Cost Management Report

April-June 2026 issue.
「Although the Recent Rise in Construction Costs May Be Levelling Off, Outlook Uncertainty is Growing」

Scroll Down

This report has been prepared by the Cost Management Group of the Architectural Design Dept. of Nikken Sekkei Ltd for information purposes. While the information herein is current as of the date of publication, its completeness is not guaranteed. The contents are subject to change without notice. Unauthorized reproduction of this report is prohibited.

CATEGORY

RELATED EXPERTISE

Although the Recent Rise in Construction Costs May Be Levelling Off, Outlook Uncertainty is Growing

Year-on-year construction cost inflation continues to slow

Year-on-year construction cost inflation peaked at +24% in the July–September 2023 quarter and has since continued to slow. It currently stands at +7% (Fig. 1). The slowdown in building construction has been leading the way, with MEP following suit and also showing signs of levelling off.

Labor input in 2025 remains virtually unchanged

As a result of measures to reduce overtime, working hours fell in 2025, but the number of employees rose slightly, meaning that labor input remained virtually unchanged (Fig. 2). Labor costs are expected to continue rising, partly due to the full implementation of the amended Construction Business Act last December, which aims to ensure appropriate labor remuneration.

  • Fig.1: Year-on-year trends in the NSBPI*1 Fig. 1: Year-on-year trends in the NSBPI*1
    Compiled by Nikken Sekkei.

  • Fig. 2: Trends in labor input (number of employed persons × hours worked) Fig. 2: Trends in labor input (number of employed persons × hours worked)
    Compiled from the Ministry of Internal Affairs and Communications’ Labor Force Survey.

The Corporate Goods Price Index rises 2%

The Corporate Goods Price Index rose 2%, in line with the Consumer Price Index (Fig. 3). Trends vary across different materials; while steel prices had been falling, they have now stabilized, while ready-mixed concrete prices continue to rise.

Uncertainty about the future is growing due to soaring crude oil prices

Crude oil prices have surged in response to the deteriorating situation in the Middle East (Fig. 4). During the oil price surges of 2008 and 2010-2014, the impact on domestic materials prices was limited. However, in 2020-2022, it is believed that materials prices were affected by the weaker yen as well as by heightened inflationary expectations. Although the outlook remains uncertain, caution is warranted as it is possible that quotations may factor in the risk of future materials cost rises that have been triggered by rising crude oil prices.

  • Fig. 3: Trends in the Corporate Goods Price Index Fig. 3: Trends in the Corporate Goods Price Index
    Compiled from the Bank of Japan’s Corporate Goods Price Index.

  • Fig. 4: Trends in crude oil prices and the Corporate Goods Fig. 4: Trends in crude oil prices and the Corporate Goods
    The World Bank’s Commodity Prices and the Bank of Japan’s Corporate Goods Price Index.

Construction Costs Remain Largely Unchanged;Equipment Costs Rise Slightly

Nikken Sekkei Standard Building Price Index (NSBPI)*1

In construction work, although a decline in steelwork costs was observed for the second consecutive quarter, increases were seen in certain categories, resulting in an overall rate of increase similar to that of the previous quarter.

Regarding MEP work, the rate of increase was up slightly compared to the previous quarter due to factors including manufacturers’ price revisions for equipment, the incorporation of rising materials costs (such as electrical copper) into quotations, and higher labor costs (Figs. 5 and 6).

  • Fig. 5: Change in NSBPI Fig. 5: Change in NSBPI

  • Fig. 6: Percent Change in NSBPI & Building Work, MEP Work Contributions Fig. 6: Percent Change in NSBPI & Building Work, MEP Work Contributions

The amended Construction Industry Act is fully implemented
Efforts to improve conditions for engineers gain momentum

Amendments to the Construction Industry Act and related legislation in June 2024, aimed at securing the construction industry workforce were implemented in stages in September and December of 2024, with full implementation completed in December 2025.

The US dollar-denominated NSBPI has plateaued due to the weak yen

In order to secure and ensure the availability of labor costs, construction contractors are required to submit quotations stating such appropriate costs, while clients are required to take this information into consideration (Fig. 7).The NSBPI, as denominated in US dollars, had been rising in line with the yen-denominated NSBPI, but has now plateaued due to the recent yen depreciation and a slowdown in the NSBPI's rate of increase (Fig. 8). Attention to changes in domestic construction prices, as viewed by overseas investors, is also warranted.

  • Fig. 7: Ready-mixed concrete price trends Fig. 7: Main impacts on private-sector clients under Con-struction Industry Act amendments enforced in Dec. 2025
    Compiled from the Ministry of Land, Infrastructure, Transport and Tourism’s Briefing on Construction Industry Act Amendments (enforced in December 2025).

  • Fig.8: Change in USD-denominated NSBPI Fig. 8: Change in USD-denominated NSBPI
    Compiled from Nikken Sekkei data and the Bank of Japan’s Exchange Rates.
    The USD-denominated index is calculated based on the exchange rate as of Sept. 2008.

*1: The Nikken Sekkei Standard Building Price Index (NSBPI) shows movements in construction prices, calculated independently by Nikken Sekkei Ltd. Using standard rental office space as a quantitative model, the index is calculated and converted into an index of construction prices that reflect prevailing prices, as identified through independent surveys from time to time. The first quarter (Q1) is from Jan. to March, Q2 is April - June, Q3 is July – Sept., and Q4 is Oct. - Dec.

*2: Quotation specifying material costs, etc.: A quotation for construction work that details, according to the nature of the work, the material costs and labor costs for each type of work, as well as a breakdown of expenses essential to ensure proper execution by the workers engaged in the construction work, and other expenses necessary for the execution of the construction work.

* This report has been compiled based on information available as of 12:00 noon on March 30, 2026.

RELATED ARTICLES

This website uses cookies. By continuing to use this website, you agree to the use of cookies. Our cookie policy.