Japan Promotes Sales Of US Prefab Homes

But regulations and little space make it a tough market

KUNIMURA, Gunma Prefecture is a small, traditional town in Japan's countryside. Outsiders are few, and most residents are elderly. But nowadays there is something new: an American-made prefabricated house.

Such homes are still a novelty in Japan. American builders have been present in the market for 20 years, yet they sell only 1,000 to 1,500 units annually.

If the Japan External Trade Organization (JETRO) has its way, Japanese people may soon see more. Indeed, the organization will be promoting sales.

Japan's government is eager to ease trade friction between the United States and Japan. Promoting prefabricated homes is a short-term palliative for Japan's trade surplus, due to each home's high unit value. The cost of one home is roughly equivalent to five cars. JETRO, a division of the Ministry of International Trade and Industry, hopes to see sales of 50,000 homes every year.

JETRO's plan calls for providing builders with low-cost exhibition grounds. Such lots, enough to display four to six model homes, rent for $10,000 a month in suburban Tokyo. JETRO-subsidized sites will cost 50 percent to 70 percent less.

JETRO will also send a trade mission to the US, possibly this autumn, to search for interested companies.

With JETRO's assistance, several builders are better-positioned to succeed. Lindal Cedar Homes, based in Seattle, is one of these companies. It opened a local subsidiary, Lindal Cedar Homes K.K., in 1973, and now boasts a spacious showroom in Tokyo's downtown area.

By sourcing its materials in North America, where prices are less than half of those in Japan, the firm can offer quality at a reasonable price. Akira Nakamura, the owner of the Lindal house in Gunma, says that a ``domestic kit would cost the same, but I prefer Lindal's quality and size.''

JETRO's assistance and quality products may not be enough to gain significant market share for American builders. The Western Wood Products Association, a private American organization for promoting forest exports, argues that building regulations make imported homes too expensive and also limit the scale of their market.

``Sales of Western-made home kits may not increase much, despite JETRO's initiative,'' says Ikuo Yamaguchi, the WWPA's representative in Japan.

About 75 percent of Japanese home buyers borrow money from the Government Housing Loan Corporation (GHLC). They pay 30 percent to 40 percent less in interest charges than what a bank's typical customer must pay. Unfortunately, Lindal's customers cannot get these loans.

To receive government assistance, builders must use lumber, which has been stamped with the Japan Agricultural Standard seal of approval. Their hardware must also be stamped with the Japan Industrial Standard seal. JAS and JIS seals are similar to Lindal's grade stamps, which it receives in Canada and the US. But the GHLC does not recognize foreign markings.

Theoretically, Lindal can get JAS and JIS seals for building materials. Mr. Yamaguchi points to a list of 15 factories across North America whose output is JAS approved. However, all companies are major corporations, including Georgia-Pacific and Weyerhaeuser. ``Lindal Cedar Homes K.K. may lack the resources to pursue such approval,'' Yamaguchi concedes.

AT the same time as cheaper interest rates give Japanese-made homes a price advantage, some building regulations restrict foreign home sales to the countryside. Fire regulations are perhaps the most onerous, Yamaguchi says. Government officials, worried about fire hazards in crowded residential areas, do not permit roofing, which contains combustible materials.

Wooden homes must also be at least five meters (about 16.5 feet) from their nearest neighbor. As most foreign homes are wooden, Yamaguchi says, ``urban areas are essentially closed to them.'' Housing lots are too small.

Japan's population is concentrated in urban areas, and wealthy people generally live closer to the city. As a result, prefabricated kits are not generally suited to making primary homes. Lindal's market focuses on wealthy people who own second homes in the countryside and on Japan's small rural population.

Without selling in cities, American suppliers cannot hope to increase their sales much. JETRO, for one, hopes that foreign companies can produce Japanese-style homes: using JIS/JAS approved materials, without combustibles, and satisfying other building regulations.

Lindal Cedar Homes K.K.'s sales manager, Katsuya Horiuchi, says that ``we can provide kits which satisfy urban safety codes. In fact, our homes are based on two-by-four construction methods, and the cedar siding is only for decoration. It is possible to use metallic siding as well.''

JETRO managers confirm that negotiations with US home builders have been going well: ``Several companies in Washington [State], Oregon, and Minnesota have expressed a flexible attitude, and we are hoping to find other participants, too.''

JETRO, Mr. Horiuchi, and Yamaguchi also hope that the government will relax regulations. The new Halta administration seems willing to continue the deregulation of the construction industry begun by former Prime Minister Morihiro Hosokawa.

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