Daiwa House Industry, Japan’s largest housebuilder, has responded to the country’s tightening labour market by paying all of its subcontractors in cash.
Before, the company made about 40% of payments in promissory notes, which take between 90 to 120 days to pay out.
Daiwa pays more than $10bn a year to as many as 4,000 companies, around 3,000 of which are subcontractors. The move to cash is expected to help small and medium subcontractors pay for more qualified workers.
In order to make the change, Daiwa will borrow more from its lenders, but the impact of this will be limited by Japan’s interest rate, which presently stands at minus 0.1%.
According to the Nikkei Asian Review, Daiwa is considering also adopting the all-cash policy at other group companies like general contractor Fujita and condo builder Cosmos Initia.
Japan’s construction industry has seen a steady drop in workers as its population ages and its birth rate continues to be among the lowest in the world.
Competitors like Penta-Ocean Construction and Taisei are making similar moves, either switching to all-cash payments or shortening the settlement time of notes to 60 days from 90 days.
Image: Daiwa House is Japan’s biggest housebuilder (Daiwa)