Japan’s top four contractors cash in on Olympic building boom

Four of Japan’s largest contractors have filed record profits for the year ending in March thanks to a boom in building and infrastructure projects, mainly in the Tokyo area.

Obayashi, Kajima, Taisei and Shimizu made a combined total of $5bn in operating profit, beating expectations by 50%, the Nikkei Asian Review reports.

The companies’ performance is based on an upsurge in building in the Tokyo Bay area as authorities use the 2020 Olympics to develop areas on the outskirts of the city and to build out a number of reclaimed islands.

Profits had been expected to be restrained by the industry’s tightening labour market but companies claim to have improved their techniques to reduce their dependence on site workers.

Shozo Harada, vice president of Obayashi, told reporters at his company’s results presentation: "New construction techniques have caught on, and we still have more than enough manpower for formwork and reinforcement tasks, for example."

The company also has long-term price agreements with many of its key subcontractors, reducing its exposure to fluctuations in the labour costs.

However, rising wage bills are expected to squeeze profits in the coming year as the Olympic workload increases. Kajima, Taisei and Shimizu have even projected declines in operating profit. Kajima expects its profit margin on building construction to narrow three percentage points to 10%, due largely to rising labour costs, Nikkei reports.

The exception is Obayashi, which is predicting a slight growth in net profit to $850m.

Some commentators in Japan suspect the companies of talking up their labour costs to justify rises in the price they charge clients, and see the record profits as proof of this.

Materials companies have also benefited from higher domestic demand. Steelmaker JFE announced that it would increase output by 3% to 29 million tonnes after its profit climbed a third to $762m.

Image: Tokyo Bay’s Rainbow Bridge may be rebuilt to accommodate larger ships (Javachan)

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