TAKESHI HAYAKAWA | PRESIDENT OF TOA CORPORATION
Japan's construction industry is facing considerable shifts. In urban centers like Tokyo and Osaka, we've seen decades of 'scrap and build' development. However, with Japan's population crisis coming to the forefront—projected to intensify by 2040—many believe this development cycle is nearing a natural slowdown. How do you currently assess the state of the Japanese construction market, and what are your expectations for its future?
Indeed, the Japanese construction sector has undergone a profound transformation over the past several decades. The major construction boom occurred more than 50 years ago, during the height of Japan's post-war economic growth. Much of the infrastructure built during that period now shows signs of aging, and there is a growing need for renovation and maintenance.
In metropolitan areas such as Tokyo and Osaka, we still see active development driven by the longstanding 'scrap and build' model. However, as Japan's demographic crisis deepens—with a shrinking and aging population—we anticipate a gradual deceleration of new construction. That being said, this doesn't necessarily signal a decline but a modification in our industry.
I will begin with civil engineering. For example, one of the significant national strategies is "national resilience," which includes earthquake countermeasures. Over the next five years, starting in 2026, a public investment program totaling over 20 trillion yen (approximately 140 billion dollars) will be implemented to enhance resilience against natural disasters. This includes seismic retrofitting of existing buildings and structures, as well as ground reinforcement. These projects play directly to our strengths, and we anticipate continued stability—and even growth—in this segment.
Looking ahead, we expect the redevelopment and renovation of aging infrastructure to dominate the market. New construction projects may slow, but the demand for seismic retrofitting and update will rise. Importantly, Japan faces a serious shortage of construction workers, which naturally elongates project timelines. Renovation work, however, tends to be quicker and less labor-intensive than entirely new buildings, making it a more efficient and appealing option for many clients.
Beyond that, emerging trends are shaping new demand. For example, in rural areas, we're seeing a surge in semiconductor-related construction and the development of data centers—driven by the growing adoption of AI. Around urban centers, the rise of e-commerce is fueling demand for logistics and warehousing facilities.
Last year, approximately 60% of our building construction work was tied to physical infrastructure such as warehouses. We have traditionally excelled in coastal and port-adjacent logistics construction, so this uptick in demand aligns well with our core competencies. We plan to focus strategically on this segment, providing stability and direction in a changing market.
Offshore wind energy is another area with significant potential, albeit with challenges—particularly cost-related concerns. Still, Japan has pledged carbon neutrality by 2050, and we are proud to be part of this national goal. We anticipate privately funded opportunities will emerge as companies look to align with this target, and we are ready to contribute to this vital initiative.
Also, one particularly promising area is the updating of facilities operated by the Japan Self-Defense Forces (JSDF). Many of these facilities were built before or during World War II. While we've not yet received formal contracts, there is an active push within the government to consolidate and upgrade JSDF infrastructure. We are positioning ourselves to participate actively in that process.
On the topic of renovation and labor shortages, there's growing consensus that retrofitting is more efficient, especially amid declining labor availability. What's your view on attracting the next generation of workers to the construction sector, especially given its reputation as "dirty, dangerous, and analog"?
That perception has indeed been a longstanding hurdle for the industry. However, I believe the core appeal of construction remains deeply compelling—it's the joy of monozukuri, or craftsmanship, the process of building and creating something tangible and lasting. When you add the impressive scale of our projects, it can be very exciting.
At TOA CORPORATION, we are constantly innovating to overcome the challenges facing the construction industry. We invest in research and development to create cutting-edge solutions that improve efficiency, safety, and sustainability in our projects. To attract younger generations, we must renew not just our tools but impression of construction industry. Integrating automation, digital technologies, and smart construction systems is vital. When young people see that construction today can be high-tech, efficient, and future-forward, we can shift perceptions. It's not just a labor-intensive job site anymore—it's a space for innovation.
Messaging and outreach are also key. We need to communicate clearly that working conditions have improved. In the past, weekend work and excessive overtime were everyday, but that's changing. Ensuring work-life balance and promoting a safer, more respectful work culture is essential.
We also encourage our employees to go back to their alma mater and actively engage with younger students. Personal outreach and storytelling about the impact and innovation within our field can go a long way toward recruitment.
You touched earlier on your company's disaster relief contributions, particularly following the 2011 Great East Japan earthquake and the 2024 Noto Peninsula earthquake. Could you elaborate on how TOA CORPORATION's technologies and capabilities have enabled swift and effective responses in such emergencies?
When disasters strike, one of the most critical issues is the collapse of transportation infrastructure—roads become impassable, isolating affected communities. We have a unique strength: we operate from the sea.
For decades—dating back to the 1995 Kobe earthquake—we've used our vessels to transport emergency supplies and personnel when land routes are compromised. This capability proved invaluable during the 2011 Great East Japan earthquake disaster and again in the 2024 Noto Peninsula earthquake.
In the recent Noto Peninsula event, for instance, the Ministry of Land, Infrastructure, Transportation and Tourism dispatched a ship from Kyushu loaded with emergency supplies. However, the local ports were heavily damaged. Our team was able to coordinate on-site logistics, unload cargo by hand, and establish functional distribution points—even when the port's basic infrastructure was incapacitated.
We're also part of the Japan Dredging and Reclamation Engineering Association, which unites marine construction companies nationwide. In times of crisis, we mobilize collectively to assess damage, avoid redundancy, and respond strategically. Our focus is not just on technology but on coordination, agility, and human-centered support.
Additionally, we help clean up after tsunamis, including the recovery of displaced individuals and debris. Again, our sea-based approach allows us to move quickly and cost-effectively in areas that might otherwise be inaccessible.
In the reconstruction phase, our local offices can effectively prioritize needs by gathering information specific to each region and combining it with their experience. For example, they can respond to a variety of needs, such as temporary repairs to piers to resume supply chains and debris removal in preparation for reconstruction.
Japan's demographic challenges are well-known. With a declining and aging population, how will this shift affect TOA CORPORATION's future operations? Do you see potential opportunities within this broader societal transformation?
The demographic reality in Japan is undeniable—the population is shrinking, and competition for human capital is intensifying. In such an environment, companies that can attract and retain talent will continue to grow, while those that cannot will eventually fade.
That's why we are so focused on recruiting. I constantly urge our employees to revisit their universities, build relationships with younger generations, and help tell our story. Hiring isn't just an HR function—it's a strategic imperative that will determine our long-term survival.
We also recognize that with fewer workers, productivity improvements will be essential. While we continue to invest in digital tools and automation, the correlation between workforce size and business output remains significant. Securing a steady pipeline of talent is a matter of corporate survival.
On the topic of internationalization, TOA CORPORATION has played a significant role in Official Development Assistance (ODA) projects across Asia and Africa. How does your approach differ from that of other general contractors working in the Global South?
International construction—especially in the context of ODA—comes with its own set of challenges: legal, financial, logistical, and geopolitical. We've learned that building trust locally is fundamental to long-term success.
Our differentiation factors are difficult to identify, but our early and sustained engagement in several key regions is a significant factor in our success. We entered countries like Singapore, Indonesia, Vietnam, and Bangladesh earlier than many peers, which allowed us to establish enduring relationships with local governments and partners. With that foundation, we've been able to propose and implement advanced technologies suited to their specific needs.
One of our corporate philosophies is "To maintain everlasting trust through reliable construction works". We place great importance on honesty and trust in construction. This principle serves as a guideline not only in Japan but also in our overseas operations. This mindset has played a significant role in our business expansion in Asia.
In Africa, while we maintain operations, our current focus is increasingly centered on Asia. We're looking to set up local entities to transition from ODA-based work to direct contracts with host governments or local capital, such as in Indonesia, where major national development plans are underway—including the relocation of the capital to Kalimantan.
You mentioned ports as a core area of expertise. In Southeast Asia, where climate change is causing rising sea levels, how is TOA CORPORATION responding to infrastructure needs in coastal regions?
Ports are indeed our stronghold, and we're seeing growing demand across Southeast Asia, especially as climate resilience becomes a pressing issue. Rising sea levels threaten many coastal communities in the region, and we believe that we have a significant role to play.
We can propose solutions based on our several experiences and knowledge, ranging from port elevation to flood-resistant logistics terminals. We also plan to establish more local subsidiaries in Southeast Asia to transition from dependency on ODA (Official Development Assistance) to a model based on direct government and private sector contracts.
TOA CORPORATION has worked on naval bases and fuel terminals used by both the Japan Self-Defense Forces and the U.S. military. With defense becoming increasingly tied to geopolitical stability, how is TOA CORPORATION positioning itself as a long-term supplier of strategic infrastructure?
I believe that port development will remain the focus of our activities. Both the U.S. military and the JSDF rely heavily on maritime infrastructure. We aim to support the renovation and modernization of these facilities, ensuring they meet today's strategic and environmental demands.
Maintenance and upgrades for such bases often occur in parallel. Our experience and technical expertise place us in a strong position to contribute meaningfully. The defense sector is largely opaque in terms of information, but we intend to analyze the latest publicly available data and focus our efforts in this area. Geographically, we believe that Kyushu and Okinawa will be the main areas of focus.
There are certainly differences in working with U.S. military versus JSDF. Generally speaking, we propose promising technologies from an economic perspective in order to reduce construction costs.
On the other hand, in the case of construction projects for the U.S. military, for example, there are specifications set by the US military, and compliance with these specifications is a prerequisite. However, in some cases, the contractor may decide that it is better to change the original specifications based on the actual site conditions. In such cases, it is necessary to obtain understanding of the U.S. military, which is the client. There are also communication difficulties due to language differences. That can be a challenge, but through diligent communication—and better English-speaking staff—we aim to bridge the gap.
In terms of overseas, even if the projects in U.S. bases or allied nations, we will not participate if we do not have a business base there.
TOA CORPORATION has also begun to explore nature-based climate solutions, including marine afforestation. How does this align with Japan's broader carbon sink strategy?
Our company has expanded its activities into architecture, civil engineering on land, and overseas projects, but we are a company with roots in marine and coastal engineering. We feel a strong desire to give back to the ocean since we have benefited from transforming natural coastlines into artificial seawalls. Therefore, we now want to give back to the environment by restoring those areas to a form as close to nature as possible.
One of our initiatives is the propagation of eelgrass and other marine plants, which have been reported to have carbon dioxide absorption capabilities four times that of forests. While we are currently in the experimental phase in collaboration with other private companies, there are environmental challenges such as rising ocean temperatures that make it difficult for plants to thrive. We also plan to invest in research and development to overcome these new ecological challenges.
Sustainability is not just a corporate obligation—it's a strategic direction. As climate policies evolve and carbon pricing becomes more rigorous, our proactive approach in this space will position us well, both in Japan and abroad.
TOA CORPORATION has several proprietary technologies, including DECOM, PLUG MAGIC, and THJ. How do these innovations give you a competitive edge?
DECOM is a ground improvement method that strengthens soft soil. It's particularly effective for port development, where stable foundations are essential. Although construction of new ports is declining in Japan, there is also demand for DECOM in overseas. We also adopted it for our project in Indonesia.
PLUG MAGIC is a construction method that utilizes plug flow (turbulence) generated within a sand and gravel pumping pipe to mix and blend dredged sand and gravel with solidification materials, enabling their reuse as foundation materials for landfill sites. In Japan, this method has a significant track record, including its adoption at Chubu International Airport. Overseas, it has also been adopted in large-scale container terminal construction projects in Indonesia. This technology contributes to reducing environmental impact by enabling the reuse of soft dredged soil.
THJ, on the other hand, is a seismic reinforcement method developed specifically for cold storage warehouses that must remain at sub-zero temperatures. It allows structural upgrades without affecting interior climate conditions. While adoption has been limited due to a current strong demand for new construction, the potential is significant as interest in retrofitting grows.
Together, these technologies emphasize two things: speed and sustainability. That's what the global market is demanding, and that's what we're focused on delivering.
Finally, what legacy would you like to leave behind as President of TOA CORPORATION before you pass the baton to the next generation?
My goal is to contribute to society in ways that go beyond traditional construction. While we will continue to grow our core pillars—civil engineering, architecture, and overseas operations—I also want to pass on seeds that could become the "fourth pillar" to the next generation, reflecting social needs.
Ideally, this would involve environmental sustainability, such as CO₂ absorption technologies or innovations that support carbon neutrality. Even if it begins as a small seed, I hope to plant something that the next generation can nurture into a major contributor to society—and to our company's future.