Although the forests planted after World War Ⅱ are going to mature enough to be cut finally, yard lumbers of Sugi (Cryptomeria japonica), which holds the great majority of these planted trees, are in serious competition with imported lumbers. In order to develop domestic forest industry under these circumstances, it is necessary to cultivate markets for domestic yard lumbers. In this paper, we focus our analysis on the Hita district in Oita prefecture to search for the best way of developing forest industry. This district is a representative yard lumber producing district in Japan and holds active even after imported lumbers gained upper hand of domestic ones in markets in the 1960s～70s. Through these analyses, we consider, vertically from forest management to consumption market, each process of production, circulation and manufacturing of lumber. Domestic lumbers have been supplied on a smallscale, dispersedly and diversely, but activity of Hita district shows that vertically integrated process, which contains structurally organized relationships between each process, could overcome difficulties of domestic lumber supply. (1) Forest management, to say nothing of small scale, even if it is large scale, is based on accumulations of dispersive and small scale stand of trees. Moreover, final cut propensity depends on financing requirement and is unstable, small and dispersive. (2) Reflecting final cut propensity, the amount of logging is small. In order to overcome such difficulties, they try to enlarge logging scale and reduce its expenditure by joint-logging with the neighbor stand. But, in fact, there is a limitation in overcoming the instability of log supply in such a way. Moreover, even in man-made forests which only one race of Sugi, there are various logs for various purposes in house building. (3) Auction markets of log collect diversified various logs, classify and assort them, and make goups composed of standardized logs. But standards of classification are established in detail by each diameter. Accordingly, if let the matter rest, each amount of dealings in log becomes small. To overcome this difficulty, they enlarge the scale of dealings (we call "Hae") up to the amount which one motor truck could carry. (4) Supported by circulation faculty which auction markets of log create, sawmills specialize in production of one kind of lumber in accordance with diameter of log and perform high turnover ratio of capital and productivity of labor. Pursuing massproduction of one kind of lumber and high productivity of labor enables sawmills in Hita district to increase their competitive abilities. This is the reason why they can increase their supply. (5) On the other hand, most of these lumbers produced in Hita district are supplied to the Nothern-Prefectures of Kyushu, or Fukuoka, Nagasaki and so on. Receiptors of these lumbers are mainly auction markets of lumber and leading lumber-retailers. In the most part of their dealings, lumbers produced in Hita district play important roles. It is strong point to be able to supply lumbers at lower prices than those of lumbers supplied by other produci-district and meet concentrated, large-scale demands by specialization. Judging from the facts mentioned above, for the sake of developing lumber producing district it is most important to overcome difficulties, which forest production includes, of small-scale, dispersion and diversity. Particularly in districts where trees were planted after World War Ⅱ, it is necessary to organize powers of log production, classify and assort various logs and increase the amount of dealings. Although auction markets have been playing important roles, we will confront many problems in the near future, for the scale of present auction markets is small, the number of them is few and they cannot meet the increase of future final cut. In addition, while most of auction markets exist in developed forest-zone, regions where forests were made after World War Ⅱ h