Material Shortages Push Japan’s Small Builders to the Brink

At an apartment renovation site in Yamagata City on Wednesday, scaffolding remained in place but no workers could be seen. The project, which had been expected to finish soon, came to a halt two weeks earlier after supplies of finishing paint failed to arrive.

“There is nothing we can do if the materials don’t come,” the site manager said. “This is the first time work has stopped purely because materials are unavailable.”

The site uses water-based paint, but demand for such products has surged amid shortages of naphtha-derived materials produced from crude oil. Contractors said the light-colored finishing paint used on the building ran out midway through the project, leaving sections of the exterior unfinished.

The apartment building, which contains three units, had already been prepared for sale before the suspension occurred.

Ikeda Painting, the company handling the work, employs around 60 craftsmen and says 10 projects have now stopped because of the shortage.

“This situation is abnormal,” the company’s president said. “If this continues, it is honestly frightening.”

The company has received repeated notices from suppliers announcing shipment suspensions and price increases, often with little explanation beyond a single sheet of paper.

The delays are also damaging cash flow. Contractors say they cannot receive payments until projects are completed, while many customers rely on bank loans tied to construction progress.

“Even during the Great East Japan Earthquake and the coronavirus pandemic, I never experienced conditions this severe,” the company president said.

Smaller contractors are facing even harsher conditions.

In Yamagata, Hiroshi Suzuki, who runs a painting company with two craftsmen, visited Ikeda Painting this week in search of work. Two of Suzuki’s own sites are also suspended with scaffolding left standing idle.

“If projects don’t finish, we can’t collect payments,” Suzuki said. “If this goes on for another two or three months, things will become dangerous.”

The painting industry typically enters its busiest season between the snowy winter months and the arrival of summer heat, with many companies taking on large amounts of work during this period. Yet suppliers told contractors that materials ordered in early April were only now beginning to arrive, while existing inventory was rapidly disappearing.

“The worst-case scenario is bankruptcy,” Suzuki said. “Every day I feel anxious.”

Suzuki is now calling for government support similar to the low-interest loans and subsidies provided during the coronavirus pandemic.

“I feel our voices are not reaching anyone,” he said.

The crisis is also hitting Japan’s roughly 500,000 self-employed construction workers.

In Yokohama, 61-year-old waterproofing contractor Hitoshi Kudo said shortages of urethane waterproofing agents and thinner, both derived from naphtha-related products, have sharply reduced available work.

“The thinner was the first thing to disappear,” Kudo said. “Without it, we simply cannot work.”

Kudo’s schedule shows a dramatic decline in jobs. After working 19 days in February and 16 days in March, he worked only four days in April and expects just six days of work this month.

Unable to make ends meet, Kudo recently began working in food delivery.

“I never imagined I would be doing food delivery at my age,” he said.

Starting at 10 a.m., Kudo spent nearly 10 hours delivering meals across Yokohama, climbing apartment staircases and searching unfamiliar neighborhoods late into the night. After 13 deliveries, his earnings totaled 10,751 yen before gasoline costs, leaving him with less than 10,000 yen in actual income.

“If I had no work because my skills were poor, that would be my responsibility,” Kudo said. “But this is different. We want to work, but we can’t because the materials are not coming.”

He added that his savings were already being depleted and warned that many workers across Japan were facing similar hardships.

The government has acknowledged the growing strain on the construction industry. Prime Minister Sanae Takaichi said on Friday that independent contractors and small construction firms were experiencing serious difficulties.

The government insists that Japan has secured sufficient quantities of naphtha-derived petroleum products overall, arguing that bottlenecks in distribution are causing localized shortages. Authorities say they will strengthen efforts to gather information and monitor supply conditions more aggressively.

However, labor unions say the government’s response has failed to match the reality on the ground.

Takayuki Nakamura, an executive committee member of Zenroren Tokyo, part of Japan’s largest construction labor union federation, criticized officials for repeatedly promising investigations without resolving the shortages themselves.

“If the problem is congestion somewhere in the supply chain, then identify where it is blocked and fix it,” Nakamura said. “Simply saying you are collecting information is meaningless.”

A survey conducted this month by the labor federation found that 86% of more than 900 responding businesses said Middle East tensions were affecting operations. Particularly difficult to obtain were thinner, paint and waterproof roofing sheets.

Many respondents also called for financial support, including tax relief and subsidy programs to help preserve employment.

Some contractors warned they were already at the breaking point.

“If this situation continues for another month, some businesses will collapse,” one union representative said. “Some people are even saying they are considering leaving life insurance money behind for their families.”

Many firms are still repaying loans taken out during the coronavirus pandemic and say additional borrowing is no longer realistic.

The Ministry of Land, Infrastructure, Transport and Tourism said it recognizes requests for price control measures and stable material supplies, while the Small and Medium Enterprise Agency said it would consider the industry’s demands as part of future policy discussions.

Even before the Middle East crisis intensified, smaller firms were already struggling under rising costs and the weak yen.

A Teikoku Databank survey conducted in April found that 108 companies nationwide went bankrupt because of inflation-related pressures, the highest monthly figure on record. Construction companies accounted for roughly 30% of those failures.

The research firm also warned that nearly 46,700 companies across Japan are connected to naphtha-related supply chains, many of them small businesses with capital below 100 million yen.

Experts fear more firms may eventually be forced to shrink operations or abandon business altogether if supply disruptions continue.

Shortages are spreading from thinner to paint and now even waterproof sealing materials, creating a constant cycle of new disruptions. With construction sites halted and payments delayed, many business owners are struggling to manage cash flow ahead of month-end obligations.

Source: TBS

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