Updated as of October 2005

SMEs Dominate Rapidly Opening Market.

Japan’s construction investment comprises 10.8 percent of Japan's GDP, and workers employed accounted for 9.5 percent of the total Japanese labor force in 2003, making the construction industry one of the mainstays of the Japanese economy.

Construction activities in Japan have been decreasing each year since 1992. Construction spending reached 84,000 billion yen in the peak year of 1992, but has followed a declining trend since 1993 to reach approximately 51,900 billion yen in 2004. This has been due to the economic slow down since the bubble economy burst, and an urgent need to reduce the national budget as Japan’s accumulated national debt continues to soar.

There were 550,000 construction contracting firms in Japan with approximately 6 million employees as of 2003. Most of the contracting firms are small and medium-size. More than 97 percent of the companies have capitalization of less than 50 million yen ($470,000).

While public sector projects declined due to the economic slump and restrained spending of the national budget for public works, private sector spending in construction investments increased to 31,500 billion yen in 2004 from 30,900 billion yen in 2003. On the other hand, public sector spending in construction investment decreased to 20,400 billion yen in 2004 from 23,000 billion yen in 2003.

As a result, the internationalization of construction activities in Japan has become quite active since 1994. The country is now certified as meeting WTO (World Trade Organization) requirements for opening the construction market according to general trade agreements.

Many American construction or engineering companies have increased their participation in the Japanese market through partnerships or joint ventures with their Japanese counterparts.