Market Integration of Domestic Wood and Imported Wood in Japan: Implication for Policy Implementation

Abstract

This study examined the existence of cointegration relationship between domestic and imported wood using price series of sawlog and lumber in order to understand the competitive relationship between them in Japanese market. Using Johansen's multivariate cointegration tests, it was revealed that domestic wood market and imported wood market had no cointegrating relationships. Based on the findings, it was concluded that the market of domestic wood and that of imported wood are not closely connected through price arbitrage and that any price change of a wood product would not affect prices of other wood products directly. Thus, any policy measures focused on increasing domestic wood supply were expected to have little effect on the demand for imported wood market through price impacts.