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Business Insight

Finding Gold in the Forest

People living in Japan's countryside have seen their communities wither and economic opportunities dry up. Now the residents of one village are rethinking the way they use a natural resource, in hopes of harvesting a brighter future.

The mountain village of Nishiawakura in Okayama Prefecture is surrounded by forests. About 1,500 people live here. Timber harvesting once provided most of the village's income. But local foresters could not compete with cheap materials from overseas.

Daisuke Maki is a forestry consultant. Village leaders asked him to help revitalize the local industry. Six years ago, he founded a company in partnership with the village. It makes use of resources that once had little or no value.

Maki shows a desk and floor made from wood thinned from the forest.

The company processes the wood into valued-added products and sells them over the Internet. Yukahari- Tile is one of the company's most popular offerings. It's flooring made 100% of wood. A rubber pad on the bottom holds it firmly in place, so there's no need for nails. It's thicker and retains heat better than other types of flooring. Since 2011, sales have grown to 60,000 tiles and more than $800,000 a year.

Maki says their vision of generating economic circulation from the forest is finally starting to take shape. His approach integrates activities ranging from forest management to sales. Local officials organized the owners of individual parcels of forest land. Maki also asked people outside the community to invest in harvesting machines and other equipment. He raised nearly $400,000.

The new system transforms what was once low-value scrap into high-value products, which are then sold directly to consumers. Money that once left the community is now circulating within it. Eleven new businesses have been launched, 120 new jobs have been created, and about $6 million have been generated in annual sales. The effects are spilling over into other parts of the local economy. Hotels that had gone out of business have reopened.

A village official says about 60 people have moved to the village recently. He says new industries are popping up, and the economy is improving.

A village hot spring also benefits from the new system. In February, the operator switched from a kerosene-powered boiler to one that runs on firewood. The supplier sells it wood that cannot be used to make furniture. It's delivered four times a day. The new boiler is good for the environment as well as the economy. Wood ash is used to enrich the soil in local farm fields. The operator of the hot spring estimates that the switch to firewood will save more than $40,000 a year.

Kohei Izutsu is the President of Sonraku Energy, the company that supplies the hot spring. He says using kerosene used to transfer money outside the village, but switching to wood has helped to cut costs and keep the money in the village. With help from the village, Izutsu plans to broaden the customer base for his business to include hotels and homes.

The unique direction taken by the residents of this village is setting an example for other communities throughout Japan, to find their way through the economic wilderness.

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