‘You Can’t Afford Not To Buy Now’ In Japan
These reports on Japan show the cyclical nature of real estate booms. “Japan is entering its fourth year of robust economic growth and has an unemployment rate of 4.1 per cent, the lowest since 1998. Unlike previous, short-lived recoveries fuelled by government spending, the upward trend now is based largely on slimmed-down companies posting record profit and returning to a cycle of hiring.”
“With Tokyo real estate prices rising in 2005 for first time in 15 years, Kazuhiro Takeshima’s home-construction business has rebounded too, allowing him to reward his staff with raises. ‘There is a sense that we’re back in business, that things are good in Japan again,’ said Mr Takeshima. ‘It makes us all feel a little more confident about opening our wallets to spend.’”
“That chain reaction of spending, from houses to cars to sneakers, heralds what economists call the long-awaited return of Japanese consumers.”
“Unlike most nations, where prices rise with inflation each year, Japan has been locked in seven years of price declines, or deflation, as gloomy consumers and sceptical businesses put off purchasing, expecting that prices would continue to fall. The drag on the economy forced some companies to cut payrolls, creating what many feared would be a cycle of constantly falling prices.”
“Takuya Wakizawa recently took the plunge into home ownership. ‘I started seeing mortgage rates going up, and I realised I couldn’t wait any longer,’ said Mr Wakizawa, who locked in a 35-year fixed mortgage for a two-bedroom Tokyo apartment at 2.62 per cent last summer. Rates for similar loans have since risen above 2.8 per cent.”
“‘My generation never used to think that prices would get higher. We became used to things getting cheaper and cheaper,’ said Mr Wakizawa, who also splurged on two rooms of American-made Ethan Allen furniture and a Japanese flat-screen television. ‘But prices are going up and it makes you feel like you can’t afford not to buy now.’”
“The number of condominiums put on sale in the Tokyo metropolitan area in March rose 13.4 percent from a year earlier to 7,596 units, the first year-on-year increase in five months. In Tokyo’s 23 wards, 2,924 condos were put on the market, up 53.4 percent from a year ago.”
“The Bank of Japan said Wednesday it will keep a close watch on real estate loans of banks and securities companies as it monitors the country’s financial system in fiscal 2006. In its annual report, the BOJ hinted at a need to forestall the possibility of an asset price bubble by enhancing the risk-management practices of financial institutions, given that commercial land prices in some areas of Tokyo have recently risen sharply.”
“But the central bank stressed it has no intention of strictly monitoring lending to the real estate sector.”
From the SMH article: ‘Major banks have cleaned up their bad loans.’
I don’t know how the reporter knows that. The Japanese corporations hid their losses offshore, and to my knowledge never revealed anything. For all their talk, the official interest rate is still negative; it’s just the same boom bust central bank game they are trying. We’ll see if they can muster one more cycle.
So true. Japanese accounting practices are opaque at best. So many entangled entities and transactions. Until they bite the bullet and clean up the banks, they are just delaying the inevitable. Nice to see the BOJ is willing to start building bubbles again.
japan has been in decline since 1991. it’s been nearly 20 years since their bubbles burst, I should hope that they soon will be recovering, especially in property and equity markets. japan is like if the US was still in a bear market mode in 2016, starting in 2000 of course.
they have bit the bullet, years of deflation.
They did not bite the bullet. They lowered interest rates and flooded the world with their currency in hopes of stimulating inflation. Instead of dealing with structural problems, the BOJ tried inflating their way out. Wait until the US tries this in the not so far away future.
then why is the 90s called the lost decade?
What kept Japan afloat was the willingness of the government to increase debt to levels that marked down their S&P rating. The second factor was American willingness too buy Japanese goods. Japan and China have been exporting their deflationary pressure via the USA. If the USA markets fall, demand is savaged and who does Japan export too? They will experience another leg down in their markets to new lows.
“‘My generation never used to think that prices would get higher. We became used to things getting cheaper and cheaper,’ said Mr Wakizawa, ‘But prices are going up and it makes you feel like you can’t afford not to buy now.’”
And so we begin again…
I guess that I better hurry off to Toyko and start speculating there. I can become “FIipper Sensei”. I am sure that it hasn’t changed since I was in Japan 20 yrs ago. Then return with “big, fat wallet”. LOL
Rainman - any Bubblefucious for Japan?
Bubblefucius say:
Japanese real estate like hari-kari. Both self inflicted and show guts.
(My generation never used to think that prices would get higher. We became used to things getting cheaper and cheaper,” said Mr Wakizawa, who also splurged on two rooms of American-made Ethan Allen furniture and a Japanese flat-screen television.)
we could use some of that here.
From my observations here in the US, now WOULD actually be the time to buy.
I have learned that unfortunately, flipping appears to be possible, given that one realizes one is simply speculating on the stupidity of others.
Why is why I own gold despite expecting upcoming deflation.
I assume you mean “time to buy [in Japan].” I somewhat agree. I have some money invested in Yen and I hope it strengthens.
Do you not believe helicopter Ben whan he says that he will avoid deflation at all costs? I’ve never really heard a good argument that says that a determined central bank could not prevent deflation with a fiat currency.
No, no I don’t believe him. I’m not saying he’s lying either. I am solely concerned with whether OTHERS believe him. And I think that is all he is concerned with as well.
So, with particular regards to deflation, we’ve seen precious little evidence of that so far. Ergo, he will continue raising. Then I believe we will see a whole frickin’ bunch of evidence, at which point I hope to have already sold my gold.
500,000 yen per square meter is cheaper than apartments in my neighborhood in Brooklyn. So then the average condo at that rate must be about 90-100 sq. meters. Sounds like a good deal to me.
I got a nice example of goldbuggery in the mail today, from the “United States Rare Coin and Bullion Reserve”. Apparently “experts” predict that gold is going to go up to $3000/ounce! “When you convert money to Gold, you haven’t spent your money but have transferred its value from a declining paper currency to a precious metal that is rising in both market and numismatic value. This is how the genius of owning Gold absolutely protects your money in today’s very volatile market.”
And “It’s a once in a lifetime opportunity!”
I guess that’s the next asset bubble.
” Japan’s financial warlords have amassed 774 trillion yen ($6.6 trillion) of outstanding debt, and have brainwashed Japanese households to accept the lowest bond yields in the industrialized world for the past decade ”
http://www.gold-eagle.com/editorials_05/dorsch030606.html
HMMM…Why does that sound familiar??
I can’t find the article of them inflating the yen..Millions/trillions? back 5-10 years ago via Bernanke, and with it they bought our Tbills. I’m sure youve seen the charts that Gold at inflated rate should be at $2500/oz based on 80’s spike. Time will tell in all things. With the inflation master( Bernanke ) and the M3 now hidden I think you’d be the fool not to at least take an insurance bet with holding the physical metal, and not options or stocks. How many more options are traded than physical metal? Going ahead do you see less ,or more inflation…You’ve been told ,CYA
I gold “should” be at $2500/oz (based on previous bubble), that would seem to indicate that it’s done pretty poorly relative to inflation. Maybe gold will continue to gold up, but I think I’d want more than hype, paranoid conspiracy theory, and astrological charts to make me part with my money. It’s possible that those forces will be enough to drive the price up in the short term, but at some point people would stop buying gold and start selling what they have. As with any other commodity, the price can’t go up past what people can pay. The price of gold, in particular can’t go up so high it kills the jewelry industry. Gold is a luxury, nobody needs to have it.
If the credit bubble deflates hard enough to cause a serious recession, I’d think that would be very deflationary.
be sure to pile in.
Don’t scoff at that $3000/oz figure. Based on either the previous trough-to-peak range of $35-$850 (~24x) or that final value of $850 inflation-adjusted to the present, a value of $2500-$3000 is not out of the question for the top of a gold bubble, assuming we would see it in the next few years.
I live in Japan, and any apparent price rise at the moment needs to be put in perspective. on average the resale cost of a conduminum declines throught the life of that condo, even without deflation.
hence at the moment in Sapporo a typical new 3 bed condo is $300,000 to $250,000, the resale value on similar properties 5 year old properties is $150,000 to $200,000 at best.
Also hundreds of new condominum blocks have been recently found to be been built not to the strict earthquake proof standards. The architects and developers have been found to be lying, this have recently put a hugh dent is the confidence it the condo market, as further revelations of fraudulent design are being uncovered.
This is a bad assessment of a situation that has been assessed wrong for a decade. Japan’s economy was never deflationary, nor will it ever be. As long as central banks continue to print more money, bubbles will occur somewhere. Just because Japan home prices might go up in the future doesn’t mean that real value is created.
Why would people continue to be suckered by the loan industry, the banking industry and the central banks? Keep your money away — you’ll watch graphs go up, but the charts are meaningless if you don’t factor in the devaluation of the currency they’re charting.
“Deflation”, for most economists and ordinary folk, means falling pricess. Prices have fallen in Japan since 1990, ergo Japan has experienced deflation.
Japan’s expansion of the money supply has been inflationary all right - everywhere but Japan.