An econometric analysis of supply and demand on Sugi sawlog in Japan

Abstract

This study aims to clarify the supply and demand on Sugi sawlogs, a major product in the Japanese domestic log market, using econometric methods, and to quantify the impact of socio-economic factors on the supply and demand of domestic logs. We develop a dynamic simultaneous equations model for the supply and demand of Sugi sawlogs. The model is estimated using two-stage least squares, and both short-run and long-run elasticities are calculated. In estimating the model, we verify cointegration within variables. The data is based on annual time series data from 1960 to 2019. The study reveals that own price, logging wage, and stand volume in planted forests all have a significant effect on the supply of Sugi sawlogs, indicating that while higher prices of Sugi sawlogs increase suppliers' willingness to supply of Sugi sawlogs, continued low replanting rates might decrease the supply of Sugi sawlogs in the future. In terms of the demand model, this study observes greater long-run elasticities than those reported in previous studies. This result suggests that a structural change could have occurred in the behavior of sawmills in terms of their demand for logs.