Legal framework for forest management and timber trade of Japan

Forest governance

Japanese forest administration is differentiated by forest owner classification. Most of National forests are managed directly by the Forestry Agency of Japan, public owned forests by the local governments, and private forests by the individuals, companies, NGOs and so on. The national and local governments provide subsidies for planting and thinning in the private forests based on regulations and multiple functions of forests.

The “Forest and Forestry Basic Law” was established in 2001 as an alternative to the “Forestry Basic Law” established in 1964. One of the main purposes of “Forestry Basic Law” was to develop forestry in correspondence with timber demand during high economic growth periods. However, the demand for forest resources has varied since the 1980s, and Japan faced a decline in its timber self-sufficiency rate up to 2001. The “Forest and Forestry Basic Law” has been amended to reflect these changes. The basic principle of the “Forest and Forestry Basic Law” is to promote multiple functions of forests, such as watershed protection, land conservation, prevention of global warming, timber production, etc.

“Forest and Forestry Basic Plan” is published every five years under the “Forest and Forestry Basic Law”. The basic plan is the fundamental national policy on forests and forestry in Japan, in which forests are categorized into three functional types according to their primary functions:

• Land and water conservation forests
• Forest-human co-existence forests
• Sustainable resource use forests

Under the Minister of Agriculture, Forestry and Fisheries (MAFF), Japan's forest governance is divided into national forests and privately and publicly owned forests. The governance structure is formed by the “Forest Planning System”. In national forests, regional office formulates regional management plan individually for each region of national forests, and each national forests are managed under that plan. In the governance of private and public forests, municipalities formulate a 10-year forest plan individually in accordance with the prefecture's 10-year forest plan, and then the private forest owners prepare a 5-year forest management plan individually referring to the10-year forest plan.

Legal rights to harvest

In Japan, forest practices and timber harvesting activities are carried out under the responsibility of forest owners in accordance with the Forest Law. At that time, based on the Forest Planning System, administrative measures for forest sustainability are taken, including confirmation of the implementation of reforestation (see 5 items below). In the Forest Planning System, the main measures taken by municipalities for private forest owners are as follows:

• Notification of harvesting and reforestation after harvesting
• Recommendation on forest practice
• Order to stop harvesting and order to create forests related to unreported harvesting
• Changes in harvesting and post-harvesting plans, and orders for compliance with them
• Notification when become the owners of forest land, etc.

The prior notification is to be submitted to the mayor of the municipality 90 to 30 days before the start of harvesting in the privately and publicly owned forests under the forest plan at the municipal level. A forest status report on harvesting and post-harvesting reforestation must be submitted within 30 days of the completion of harvesting. The submission of these documents may also be done by the forest purchaser on behalf of the forest owner. If not notified in advance, a fine of up to 1 million yen will be imposed in 2020. If the forest status is not reported, a fine of up to 300,000 yen will be imposed as well.

Taxes and fees

Referring to the National Tax Agency, the forest income (No. 1480) refers to the income generated by selling logs after harvesting or selling them as standing trees. However, if harvesting or transfer is made within 5 years of acquiring the forest, it will be business income or miscellaneous income instead of forest income. In addition, the portion of the land when transferring the entire forest will be capital gains.

The amount of forest income is calculated as follows:

Gross income - necessary expenses - special deductions (up to 500,000 yen) = amount of forest income

1. Gross amount of income: The consideration for the transfer is the amount of income. If you harvest timber and use it to build your own house, the market value at the time of consumption will be included in the gross income.
2. Necessary expenses: Necessary expenses include acquisition costs such as tree planting costs, cultivation costs such as weeding costs, management costs required for maintenance, and transfer costs such as harvesting costs, transportation costs, and brokerage fees.
3. Special provisions for necessary expenses: There is also a special provision for necessary expenses, called the deduction for estimated expenses. If you harvested or transferred the forest that you have owned for 15 years prior to December 31 of the year in which you harvested or transferred the forest, you can use the amount equal to 50% of the amount of income minus the cost of harvesting or transferring the forest.

Forest income is not totaled with other income, but the tax amount is calculated by a calculation method different from other income, and it is necessary to file a final tax return. In addition, owners of private forests are subject to annual property taxes. The inheritance and transfer of forest assets are also taxed.

Timber harvesting activities

Timber harvesting activities are conducted in accordance with the rules outlined in the Forest Planning System. In National Forests and publicly owned forests, forestation and harvesting are carried out according to the respective 10-year forest plan. In these forests, standing trees are sold under the respective 10-year plan. In this case, a bid is placed after the announcement to determine the purchaser. In privately owned forests, the forest owners basically carry out silvicultural and harvesting activities at their own discretion in accordance with the forest management plans they have prepared. Since most tree planting on privately owned land is subsidized, the government will check whether the trees have taken root after planting.

In terms of requirements for harvesting activities, private forest owners shall provide prior notification of harvesting and reforesting information as described above (Legal rights to harvest).

Third parties’ rights

Indigenous people live in some areas of Hokkaido in the northern part of Japan. Indigenous peoples' lands are treated with respect as their own private property.

Trade and transport

Documents and information on exports and cargo flow are explained on JETRO's website. The export price of wood products is determined by negotiations between the buyer and seller, plus insurance and cargo handling fees. According to the Plant Protection Station, an export inspection is conducted to see whether plants to be exported from Japan satisfy plant quarantine conditions imposed by an export counterpart. The procedures for export plant quarantine in Japan can be found on the quarantine station website. For example, when logs are exported from Shibushi Port in Japan to China, the cost of fumigation is 6-9% of the export price, and the cost of fumigation rent is 1-3%. A form of Export Quarantine Certificate can be obtained on the MAFF website.