Japan Develops Two Economies in One Country
Thursday, March 23, 2006 Posted: 08:47 PM JST
Commercial land prices in Tokyo, Osaka and Nagoya showed an increase for the first time in 15 years, the Japanese Ministry of Land, Infrastructure and Transport said today in a statement. The average price of commercial land in these urban areas gained 1 percent last year. In addition to commercial land prices, residential land prices in Tokyo, Nagoya and central parts of Osaka and Kyoto also showed positive growth. But the good news has a dark shadow.
Although the survey showed that land prices nationwide still declined by 2.7 percent, this decline was the lowest since 1991. Average land prices in Japan haven't seen a rise since they peaked in 1990. Since then values have dived by two-thirds for commercial property and about half for residential real estate. The national average price for commercial areas is now at levels as they were around 1970, while that of residential districts is at the 1986 level.
The small decrease of last year, say experts, is evidence that the property market is finally rebounding in Japan.
Demand for property in larger cities increased because of strong economic growth. The Japanese economy grew by 2.7 percent in 2005. This is the highest growth since 2000. As a result, real estate investment trusts doubled to 26 from 14, with many institutional investors pouring in the money. Investment bank Morgan Stanley bought USD 8 billion of Japanese real estate last year, Bloomberg reported.
The results however, show an enormous gap between Tokyo and the rest of Japan. Japan's top 10 residential areas in terms of land price increases were all located in Tokyo's Shibuya and Minato areas. The top 4 were in Tokyo's fashionable Aoyama district. Gains between 26 percent and 29 percent were seen here. The largest commercial increase was recorded in Nagoya, with almost 40 percent.
Provincial areas in Japan have been complaining that their needs and interests are being ignored, and these figures appear to confirm their claims. Especially Hokkaido is hurting with values still falling in the double digits in some places. Even in towns where land prices have been rising, there seems to be an invisible line. Walk a few hundred meters away from the main station and shops in traditional shopping arcades are hurting badly. There seems to be two economies in Japan, inhabited by different people. The topic of the growing gap between the rich and the poor is starting to attract a lot of attention in Japan, but many politicians, with Koizumi as their leader, dismiss it as hogwash.
The increase in real estate values immediately rekindled fears that the Bank of Japan may increase interest rates. The bank ended its five-year policy of near zero interest rates to fight deflation on March 9. It has not raised interest rates, yet though. If it does raise rates, it will be "very slow-paced'' Bank of Japan policy maker Shin Nakahara said today. At a news conference in Toyama City, the policy maker said that Japan's consumer prices aren't likely to increase fast enough to prompt immediate policy action.
The survey by the Ministry of Land, Infrastructure and Transport covered land prices at 31,230 locations nationwide as of January 1.
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