Market Power in the Log and Lumber Import Market in Japan

Japan imports rather than exports forestry products even though it has ample forestry resources. Moreover, the leading exporters of forest products often have strong market power in the trade market of forestry products. The possibility of incomplete competition in the Japanese wood import market can also be suspected from the fact that the structure of imports of logs and lumber has remained unchanged over the past 10 years. However, there has been limited empirical economic analysis of the timber trade market to support this assertion. In this study, we examine the market power of the primary exporting countries in the Japanese log and lumber market based on the residual demand model. We analysed the import data of forestry products from 1988 to 2010 with respect to every main item exported to Japan. The analysis shows that Canada has market power over several items of logs in the Japanese import market, while the United States and Canada have market power over several items of lumber. The study also clarifies that imperfect competition exists in the Japanese timber import market and that the timber price in Japan is partially determined by the exporting countries. JEL Classification: Q17, Q23, Q27Wood Import Market; Log and Lumber Trade; Market Power; Residual Demand Model; Japa