern Alberta, and heard their stories.”

Mr. Pohanke has moved back into his parents’ Surrey home, returning to his old bedroom that had been converted into a guest room. Seven of his B.C. friends also flocked to Alberta after high school. Mr. Pohanke is the last to return. “I made it the longest and everyone else is back,” he said. He’s now a mill worker along with Mr. Cronin.

Asked whether they would return to Alberta, Mr. Cronin and Mr. Pohanke joked that they couldn’t really say, given that their boss was within earshot.


Logan Jones, 26, also a former energy-sector worker, is now the general manager of a small unit at Teal-Jones that is producing shingle-siding panels from western red cedar, hoping to find a niche in the U.S. market by making a higher-quality product.

Mr. Jones, who graduated from high school in B.C.’s Fraser Valley, spent 18 months at rigs in Alberta and B.C. The former roughneck moved back to his home province in April, 2014 – before the energy industry downturn.

Praising the work ethic of Mr. Cronin and Mr. Pohanke, Mr. Jones said their time in Alberta helped shape his two employees.

“You learn how to work hard, and in the cold.”

Alberta hit hard


Alberta is in the midst of one of its “most severe recessions” ever, Toronto-Dominion Bank says, warning of a cumulative contraction of a sharp 6.5 per cent in economic activity by the end of this year.

TD chief economist Derek Burleton and economists Diana Petramala and Warren Kirkland said in a new forecast they expect Alberta’s gross domestic product to shrink by 3 percentage points this year, coming on the heels of what the province has already suffered from the oil shock.

“Based on our revised forecasts, the 2015-16 recession is likely to go down in history as one of the most severe using the GDP benchmark,” the TD economists said.

“Compared to the average of the past four recessions, declines in both real and nominal [GDP] are expected to be double the magnitude.”

The hit to jobs, though, suggests an “average” recession, and the current slump probably would have been uglier still but for some offsetting reasons, including low interest rates, the sinking Canadian dollar and a “moderately growing” U.S. economy.

“That said, to the extent that these factors have been blunting the downside, the recovery anticipated in Alberta starting next year is likely to lack the typical punch that has characterized those in the past,” they said, projecting average economic growth of 3.2 per cent between 2017 and 2018.

As TD put it, Alberta can’t catch a break. Just as oil “provided a decent whiff of recovery,” along comes the uncertain trade threats from Britain’s decision to leave the European Union. That comes on top of the Alberta wildfires that ripped through the Fort McMurry area.

Looking at four previous recessions starting in the early 1980s, TD found this:


Note the hit to personal disposable income. And while unemployment is well below the levels of those past recessions, it is forecast to remain elevated through the end of the year.

It’s also worth noting that while TD forecasts Alberta won’t get back to its 2014 levels until 2018, GDP per capita will still top that of other provinces even during the slump.

“Regarding Alberta’s longer-term prospects, much will depend on how the province tackles many of the challenges on its doorstep – sizable budget deficits, inadequate oil and gas pipeline capacity, competition from the U.S. shale industry for investment, and addressing climate change, to name a few,” the TD economists said.


B.C.’s decision to impose an extra tax on Vancouver-area home purchases by international buyers surprised many. (DARRYL DYCK For The Globe and Mail)

The loonie could be a victim of B.C.’s foreign buyer tax

David Parkinson

The Globe and Mail

Published Wednesday, Aug. 03, 2016 5:09PM EDT

Last updated Wednesday, Aug. 03, 2016 7:15PM EDT

British Columbia’s new tax on foreigners’ home purchases may cool more than just the white-hot Vancouver housing market. The chill could extend to the Canadian dollar.

In a research report last week after the B.C. government announced a 15-per-cent transaction tax on purchases of real estate in Greater Vancouver by people who are not citizens or permanent residents, economist and foreign-exchange strategist Charles St-Arnaud of Nomura Securities in London made a case that the inflows of foreign money into Canada’s housing “are likely sufficiently significant to influence the value of the Canadian dollar.” (Mr. St-Arnaud was an economist at both the Bank of Canada and the federal finance department before joining Nomura in 2010.)

The logic is pretty straightforward. When foreigners buy residential real estate in Vancouver (and elsewhere in Canada), they purchase Canadian currency to do so. That demand for Canadian dollars has become substantial, as the booming markets in Metro Vancouver and the Greater Toronto Area have become magnets for foreign investors. And like anything else, rising demand for the currency pushes up its value.

It is hard to say just how much foreign money has been flowing into Canada’s real-estate market – indeed, this has become a crucial question for policy makers trying to tackle the increasingly concerning market excesses in Vancouver and Toronto, and the available data have barely scratched the surface. But Mr. St-Arnaud has extrapolated from some numbers recently collected by the B.C. government to try to come up with a rough estimate.

B.C.’s Ministry of Finance reported last week that between June 10, when it launched its collection of data on foreign purchases, and July 14, foreigners spend $1.02-billion on B.C. residential real estate, including $885-million in Greater Vancouver alone, representing about 10 per cent of the city’s sales. Assuming this was fairly representative of current demand, Vancouver and its surrounding areas attract something approaching $1-billion a month in foreign investment.

We do not have comparable information for the GTA market, but the Toronto Real Estate Board reported $9.66-billion in home resales in June. Sales of new homes totalled roughly another $2.7-billion, based on data from the Building Industry and Land Development Association. Even if you assume foreigners are not as enamoured with Toronto as they are with Vancouver, you could comfortably estimate that Toronto would account for between $500-million and $1-billion a month of foreign housing investment.

Toss in the rest of the country, which certainly attracts some foreign buying despite having generally much less exciting conditions than the Vancouver and Toronto markets, and “maybe total flows into Canadian real estate is $2-billion [a month], and maybe even slightly higher,” Mr. St-Arnaud said via e-mail.

To put it in perspective, net inflows of foreign investment in Canadian securities (stocks, bonds and the like), which certainly have a significant effect on the currency, have averaged about $15-billion a month this year. Inflows from the export of energy products – always a big deal for currency traders, who grossly oversimplify the Canadian dollar as a petro-currency and thus reflexively link its value closely with the price of oil – have been about $5-billion a month. The foreign inflows in the housing market might not be big enough to be driving the currency’s gains this year (up 12 per cent against the U.S. dollar since mid-January), but in a year when Canada’s overall exports have generally struggled (down 3.4 per cent year over year), they are big enough to be providing meaningful support.

So if B.C.’s new tax puts the intended serious dent in foreign demand that could certainly put the Canadian dollar under pressure – at a time when the currency is already facing another downturn in oil prices. So far, the loonie has weathered oil’s recent skid admirably, thanks in part to the country’s relative attractiveness as an investment haven (economic and financial stability, proximity to U.S. growth, interest rates that still look unlikely to decline.) But add in shrinking foreign inflows in the housing sector, and that resilience could give way to a new downturn in the currency.

For some, especially in the export sector, that might be for the best, providing a renewed competitive shot in the arm. Still, it might not happen. As Mr. St-Arnaud points out, the new home-buying tax affects only one attractive Canadian real-estate market (albeit a big one); foreign investors could merely move their attention to Toronto, or Victoria, where hot markets remain unfettered by such a tax.

Still, given the level of concern expressed by all levels of government as well as the Bank of Canada at the housing-market frenzies on the B.C. coast and in Ontario’s Golden Horseshoe, it is hard to imagine that such a shift would last for long without further measures being imposed to cool foreign investors’ enthusiasm. Which might pave the way for the soft landing in housing for which policy makers have long prayed.

Just don’t be surprised if the ultimate fallout includes a somewhat lower-altitude currency, too.

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Greater Vancouver home sales tumble in August following foreign homebuyers tax

Defaults Done Has the ulta-hot real estate market frozen solid?


Home sales in Metro Vancouver took a sharp drop in August, as expected, one month after the introduction of the 15-per-cent foreign homebuyers tax.

The Real Estate Board of Greater Vancouver says sales fell 26 per cent compared to the same month last year. Residential property sales totalled 2,489 in August, compared with 3,362 sales in August 2015.

The numbers also represent a 22.8 per cent decline compared with July sales.

As sales slowed, the price of a house, condo or townhouse in Metro Vancouver continued to rise. The benchmark price for detached properties, according to the report, increased 35.8 per cent over August 2015 to $1,577,300, a 4.2 per cent increase over the last three months.

An apartment property increased 26.9 per cent over that same period to $514,300, and the price of townhouse jumped 31.1 per cent to $677,600.

“The record-breaking sales we saw earlier this year were replaced by more historically normal activity throughout July and August,” said board president Dan Morrison in a statement Friday.

“Sales have been trending downward in Metro Vancouver for a few months. The new foreign buyer tax appears to have added to this trend by reducing foreign buyer activity and causing some uncertainty amongst local home buyers and sellers.”

The sales-to-active listings ratio for August 2016 is 29.3 per cent, indicating it remains a seller’s market.

Analysts had predicted a sharp decline following the tax, which came into effect on Aug. 2.

Realtor Steve Saretsky said sales of detached homes dropped 50 per cent in Richmond, Vancouver and Burnaby compared to the average number of sales in August between 2010 and 2014. He left August 2015 out of his calculation because it was an abnormally hot month.

RBC senior economist Robert Hogue said a number of data sources confirmed a sharp drop-off for the first half of August but it will take months to see whether the initial blow will be sustained. He said the market had already begun to cool after an all-time high in February for a number of reasons, including a lack of affordable homes that was hurting demand.

Areas covered by the Real Estate Board of Greater Vancouver report include Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, New Westminster, Pitt Meadows, Maple Ridge, and South Delta.

Meantime, on Vancouver Island, sales hit record-breaking numbers in Greater Victoria. August saw 883 properties sold through the Victoria Real Estate Board’s multiple listing service, leading to a total sales value of $496 million.

That’s up by 19.2 per cent from the 741 properties sold in August 2015 and sets the sixth consecutive monthly sales record, the Victoria Real Estate Board said Friday.

The benchmark price for a typical single-family house in the Victoria core area is now at $746,900. A year ago, it was $603,200. For those who look at average prices, the average for a single-family house throughout Greater Victoria came in at $752,509 and the median (mid-way) price was $645,000.


With files from The Times Colonist and The Canadian Press



September home sales plunge nearly 33% in Metro Vancouver


Tiffany Crawford More from Tiffany Crawford

Published on: October 4, 2016 | Last Updated: October 4, 2016 7:48 AM PDT

The Real Estate Board of Greater Vancouver says home sales in Metro Vancouver plunged by nearly 33 per cent per cent in September over last year, as uncertainty continues in the housing market. Gerry Kahrmann / Vancouver Sun


The Real Estate Board of Greater Vancouver says home sales in Metro Vancouver plunged by nearly 33 per cent in September over last year, as uncertainty continues in the housing market.

In a report Tuesday, the board said the number of sales dipped below the 10-year monthly sales average last month for the first time since May 2014.

There were 2,253 sales last month, a decrease of 32.6 per cent from the 3,345 sales recorded in September 2015 and a decrease of 9.5 per cent compared to August 2016 when 2,489 homes sold.

Last month’s sales were 9.6 per cent below the 10-year sales average for the month, according to the report.

As for the cost of a home in Metro Vancouver, prices remained stable, with a slight decline month to month.  The composite benchmark price for all residential properties in Metro Vancouver, according to the board, is $931,900, a 0.1 per cent decline compared to August. Year over year, however there is still an increase of 28.9 per cent increase.

The cost of a detached home remained steady at nearly $1.6 million, which increased by 33.7 per cent over last September, but represents a small decline of 0.1 per cent compared with August.

Board president Dan Morrison says changing market conditions are easing upward pressure on home prices in the region.  August was the second month that a 15 per cent tax applied to foreign buyers.

“There’s uncertainty in the market at the moment and home buyers and sellers are having difficulty establishing price as a result,” he said, in a statement Tuesday.

The biggest hit was in the sales of detached properties compared with last year, which decreased 47.6 per cent to just 666 homes sold.  Townhomes were down 32.2 per cent and sales of condos declined by 20.3 per cent.

New listings for detached, attached and apartment properties were down one per cent to 4,799 in September, and down 11.8 per cent since August.

The report says the total number of homes currently listed for sale is 9,354, a 13.4 per cent decline compared to September 2015 and a 10 per cent increase compared to August 2016.

The sales-to-active listings ratio for September 2016 is 24.1 per cent, the lowest since February 2015.

Canadian Housing Corporation Statistics








United States News

Summertime blues about Christmas


Michael O’Neill, Agility Forex Senior Analyst, Special to Financial Post | August 11, 2016 7:39 PM ET More from Special to Financial Post

(Mark Wilson/Getty Images) Federal Reserve Board Chairwoman, Janet Yellen

Forget “Summertime Blues.” Global financial markets are already singing Christmas songs despite a heatwave in large swaths of the Northern Hemisphere.

Unfortunately, those songs are of the less cheery variety and include “Blue Christmas”, by Elvis Presley and “The Season’s Upon Us” by Dropkick Murphys.

It’s not actually Christmas that has markets down in the dumps, it’s the lack of clarity surrounding the Federal Open Market Committee (FOMC) interest rate decision due December 14 and the increasing belief that Fed Chair Janet Yellen and the FOMC members have lost their way.

That sentiment isn’t new. Last December, the Fed raised the target funds rate by a quarter point, from 0.0%-0.25% to 0.25%-0.50%, the first rate increase in seven years. In fact, at the time, the decision was viewed as a “doveish” hike and one that was made almost reluctantly. China’s August 2015 equity market meltdown and currency devaluation had triggered a stampede into risk aversion trades and underscored the fragility of the global economic recovery. Deflation was a major concern due to the impact from falling oil prices. Still, the FOMC made a decision.

Today’s issues with the Fed stem from the December 2015 FOMC Economic Projections. Back then, they forecast that the Fed Funds rate would be 1.4% in 2016, 2.6% in 2017 and 3.4% in 2018.

Markets being markets, became convinced that those projections translated into four rate increases in 2016, slotting one increase per quarter, in March, June, September and December.

Then a whole lot of things happened. China equities melted down, again. China devalued the yuan, again. Bank of Japan stimulus initiatives not only failed to devalue the yen, but precipitated a huge rally (From 125.60 to 100.00). The European Central Bank (ECB) ran into the same problem. ECB President Mario Draghi announced a massive stimulus program in March 2016, but the expected EURUSD decline fizzled when he did a Looney Tunes impression and said “That’s all folks.”

In between, Daesh was terrorizing Europe, China had imperialistic sights on the South China Seas and Europe was attempting to deal with a gargantuan refugee and humanitarian crisis, all of which contributed to global economic downgrades by the likes of the World Bank, the International Monetary Fund and the Organization for Economic Cooperation and Development.

And to make matters worse, the United Kingdom held a referendum and voted to leave the European Union.

Despite all the global turmoil, China issues, failed stimulus programs, Brexit risks, and a reduction in global growth forecasts, the erstwhile Committee members of the FOMC fanned the rate hike flames.

Kansas City Fed President Esther George said on July 20, that “the current level of interest rates is too low relative to the performance of the economy.”

Philadelphia Fed President Patrick Harker was even more direct on July 13 when he said “it may be appropriate for up to two more rate hikes in 2016.”

San Francisco Fed President John Williams said that “the very low interest rates that we have today are not normal.”

And FOMC Vice Chairman Stanley Fischer went as far as to imply that if Brexit hadn’t happened rates would have increased in June.

More recently, in early August, Chicago Fed President Charles Evans said he was open to one interest rate increase in 2016 while the Atlanta Fed President wouldn’t even rule out a September rate hike.

Then came the August 5 nonfarm payrolls report. The surprisingly robust 255,000 increase in jobs combined with a bump in average hourly earnings is just the data that the FOMC said they needed to pull the trigger on a rate hike.

Except the financial markets don’t believe it is. The CME FEDWatch tool indicated that the probability for a September rate hike only jumped to 18% from 9% immediately after the data, but it has since declined to 12%. The December probability is only 34.3%.

FX traders apparently agree with the FEDWatch tool. Already, EURUSD and the Canadian dollar have recovered all of Friday’s post NFP losses while USDJPY is only slightly higher.

Ben Bernanke, Fed Chairman from 2006 to 2014, wrote an article for the Brookings Institute suggesting that “with policymakers sounding more agnostic and increasingly disinclined to provide clear guidance, Fed-watchers will see less benefit in parsing statements and speeches and more from paying close attention to the incoming data.”

And therein lies the problem. The data is muddled and sending mixed signals. The employment report may have been strong, but Q2 GDP missed forecasts and was a weak 1.2%. The current Atlanta Fed GDP Now indicator attempts to show current levels of GDP and, as of August 9, U.S. GDP for Q3 is at 3.7%.

Still, the FOMC statement noted concerns about soft business investment and inflation that “continued to run below the Committee’s 2% longer-run objective.”

Janet Yellen has continually stressed, since last December’s meeting, that rate hikes will be data dependent. At the same time, the FOMC still has at least one rate hike forecast for 2016.

As long as the U.S. economic data releases continue to be mixed and inflation remains low, markets should heed Mr. Bernanke’s advice about ignoring Fed speakers and just concentrate on the data.

When Santa comes, he may not have a rate hike in his bag of toys.

 Home size increases, but lumber usage down


The average size of new, single-family homes in the U.S. has grown larger in recent decades. Homes being bL1iJ.t now are more than 2.5 times larger than houses built in 1950. However, the volume of timber used in new homes has been in a gradual declines since 1990.

Industry analyst Tack Lutz with the Forest Research Group, a Maine-based firm providi.ng forest economics and timberland investment consulting services, offers several observations.

In a recent report, Lutz noted that house size has been growing faster than wood use per unit. TI1e amount of wood used per square-foot of house has declined from 8.9 board feet per square foot of house in 1950, to 5.6 board feet per square foot in 2010 (a 37% decrease).

As the average new home is getting bigger, rooms are getting bigger – and larger rooms require less lumber per square foot of room. As an example: a 10 x 10 room has 100 square feet of floor space and 40 linear feet of wall, with studs every 16 inches plus top and bottom plates. This adds up to about 235 board feet of 2x4s. A 12x 12 room has 144 square feet f floor ·pace and 48 linear feet of wall, and just over 275 board feet of 2×4. ‘The floor space is 44% higher, but the volume of2x4s is only 18% greater.

As houses have gotten bigger, they have become a tor more open, with fewer walls. Fewer walls and door means less lumber – but in multilevel homes, stronger materials are required to keep the second level floor from sagging.

Engineered products have replaced solid wood in some applications. Some of these engineered products u e le wood. For example, I-joists that replaced solid-sawn 2xl0s and 2x12s as floor joists use less wood.

Lutz reported that vinyl and wood composites have re­placed wood in exterior siding on many homes, and vinyl has surpassed wood usage in windows. Wood composites are also being used on decks and railings.

When doves cry? America’s economy


Today’s jobs report is the only one falling between the Federal Reserve’s most recent monetary-policy meeting and its next, in early November. Analysts reckon payrolls swelled by 168,000 in September—just a little below the average monthly gain this year. That is unlikely to be enough to make the Fed raise rates at its November meeting, which falls just days before the presidential election. Rate-setters do say the case for tightening monetary policy has strengthened, though; traders are betting on rates rising in December. Core inflation, which excludes volatile food and energy prices, is 1.7%, a little below the Fed’s 2% target. But hawks are keen to slow the labour market as they approach their goal, lest they overshoot it. Doves think that a dose of above-target inflation would be a good way to raise inflation expectations, which have sagged in recent years. Come December, the hawks will probably get their way­.

Random Lengths “Through the Knot Hole” September 19 2016