Japanese Forest Sector Modeling through a Partial Equilibrium Market Model

Abstract

The structure of Japanese timber markets has changed drastically during recent decades. After the introduction of a large amount of imported softwood products. Japanese timber producers have faced global competition with foreign timber suppliers such as Canada, the US, and recently Nordic countries. In this paper, we present a forest sector model for lumber markets with a focus on eight aggregate regions (Tohoku, Kanto, Hokuriku, Chubu, Kinki, Chugoku, Shikoku, and Kyushu) in Japan. The proposed model is based on the Samuelson-partial equilibrium formulation, which searches for an optimal solution by maximizing the net social payoff subject to demand and supply constraints. A nonlinear programming solution technique is incorporated into the proposed model. Three types of lumber are considered, i.e., domestic lumber, the lumber processed in Japan from imported logs, and imported lumber from the US and Canada. Using data for 1998, our analysis indicates that the derived equilibrium solution has a higher price for the imported lumber supply in all regions, and a lower price for the other two products in most regions than the actual current price in 1998. The derived net social payoff gains 1.6% compared with the one derived with the current set of prices and quantities.