Japan should introduce a recycling system to better utilize its forestry resources, the Agriculture, Forestry and Fisheries Ministry said Tuesday in its annual forestry report.

The fiscal 2001 report suggests a recycling system be set up so that forest resources can be used for houses and public facilities and scrap wood can be recycled.

It also urges the government to develop forests with "multilateral functions," including using the woodlands to absorb carbon dioxide and prevent natural disasters such as mudslides.

"It is important for society as a whole to pass on sound forests to the next generation," the report says, pointing out that mountain villages could become an advanced model for recycling-oriented communities.

The report is the first of its kind since the enactment of a law on forestry in June that prioritizes multiple uses of forests instead of just production-oriented activities.

Japan's forestry industry has been in decline since a high-growth period in the 1960s and 1970s.