The New Building Regulations

in Japan: Creating
Opportunities for High-Tech
Wood Products
Dr. David H. Cohen
Director, Centre for Advanced
Wood Processing
University of British Columbia

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

The New Building Regulations in Japan:

Opening Doors for High-Tech Wood
Introduction
In terms of number of housing starts, the Japanese housing market has rivalled that of the
United States during the past three decades (see Figure 1). This is despite the fact that the
population of Japan is only 126 million people compared to almost 300 million in the US.
Despite similar numbers of housing starts in Japan and the US, the average house size
differs dramatically. On average, the Japanese house is about the same size as houses in
Europe but smaller than those in North America; between 50-60% of the area of a US or
Canadian house (Anonymous, 1998a). However it is not just the sheer size of this market
that makes it attractive. Japan has a tradition of wood housing and the Japanese people
have embraced western styles of house design and construction during the past fifty years.
In addition, Japan is only able to satisfy about a third of its own demand for wood from its
own forests and the trend is declining harvests and self sufficiency.

The Housing Big Bang

Japan is in the midst of a “big bang” in the residential construction sector driven by both
mandatory and voluntary regulatory changes. It is expected that the entire industry structure
of the residential construction business will undergo a major evolution due to the changes
currently being implemented. These changes are no longer speculation but are rapidly
becoming fact. This paper briefly reports on three of the important areas of regulatory change
that contribute to the big bang in housing in Japan. The drivers behind these changes are
myriad and include the following:
♦ the need to improve the quality of housing built in Japan,
♦ the need to ensure more structural stability during earthquakes and other common
natural disasters,
♦ the need to develop more accountability among house builders
♦ the desire to ensure consumer choice based on accurate information, and,
♦ the need to adapt housing to a rapidly aging population (see Figure 2)

2,000
20
thousands of housing starts

1,800 18
Population in m illions

15
1,600 13
10
1,400
8
1,200 5
3
1,000
0
1990 2000 2010
800
year
74

77

80

83

86

89

92

95

98

Ma le Fe male

Japan US A

Sources: Japan MOC and National Association of Sources: Japan Statistical yearbook, 2000
House Builders in the US. Figure 1: Aging Japanese Population
Figure 2: Japanese/US Housing Starts

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

Three important areas of change are 1) the Government Housing and Loan Corporation
(GHLC) requirements for low interest loans initiated in November 1998, 2) a major revision to
the Building Standards Law (BSL) and, 3) the new Housing Quality Assurance Law (HQAL)
enacted on April 1, 2000. Each of these regulations, manuals or laws is complex and
addresses a different aspect of the housing big bang. Table 1 shows the regulatory change,
which law or regulation addresses this change most directly and the Japanese government
agency or agencies responsible for this regulation or law.

Table 1: Regulatory Changes Leading to Big Bang in Japanese Residential

Construction
Regulatory Change Regulation or Law Ministry Responsible
Change to how home owners and GHLC Building Manuals Ministry of Agriculture
builders can qualify for Fish and Forestry
government supported low interest (MOAFF) and Ministry
and long term loans of Construction (MOC)
Shift from prescriptive building Revised Building MOC
code to performance based Standard Law (BSL)
building code
Improve quality and accountability Housing Quality MOC
of home builders to home buyers Assurance Law (HQAL)
Adapted from Japan Lumber Journal, 1999-2000

Government Housing and Loan Corporation (GHLC)

The GHLC has been the venue by which the Japanese government has actively promoted
the design and construction of new houses in Japan since the Second World War. This
organization not only provided financial support through low interest long-term loans but also
directed the style and type of house that was constructed. According to Onobayashi (1995), it
has been a tool to support government policies regarding social issues (e.g. promotion of the
nuclear family since WWII) and practical issues (e.g. encouraging workers to move to urban
centres). The GHLC has both fiduciary and regulatory responsibilities. However, many of the
GHLC regulations are voluntary since they only are required to qualify for the GHLC
approved loan. However, few houses are built in Japan without some financial support from
the GHLC resulting in their “voluntary” policies translating to practical requirements.

As of June 2000 the GHLC can provide loans of up to 12.7 million Yen (CAN$176,000 or
133,000 ECU) for new house construction. Interest rates are low (2.75% per annum) and are
fixed for over 70% of the 35 year term. On average, this loan covers the cost of about a third
of a new house purchase in Japan (including land) but slightly less in the Tokyo region. For
owner built homes the GHLC provides about 45% of the funds with another 45% coming
from personal savings and the final 10% coming from banks and other lending institutions.
Developers responsible for apartments and the houses built for sale receive about 48% of
their funding from the GHLC, 23% from savings and the rest from various sources. From 65-
80% of all funds borrowed to build houses in Japan came from the GHLC in 1999
(Anonymous,1998a). The result is that their voluntary regulations are de facto required
regulations. The GHLC manuals which detail what criteria must be met to qualify for a GHLC
loan were revised in November 1998. These changes were dramatic and have undergone
interpretation and updating since that time. There are three classifications for housing: 1)
barrier free, 2) energy saving, and, 3) durable. Each classification has detailed prescriptive
standards that must be met for a house to qualify.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

The objective of barrier free housing is to make a house “friendly” in case one of its
inhabitants is disabled or has decreased physical capacity. This objective should ensure that
the next generation of houses in Japan is suitable for the rapidly aging population and can
accommodate the surge of seniors shown in Figure 2. The regulations include specifics
about interior opening size, width of passageways, size of bathrooms, type of non-slip floor
surfaces, use of handrails and more. Most particulars can be explained as ensuring future
houses are easily adaptable to those in wheelchairs or walkers. The specific regulations are
detailed in the Government and Housing Loan Corporation Building Manuals1.

Energy saving houses have a structure that is insulated for heat conservation in accordance
with GHLC specifications and standards provided by the MOC Energy Organization. The
GHLC specifications provide specific details to meet government guidelines regarding air
tightness, ventilation and window performance. The details ensuring energy efficiency are
expected to become more rigorous given the existing attitudes of both the Japanese
government and consumers towards energy efficiency and global warming. Recent studies
have illustrated that the completely airtight house remains a serious problem in Japanese
(unpublished research from the Harvard School of Public Health).

Durability is specified for all aspects of superstructure from foundation to wall systems.
Included here are durability of individual support members by species group, an increase in
the allowable foundation height, improved crawl space and attic ventilation requirements and
much more. Specific details are provided in the revised GHLC Manuals. The focus on
durability is due to the Japanese concern with stability during earthquakes after the Kobe
quake of 1995. No loan will be issued by the GHLC unless the house design and
construction will meet the durability guidelines.

To qualify for the standard GHLC loan the house must qualify as both durable and barrier
free or both durable and energy saving. It is clear that durability is of prime importance. This
is shown in Figure 3. There are both mandatory and recommended practices necessary to
qualify for each of the three standard loan criteria. These may need to be adjusted due to
regional conditions. For example there are adjustments for the North Island of Hokkaido and
a cold climate. While only the mandatory requirement must be met to qualify for loans, in the
future the more rigorous recommended practices could become the revised mandatory
requirements. It is very important to note that these regulations apply to all house
construction including traditional post and beam as well as 2 by 4.

The increased performance requirements not only for the design and construction of houses
but also for material selection will open the door to higher quality wood products. Wood is the
primary material for single family residential construction and the most used material for all
construction in Japan (see Figure 4). To meet many of the stability requirements detailed in
the GHLC building manuals, the existing trend towards engineered wood products and kiln
dried wood will be accelerated (Gaston, Cohen & Fell, 2000). Previous studies have already
indicated the growth potential of engineered wood products among builders in Japan (Cohen,
1993; Cohen & Gaston, 1998). The new GHLC manual will increase the rate of adoption and
create opportunities for additional new high tech wood products.

1
Much of this information is derived from various articles in the Japan Lumber Journal and a
translation of Japanese Government Housing Loan Corporation Building Manuals. The
Council of Forest Industries, Vancouver, BC, has translated, published, and sold manuals in
Canada.
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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

23%

31%

46%
Energy Saving
Durability Qualify for
GHLC Loan
Barrier free

Wood Concrete Steel

Figure 3: Qualifying for GHLC Loan Source: Japan Statistical Yearbook

Figure 4: Structural Material in House
Construction in Japan

Revised Building Standard Law

For the first time in fifty years, Japan has introduced significant revisions to the Building
Standards Law (BSL) of Japan. These revisions are a fundamental component of the
Housing Big Bang that is creating so much uncertainty among the building industry in Japan.
While dramatic change in industry structure is expected, exactly what this change will be is a
matter of speculation.

The most significant change from the previous BSL is the move from a prescriptive-based
building code system to a performance-based one. This shift was influenced by the Great
Hanshin Earthquake of 1995 and reinforced by recent problems with builder/contractor
bankruptcies. The move to the performance-based BSL of 2000 is very much directed toward
the protection of the homeowner and a shift of responsibility from government to builder.

Building codes and standards have historically been prescriptive. Rules are developed that
create “recipes” that must be followed to ensure adequate safety due to structural integrity,
fire resistance, durability or serviceability. Experts determine which rules will guarantee
adequate performance. These rules then form part of the detailed building codes, which
cover every aspect of building. Builders concern themselves with meeting these minimum
requirements and site inspections ensure that they are following the “recipe book”. If the
recipe fails the fault lies with the regulation and not the builder. Performance-based codes
and standards outline how a building or component should perform without detailing how this
performance is to be achieved. To fully understand the distinction, consider the example of
fire safety, an objective common to all housing codes. A prescriptive code would specifically
state what can or cannot be used for materials in a wall assembly. A performance-based
code would state something like the wall must be able to contain a fire of a certain
temperature for a certain period of time. The engineers, architects and designers would then
decide how this performance is met. If the building does not perform the fault lies with the
builder and not with the regulations. Performance based codes, in theory, allow more
innovative solutions to performance difficulties (Foliente, 2000).2

2
Much of this paragraph summarized personal communications with Dr. Chris Gaston, of
Forintek Canada Corporation.
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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

The main points of the revisions to the Building Standard Law of Japan are: (adapted from
Anonymous, 1998b):
1. To rationalize the content of building regulation by shifting from a prescriptive code to
a performance-based code. This means that there is more freedom to try innovative
building systems and high tech materials as long as their performance meets the
criteria set out in the revised BSL. Section 37 will allow for foreign testing agencies to
approve materials and systems concerning their performance. The details of how an
organization becomes an accredited foreign testing agency are not yet finalized. This
process has the potential to create non-tariff trade barriers as well as open up the
Japanese market to increased high tech foreign building materials and components.
Only time will tell whether the intent to open up the market is implemented or
subverted to protect domestic suppliers.

2. To rationalize building confirmation procedures by increasing the number and rigour

of onsite building inspections and consigning them to private organizations. Japan
has significantly fewer building inspectors than other developed nations. For example
Japan has only 5.8 building officials per 100,000 of population compared to 25.7 in
the United States. Since changing regulation does little good unless these changes
are put in place during construction, there is a well-defined need for additional
inspections during construction. The decision has been made to use private
inspectors rather that increase the state building bureaucracy. This requires the
development of a building support infrastructure outside the direct control of the
government. It will require significant training and the establishment of guidelines to
certify private organizations to ensure similar standards in all regions of Japan.

The BSL does require interim on-site building inspections, which are detailed in other pieces
of legislation. There has been an attempt to revise the BSL so that it will not require further
modification. The details to achieve some of the objectives stated in the BSL are included in
other pieces of legislation which could be revised with much less time delay or need for
broad consultation. In fact most of the protection for the consumers has been relegated to
the Housing Quality Assurance Law discussed in the following section.

The shift to a performance based building code opens the door for more innovative, high tech
wood materials as well as building components. It is still too early to determine exactly how
this opportunity will present itself, however, there will be significant opportunities for high tech
wood materials which can prove their engineered performance characteristics over time.

This far-reaching law was enacted on April 1, 2000. There are three important parts of this
law. The first aspect is the requirement for interim and final building inspections leading to a
mandatory 10-year warranty. The second aspect requires a completion guarantee for all new
houses being constructed. These two are mandatory requirements for all houses being
constructed in Japan. The third aspect is not mandatory but will most likely become a market
necessity rather than a legal requirement. The HQAL encourages the use of voluntary
performance measures for new house construction. Each of these three aspects will be
discussed below.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

Mandatory 10 Year Warranty

The HQAL requires homebuilders to provide homebuyers with a 10-year warranty on all new
houses built in Japan. This warranty must cover the house against structural defects and
poor durability where durability refers to the longevity of the house. Included in the definition
of low durability is rain penetration into the structure. This is a global problem in residential
construction and Japanese authorities are being proactive in trying to prevent this problem as
they move towards air tight housing. Homebuyers may make a claim against the homebuilder
if the during the first ten years after construction the house does not meet a specific set of
criteria. These criteria are still being finalized but should be available very soon. Unlike the
revised BSL, they will be prescriptive rather than performance based. An example of the
detail of one of the prescriptive standards would be that a floor should not have a slope
exceeding 6 per 1,000 or the builder would have to make the floor level. The homeowner
could make a claim anytime within the first 10 years should this requirement not be met.
Because this is the first such warranty in Japan there are no mechanism in place to resolve
disputes that arise between homebuilder and homeowner.

The bureaucratic nature and tendency for the Japanese to avoid confrontation contributed to
few claims under a previous and limited 10-year warranty. Many homeowners preferred to
live with the problems rather than enter a protracted and often confrontational process for
redress. To ensure improved consumer service the HQAL includes the establishment of a
mechanism for resolving disputes. The HQAL provides the authority to set up Alternative
Dispute Resolution (ADR) bodies. These will be established in each prefecture in Japan to
settle disputes arising from this new warranty. Their goal is to reconcile differences between
homeowners and builders during the 10 years that the warranty is in effect. By using
alternative dispute resolutions, the cultural propensity to avoid confrontation should be
alleviated.

Each ADR body will be staffed by lawyers who will use the “Judgement Standards for
Defects” to determine whether a defect is sufficiently severe to require correction or
compensation. These standards are prescriptive in nature. The purpose of these detailed
and prescriptive warranty standards are to create a national benchmark of quality for
housing. This benchmark would apply to all houses regardless of construction method or
material. The warranty resolution criteria will create a means for homeowners to have these
standards met and provide a mechanism to improve houses below the prescribed quality
benchmark. Similar to the GHLC, the HQAL is a means of improving the quality of residential
construction without the appearance of undue prescriptive regulation in the Building Standard
Law. It also allows changes to these standards without the typically onerous and time-
consuming process of changing the building law itself.

Housing Completion Guarantee

Much of the new house construction in Japan is rebuild3. Small builders construct many of
these. In fact there are over 100,000 small builders that construct less than 5 houses per
year and over 70% of all single family housing starts are built by contractors who build less
than 100 houses per year (Japan Lumber Journal Oct.15/99 pp 1). The Asian economic
crisis of 1997 resulted in an unprecedented number of bankruptcies of small businesses.
Many

3
In 1999 43% of all new starts were rebuilds according to the MOC of Japan.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

of these small businesses were komuten (i.e. small traditional house builders) unable to
secure loans from the banks who overreacted to the criticism of sloppy loan policies by
halting all new loans for a period of time. This caused some of the small builders to go
bankrupt while building houses for homeowners.

In Japan homeowners pay the builder prior to completion of each construction activity. The
owner pays one third prior to the start of construction, a further third after walls are framed
and the final third upon completion of the house. Tightened credit combined with the more
than 25% reduction in housing starts from 1996 to 1998 caused many small builders to go
bankrupt leaving consumers in a triple bind. Consumers had 1) partly finished houses,
2) outstanding liens on building materials, and, 3) increased construction costs to finish the
construction job.

To prevent this situation from reoccurring there is a provision in the HQAL that protects
homebuyers against the default or bankruptcy of the builder or contractor through the
Completion Guarantee System. This system will provide homeowners with insurance so that
if their contractor or builder goes bankrupt there will be sufficient funds to complete
construction of the house. The legislation provides no prescribed method indicating how
builders are to offer this insurance. Larger builders are of sufficient financial strength and
size to offer this insurance on their own. However, for most of the small builders several new
approaches are needed to provide both the 10-year house warranty and the completion
guarantee. Since this law is just being introduced in 2000, new approaches are still being
developed. To date the financially stable builders can access a variety of schemes to provide
insurance. Building material and product wholesalers are offering insurance to selected small
builders, large builders are offering franchise opportunities to some small builders and pre-
cutters are banding together in order to offer insurance and security to selected small
builders. However not all small builders will qualify and a significant restructuring of this
important segment of the residential construction sector in Japan is expected over the next
few years. This assumes that the government does not react to increased unemployment of
the small builders by offering this insurance to all regardless of construction quality or
financial stability.

Impact of Mandatory Warranties and Guarantees

There will be significant impacts due to the required 10-year warranty and the completion
guarantee. To protect themselves builders are selecting higher quality and better performing
materials for construction. This trend is already reflected in the dramatic increase in use of
dimensionally stable kiln dried lumber and glue laminated posts and beams in house
construction. This trend is also reflected in increased domestic kiln capacity that still falls far
short of satisfying Japanese domestic demand for kiln dried material. This has led to a
dramatic growth in the import of kiln dried lumber from Europe and a desire for more uniform
and stable structural components.

It is expected that as warranties and guarantees are required from builders, they will require
the same from their suppliers. Builders as well as distributors will be looking to push the
warranty and guarantee responsibilities onto the suppliers of both building materials and
products. Just recently a new consortium of pre-cut mills has developed a warranty system
against defects which will be running in October 2000. Opportunities for high tech wood,
which due to its design and manufacture can provide performance guarantees, will be in
great demand in Japan as long as price does not prohibit their use.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

Voluntary Performance Indicators

The HQAL also provides for the voluntary “Housing Performance Indication Standards”. They
provide a set of standards for nine indicators against which the performance of specific
houses can be compared. The overall objective is to provide consumers with an unbiased
means of comparing houses based on nine important criteria that are measured in the same
way by all builders. The nine performance indicators and a brief explanation of what is being
measured are shown in Table 2.

Table 2: Nine Performance Indicators

Indicator explanation Indicator explanation
structural stability earthquake-proof, loading, air quality ventilation & formaldehyde
foundation
fire safety fire spread time, heat sensors, light environment ratio of exterior openings to wall
escapes, etc. area
durability decay & deterioration acoustics insulation for noise, transparency
loss, etc
ease of ratio of common pipes to barrier free design convenience for elderly & physically
maintenance common pipes impaired
energy efficiency insulation, window types, etc.
Adapted from Japan Lumber Journal, Jan 31, 2000.

The Ministry of Construction has developed specific measures for each of the nine indicators.
These are technical measures that have only recently been published. A house would be
ranked on each measure based on its performance. To rank at the highest level for each of
the nine indicators would be cost prohibitive. For example, in March 2000 durability was
defined as the expected longevity of a house based on decay and deterioration of the
structure. There were three performance levels representing longevity due to durability:
1) less than 50 years, 2) 50-75 years, and, 3) over 75 years. All of these, even the lowest,
represents a longevity far greater than the current average life span of a single family
dwelling in Japan which is between 20 and 30 years depending on the region4.

Private evaluation bodies will determine which houses meet which levels of each standard.
This is expected to require building inspections during the foundation stage, framing and
finishing. Houses that are judged to meet or exceed a specific level in the performance
indication standards will receive certification as a “Performance Recognized House”. This will
allow the builder to substantiate their claims and differentiate their houses from the
competition. The HQAL also provides for manufacturers of building components that meet
the performance standards to become certified as “Authorized Manufacturers of Performance
Components”. This opens the door to high tech wood building components that can be
evaluated based on the nine performance criteria.

One of the most important aspects of the nine performance indicators is the ability to
segment the Japanese housing market based on performance criteria. It should facilitate the
export of higher valued, more high tech materials by being able to identify who would be
willing got pay the premiums for specific performance attributes.

4
In Japan two of the three most important reasons for replacing a house are to change style
and to increase size. Thus many potentially durable houses are being replaced. This
performance indicator evaluates longevity due to durability only and is not an accurate
surrogate for overall house longevity.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

Summary

The residential construction industry in Japan is undergoing dramatic change instigated by

changing regulations. All of these changes provide a dynamic situation, which can lead to
new opportunities for the increased use of high tech wood products that provide clear
performance characteristics. Changing regulation is requiring increased clarity and
assurances regarding the performance of materials, building components and housing
systems. High-tech wood products provide many of these performance benefits at very
reasonable costs. Requirements that place more responsibility on homebuilders will also
generate increased interest in high performance, high-tech wood products. Performance
required by these new regulations, both mandatory and voluntary, can often be engineered
into the development of high-tech wood products creating a valuable competitive edge to the
Japanese builder during these changing regulatory times.

However, the situation is far from stable and constant monitoring and observation is
necessary to ensure the opportunity of this two-edge sword is explored without incurring the
threats of the other edge. The negative aspects of these changes could include additional
non-tariff trade barriers, a regulated preference for Japanese materials and products and a
lack of implementation or enforcement on a national basis. Overall, the new building
regulations in Japan are creating opportunities for high-tech wood products at an
unprecedented –rate.

References

Anonymous, 1998a. A quick look at housing in Japan, 4th edition. The Building Center of
Japan, the Housing Bureau of the Ministry of Construction and the Housing and Urban
Development Corporation. (Tokyo. Japan). 50 pages.
Anonymous, 1998b. Law for the Amendment of the Building Standard Law 98 (Law No. 100,
June 12, 1998. The Building Center of Japan, the Housing Bureau of the Ministry of
Construction and the Housing and Urban Development Corporation. (Tokyo. Japan). 114
pages.
Cohen, David H. 1993. Preliminary assessment of market potential for finger-jointed lumber
in Japanese residential construction. Forest Products Journal 43(5):21-27.
Cohen, David H. and C. Gaston, 1998. Japan’s Value Added Market: Wood Product
Attributes and Competition - Attribute Analysis Report D: Engineered Structural Members.
Forintek Canada Corp Report. Prepared for Forest Renewal BC (Victoria, BC) 27 pages.
Foliente, G.C. 2000. Developments in Performance-Based Building Codes and Standards.
Forest Products Journal, Vol. 50, No. 7/8, 12-21.
Gaston, Chris, David H. Cohen and David Fell, 2000. Wood Market Trends in Japan. Special
Publication SP-43 ISSN # 0824-2119. Forintek Canada Corp. Report Published in
cooperation with Forest Renewal BC (Victoria, BC) and Natural Resources Canada (Ottawa)
32 pages.
Japan Lumber Journal, various issues 1998, 1999, 2000 Tokyo Japan (25 issues per year)
Japan Statistical Yearbook 2000. Statistics Bureau, Management and Coordination Agency,
Government of Japan, Tokyo, Japan. available on the web at
http://www.stat.go.jp/english/1431.htm on August, 2000.

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 The New Building Regulations in Japan: Creating Opportunities for High-Tech Wood Products

Onobayashi, Hiroki, 1995. A History of Modern Japanese Houses. The Japan Architect June,
1995:71-84

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