Because of increasing supply of the imported wood at low price, the rate of wood selfsufficiency in Japan has dropped further below 20%. This resulted in abandoning the reforestation activities after harvesting, which could impinge on the sustainable forest management. In this study we first overview the current state of Japanese forestry with a focus on relationship between the timber market and the sustainable forest management. Secondly, we estimate price elasticity of lumber supply and demand for eight Japanese regions (Tohoku, Kanto, Hokuriku, Chubu, Kinki, Chugoku, Shikoku, and Kyushu), China and Korea. With the estimated price elasticities for these regions, we finally analyze the characteristics of the supply and demand structure through the spatial and inter-temporal partial equilibrium market model called JAFSEM (Japanese Forest Sector Model). Our results show the following; 1) at the present price level Japan would face to difficulty to continue the sustainable forest management, 2) Japanese regional lumber demand except Kyushu would increase, and 3) the additional demand for lumber would be met by Korea and China.