You Asked Us…I’m new to Japan’s property market. Where is the best place to invest?

22 Jun, 2017 –

Japan Investment Properties

Japan Real Estate

Across Japan, other than in Tokyo, foreign investors have been turning to investments in high yield, cash flowing apartments that are surprisingly affordable. A property market of high supply and equally high demand. From USD$25,000 to $60,000 you can easily find properties with rental yield of 6% to 12% on average net pre-tax, depending on the location. “Net pre-tax” is important because it factors in all known costs. It doesn’t include taxes and unknown costs.With yield this high, it’s not surprising that offers are made on attractive, high-yielding properties almost as soon as they hit the market from local investors. Based in Fukuoka, our Japanese and English speaking team help foreign investors also get their foot in the door.

Since you are new to the market, unless you are looking for properties synonymous with Australia, UK and even New York focused on appreciation, I would avoid the Tokyo market. In this speculative arena, you would be paying a mighty high price for very low yield. Instead, a safer alternative would be small apartment investments in tier one and tier two locations as you would find in Fukuoka and Nagoya with rental yield of 6% to 8% net pre-tax.

Comparison of the Numbers in the Three Tiers

In the first tier, based on appreciation potential and population are Fukuoka, Osaka and Tokyo. In Fukuoka, both population and prices have increased in the last three years, and occupancy rates are higher, making this city a safer investment for monthly rental income. For a 1 bedroom apartment priced at USD$32,000 at 7.4% yield net pre-tax, you could earn approximately $200/month in rental income.

In the second tier are cities such as Nagoya, Yokohama, Kawasaki and Sapporo. Sapporo is Japan’s 4th largest city where you will still find a steady long-term tenant base, however population growth is lower than that of the first tier and prices haven’t increased significantly, resulting in slightly higher yield. In this tier rental yield would be closer to 9% to 10% net pre-tax. For a 1 bedroom apartment priced at $28,000 at 9% yield, net pre-tax you could earn approximately $218/month.

Finally, as you grow your portfolio, you could dabble in more adventurous, smaller but stable satellite cities or attractive industrial towns such as Kobe, Kumamoto and Kitakyushu where you can find yield upwards of 10% net pre-tax. In this example, a two bedroom unit in Yokohama, priced at approximately $80,000 at 10% yield would generate approximately $650/month.

Cash Flow and Appreciation

As unusual as it sounds, in Japan, properties depreciate while land value appreciates. With this in mind, the best scenario would be to benefit from cash flow and appreciation. For as little as $300,000 you could own a small apartment building in a growing area which would give you both appreciation on the land portion of the building as well as rental income from each unit. As an example, in Fukuoka city, on a $300,000 building, with rental yield of 7% net pre-tax, you could generate $1,900/month in Fukuoka city.

These are just a few examples of what you can expect in the Japanese property market. Ask me about properties to suit your criteria with the highest yield.

(Source – Priti Donnelly, Nippon Tradings International”, Pic – Sapporo at Night / “Alpha 2008)”

Japan’s Economy on a Warm Streak

Japan Investment Property

Consumer Spending

15 Jun, 2017 –

TOKYO — Japan’s economic engine may not exactly be roaring, but there is a definite hum in the air. The economy grew for a fifth consecutive quarter at the start of 2017, the longest stretch of growth in more than a decade. The government of Prime Minister Shinzo Abe has been trying for four and a half years to coax the economy into a higher gear. Although Japan’s output is still the world’s third-largest, after the United States and China, consistent growth has been elusive — the result of headwinds like a declining population and deflation.

What Happened?

Japanese gross domestic product increased by 2.2 percent in annualized terms in the three months through March, the government’s Cabinet Office said in a preliminary estimate on Thursday. The economy has now been expanding for a longer period than at any time since 2005-6, when it grew for six quarters in a row.

The pace of expansion also accelerated from the previous quarter, and was stronger than economists had expected. Analysts surveyed by news agencies had forecast a growth rate of 1.7 percent, on average.

What Is Driving Growth?

Exports have been lifting output since the start of the expansion, and they did so again last quarter. A broadly recovering global economy is helping, as is a weaker yen, which makes Japanese cars, electronic components and other goods more affordable abroad. (Japan’s trade surplus irritates the Trump administration, which has criticized some of the country’s practices.)

The domestic side of the economy has been shakier, with spending by consumers and businesses mostly weak and inconsistent. But in the latest quarter, consumption and business investment both rose.

Is the Economy on a Hot Streak?

A warm one, certainly. Output grew 1 percent in all of 2016 — not exactly China-fast, but about twice what economists estimate Japan should be able to achieve given its shrinking pool of workers and consumers. For the first few years after Mr. Abe came to office, in 2012, on a promise to kick-start growth, the economy lurched between expansion and contraction. Now it appears to have found a more stable groove.

Is ‘Abenomics’ Succeeding?

The government and the central bank have been pouring money into the economy, and there’s little doubt that those moves have helped lift growth. But a crucial ingredient is missing: inflation.

The big idea behind “Abenomics,” as Mr. Abe’s strategy is known, was to engineer a rise in consumer prices, which would in turn lift corporate profits and workers’ pay. That, the government said, would make the economy grow not only faster but also more consistently. Prices have barely budged, however, leaving many economists speculating that the current streak, though welcome, will fade.

(Source – “The New York Times“, Pic – Shopping in Japan / “Ivan Walsh“)

Japan’s Shared Houses a Trendy Lifestyle Choice for Social Singles

Japan Properties

22 May, 2017 –

Fully furnished rooms with shared kitchens, chandeliers, soundproof music rooms and parties galore. Plus, the chance of finding the love of your life. Shared houses in Tokyo as well as in major cities such as Kyoto offer these and more as an upmarket and a trendy lifestyle choice for singles who like the convenience and sense of community.

While the concept is not new – the first shared houses in Japan emerged about 20 years ago – it is gaining popularity as the number of singles grows. One in five men and one in 10 women had never been married by the age of 50, according to the latest government data published in 2010. The figures are expected to rise to one in three men and one in five women over the next 20 years. Ms Ai Hasegawa, a media art designer in her 30s, is one happy camper after moving into a luxurious 41-room shared house in suburban Tokyo called Ryozan Park.

“As an artist, there are days when I don’t leave the house at all, working on my projects. When I was living in London, I went into a kind of depression because of that lifestyle,” Ms Hasegawa, who worked as an art and design researcher at the Massachusetts Institute of Technology, told The Straits Times. “So when I moved back to Japan, I wanted to avoid that,” she added. Living at Ryozan Park, she said, means almost every night is party time, with spontaneous drinking sessions in the kitchen or lounge for anyone in the mood for it. Ms Hasegawa added: “I get to meet interesting people from all walks of life here, and the size of the community is not too big to be overwhelming. The gym is also very convenient.”

The number of shared housing properties in Japan has tripled to nearly 3,000 over the past three years, offering a total of some 40,000 rooms, according to the Japan Shared Housing Organisation. Hituji Incubation Square, which runs an online portal listing available shared housing in Japan, said the number of properties on its site has increased by 20 times since the website was started nearly 10 years ago.

In the past three years, the number of inquiries for shared housing has doubled to about 200,000 a year, the company said, mainly from women in their 20s to 30s looking to widen their social circle. Shared housing used to be seen as less than ideal as residents had to share the kitchen, bathrooms and toilets, which were likely to be furnished very simply. But, in the past five years, they have been transformed into a coveted mode of living by operators hoping to tap the growing pool of singles.

Rooms in shared houses mostly cost between 50,000 yen (S$620) and about 150,000 yen a month, including the cost of utilities, Wi-Fi and maintenance. Cleaning services for common areas are also included. It is not cheaper but more expensive than renting a private home. Residents, however, are happy to exchange privacy for a larger living space. They see it as an affordable way to live in a chic environment with facilities that look like they are from an interior design magazine.

Ryozan Park, for example, has chandeliers in the kitchen and leather sofas in the lounge and reading room. It also has a gym, soundproof music room and sun terrace. Mr Noritaka Takezawa, who owns and runs the facility, positions the property as “modern village living”. His family, which is in the real estate business, has lived in the area for the past three generations. “It’s about building a community and forming deep social bonds,” he said, adding that he screens potential tenants to make sure they fit in the community, which has about 40 residents.

Another selling point of shared houses is that tenants generally do not need to pay a deposit of up to five months’ rent, which is required when renting a private apartment in Japan, or provide a guarantor. Operators also offer more flexibility in the form of shorter leases that start from one month, compared with the usual two years for conventional apartments.

Ms Nanako Otake, a Hituji spokesman, said the market was also boosted by the increasing number of foreigners living in Japan. She added that “Japanese who return from overseas or those who are hoping to interact with foreigners” also increased demand. In general, Japanese tenants stay an average of two years, while foreigners stay six months, according to Global Agents, which operates the Social Apartment brand of shared housing, with more than 1,200 rooms across Japan.

Mr Nobuki Arai, a professional gambler in his 40s, lives in a large shared apartment in Tokyo with more than 100 residents run by property management company Oakhouse, which has 20 years of experience in the industry. He had travelled around the world for 15 years and, upon returning to Japan, found shared housing convenient. He had tried shared housing overseas as a student. “It has turned out to be more enjoyable than I expected. The large shared common spaces and public bath are plus points, and I get to meet foreigners to practise my English with,” said Mr Arai. Global Agents spokesman Zacharie Coskun said: “Tokyo can be intimidating, even for Japanese who have moved in from another part of the country. ”

A majority of people choose to live in our apartments as a means of meeting people and nurturing relationships.” A survey of 500 residents by Global Agents showed “having people around just in case something happens or when I need help” was the top draw of communal living. Expanding their social circle was another main reason cited. That, after all, is the spark for romance. Ryozan Park, for one, has had 24 residents couple up and marry since it opened nearly five years ago. “The shared house environment allows people to interact and get to know one another on an intimate level,” said Mr Takezawa. “If couples at the shared house have a tiff, they are able to get advice and confide in their housemates.”

Four of those couples have chosen to move out to apartments within a five-minute walk to stay close to the rest of the “village”. The families also keep in contact by having regular outings during which the husbands look after the children and the wives enjoy the day off. One of the couples, Mr Hideharu Miyakawa, 32, and Madam Yuki Usami, 37, met at Ryozan Park in September 2012 and decided to tie the knot after dating for about 11 months. Mr Miyakawa said: “We got to know each other’s living habits before moving in together officially, and it was great being able to go home together after our dates.” At Oakhouse, Mr Arai said he knows more than 10 couples who have hit it off. At his former shared house, which was larger, with more than 260 residents, 11 couples got married during the three years he lived there. “Of course, there were other couples besides those who got married,” he added.

But, for some, the convivial atmosphere of shared houses can get too much. Ms Keiko Tamura, a customer service executive in her late 20s, left a shared house after six months as she was overwhelmed by the “pressure to socialise”. “If you don’t take part in the events, you may be seen as rude or unfriendly. In Japanese society, one is expected to ‘show face’ at these events, and it took a toll,” she said. “I also found myself spending more money on buying drinks or food for parties.”

(Source – “The Straits Times“, Pic – Restaurant, Japan / “John Blower”“)

Sapporo Becomes First Major City to Recognize Same-Sex Partnerships

Japan Properties

Japan Real Estate

17 May, 2017 –

The municipal government of Sapporo has said it plans to officially recognize same-sex partnerships between gay, lesbian, bisexual and transgender couples from June, becoming the first major city in Japan to do so. The local government initially planned to begin the program in April but decided to first set a publicity period to inform the public. The timing of the introduction was announced during a municipal assembly committee session on Tuesday.

About 1,500 people have expressed opinions welcoming the program, according to the city, while some opposed it. Among such opponents, there was a view that the program would accelerate the nation’s declining birthrate. Under draft rules unveiled in January, those eligible for the status need to be city residents and at least 20 years old. Upon receiving what would be called a “partnership vow,” the local government would issue the couple a receipt and a copy of their vow. While the certification would not confer special legal rights or obligations on the couple, they would be able to become recipients of life insurance money and given access to various discounts provided to family members, such as on mobile phone contracts, according to the city.

“I was anxious about a postponement (of the program’s introduction),” said 42-year-old Kumiko Kudo, who lives with her same-sex partner in the city. “But now I feel relieved as (the government) made clear when it will start,” she said after sitting in on the committee session. Efforts are being made in Japan to eliminate discrimination against sexual minorities amid growing public recognition of LGBT rights.

In April 2015, Tokyo’s Shibuya Ward became the first place in the country to recognize same-sex partnerships as equivalent to marriage, passing an ordinance for issuance of ward certificates to such couples. Several municipalities have since followed suit.

(Source – “The Japan Times“, Pic – Vacation Property / “Roderick Eime”“)

Japan’s Real Estate Sector Poised to Thrive as Nation’s Wages Expected to Accelerate

11 May, 2017 –

Japan Investment Properties

Japan Real Estate

TOKYO • It is not making headlines yet, but wages in Japan are rising the fastest in decades, in a shift that is poised to divide the nation’s companies – and their stocks – into winners and losers, according to Morgan Stanley. The firm expects wage growth to accelerate to 2.8 per cent by the end of next year, with higher hourly earnings cancelling out fewer working hours and slower employment growth.

While wage reflation means companies have to pay more in salaries, it also leads to stronger demand and revenue gains. Inflation, spurred by wages, will be “the last piece of the jigsaw puzzle to fall into place” for Japan’s economy, said Mr Jonathan Garner, Morgan Stanley Asia’s chief Asia and emerging market equity strategist.

Compensation levels are already climbing, with a broad gauge showing a 2.2 per cent jump last year that followed two years of near 2 per cent gains – the strongest trend since the 1990s. Hourly pay rates have yet to show that strength, as seen in a release on Tuesday showing a 0.4 per cent drop in March. Mr Garner and his colleagues published in April a study on how wage increases will shake out across corporate Japan, concluding that there will be more winners than losers.

The report stated that the main winners from wage reflation were the real estate sector, as rents increase and higher inflation expectations lift property prices, and commercial and professional services, particularly companies that offer staffing and employment assistance. Media will also benefit as corporate advertising rises in anticipation of higher consumer spending. So too software and services, with consumer spending boosting earnings of business-to-consumer e-commerce players. Logistics and some healthcare companies will be most negatively impacted, the report said. “On the whole, it’s going to turn out to be a relatively good story,” Mr Garner said.

The yen, in a global inflationary environment, will slip to 125 per US dollar by June 2018 from about 114 now, Morgan Stanley said. The yen was trading at 80.7 against the Singapore dollar yesterday. A tight labour market, with unemployment at 2.8 per cent in March, suggests bigger pay cheques are coming, particularly as a worker shortage becomes more acute. Household names from Panasonic to Toyota Motor announced wage increases in March. Over the past four decades, when wage inflation and economic growth accelerated at a similar pace, it led to gains in the Topix in each of the next two years, the report said.

“More sectors have positive than have negative correlation between operating profits and rising wages historically,” it said. “Only the general-purpose machinery sector has meaningful negative correlation.”

(Source – “The Straits Times“, Pic – Office, Tokyo / “Ville Miettinen“)

Japan’s Healthcare Property Market Projects a Promising Future

Japanese Property Market

Japanese Property Market

08 May, 2017 –

When investors look at Japan, they invariably think about its ageing population and the effect it will have on savings. Astute players in the property industry have begun to tap the potential returns that can be generated from building and operating specialised housing and healthcare facilities.

With the longest average lifespan in the world for men and women, Japan is becoming a society unlike any other, where the focus on quality of life for senior citizens is greater than ever. The objective is not merely long life but long-term health. It makes the achievement of healthy longevity an urgent issue – but also an opportunity for investors. Not only is the population ageing, so too is the stock of property catering to senior citizens. Much hospital property in Japan is decades old; there has long been a shortage of housing for people living on their own and long-term care facilities offering health services for those who do not require hospitalisation.

While investors and the Japanese government have only recently started to redress those shortages, early moves have stimulated consolidation and attracted fresh capital to Japan’s healthcare property market. Cap rates on senior healthcare property have been falling, but in the prevailing low-interest-rate environment going-in yields are attractive. Analysts expect Japanese healthcare assets to be a primary target for institutional capital in the year ahead. The investment case is rooted in value-add situations across a fragmented sector of numerous local operators and a handful of national players, providing investors with an opportunity to develop or improve healthcare facilities, typically through partnerships with experienced operators and related service providers. Deploying capital to Japanese assets can be difficult, requiring the creation of special-purpose entities domiciled in Japan to execute transactions and conduct business.

One of the most extensive operations is Japan Senior Living Investment Corporation (JSL), established in 2014, which listed as real estate investment trust (REIT) on the Tokyo Stock Exchange in 2015. The company is sponsored by Kenedix, one of the largest independent property investment managers in Japan. Kenedix is the largest shareholder – it owns a 60% stake – of the asset manager of JSL. Nearly 80% of JSL’s portfolio consists of assets located in or around Tokyo and Osaka. The assets are managed by operators with long-term records in the healthcare sector, some of which go back to the 1960s. The company targets acquisitions and development projects in assisted-living units, residential private nursing homes, hospitals, clinics and other serviced residential facilities.

Over the past two years there has been an initial wave of acquisitions by JSL and a number of other newly launched healthcare REITs. Many of the assets snapped up by the early movers are changing hands again, as managers strive to increase financial performance and optimise operations, and as newer entrants move into the sector. ParkwayLife Real Estate Investment Trust, based in Singapore and 35%-owned by Malaysian hospital operator IHH Healthcare, at the end of 2016 divested four nursing homes in Japan for SGD48.9m (€32m). ParkwayLife REIT entered into purchase and sale agreements with a Japanese subsidiary of global investment firm Fortress.

“The proceeds received from the divestment will provide greater financial flexibility to seize other attractive investment opportunities offering better value,” parent Parkway Trust Management said in a statement. The sale was expected to generate a net gain of about SGD5.2m over the net book value of the assets. Parkway Trust also said there was intense compression in cap rates for nursing home properties in Japan due to strong investor demand in the market.

Investors are chasing yield. ParkwayLife REIT acquired the four nursing homes only in March 2015, for a going-in net yield of 6.6%, according to local media reports at the time. Those yields are based on sustainable fundamentals similar to infrastructure assets, which means income will hold steady, according to a recent report on ParkwayLife REIT from DBS Bank in Singapore. “Parkway Life REIT offers one of the strongest earnings visibility profiles,” among Asian property REITs, it said. A key reason is that 40% of ParkwayLife REIT’s revenue is “derived from its nursing homes and healthcare facilities in Japan which offer long-term certainty, given a weighted average lease expiry of 13 years.”

Some are even longer. JSL’s portfolio boasts an average remaining lease period of 17 years, and an average lease period of more than 23 years. The company achieves that income security by investing in properties where operators need capital to expand to meet the rising demand for senior healthcare assets in Japan, but wish to avoid property investment risk. Mitigating those risks are government support for the sector – and Japan’s demographics.

In March 2013, a government-backed panel recommended launching healthcare REITs to help finance the construction of elderly care facilities. Japan’s population is expected to fall by 30% to below 90m by 2060, according to government forecasts. By 2050, JSL says, nearly 40% of the Japanese population is expected to be age 65 or over – up from just 23% in 2010 and 29% in 2020. And these days more Japanese choose to put ageing parents into specialist residential and medical facilities. Registrations for serviced housing for the elderly have soared since 2012, driving capacity from just 31,000 rooms to more than 202,000 by May 2016.

Japan will remain a target for institutional capital. ParkwayLife REIT, says DBS, “continues to look for acquisition opportunities to bulk up its exposure in Japan”. The bank has priced in “acquisitions at a 6.5% yield in our forecast”. Investors in Japanese healthcare property face a potentially good year – as long as Japanese continue to grow old.

(Source – “IPE Real Estate“, Pic – Old Man Near Tulips / “Aaron Shumaker“)

Government Subsidies for Home-Owners Renting to Seniors

Japan Investment Properties

Japan Real Estate

05 May, 2017 –

An initiative to incentivize property owners to make available vacant homes for use by the elderly, low-income households and child-rearing families won approval in the Diet on Wednesday. The Upper House unanimously approved the bill that revises the housing safety net law during a plenary session. The measure cleared the Lower House earlier this month.

The Ministry of Land, Infrastructure, Transport and Tourism plans to put the new system into action as early as this fall. Home owners sometimes refuse to lease their properties to elderly people living alone due to concerns they could fall behind on rental payments or die unnoticed.

Under the new system, owners of vacant homes can register their properties with local governments. If they are made available only to the elderly and low-income earners, subsidies will be paid to help cover some renovation costs and rents if certain conditions are met.

The ministry hopes that 175,000 vacant homes will be registered by the end of March 2021.

 

(Source – “The Japan Times“, Pic – Aging Japan / “Hiro Kokoro Photo“)

Japan Grapples with Labor Shortage Amidst Surging Condo Construction

Japan Investment Properties

28 Apr, 2017 –

TOKYO — Construction companies in Japan are scrambling to hire site managers as the industry is gearing up for a surge in building projects ahead of the 2020 Tokyo Olympics. A website operated by C4, a specialized job placement service for construction managers, has attracted over 2,000 employment offers for work for the next several months from major construction companies alone.

Since around January, large general contractors have been transferring their permanent full-time employees from stints in Japan’s northeastern areas affected by the March 11, 2011 earthquake and tsunami to construction sites in Greater Tokyo, according to C4. This trend has led to an increase in the number of construction sites in disaster-hit areas that are supervised by managers dispatched from temp agencies.

Consequently, the wages of building managers working in these areas have shot up. Their annual income is now 1 million yen to 2 million yen ($9,000 to $18,000) higher than what their counterparts in the Tokyo area earn. But even the higher pay is not resolving the shortage of construction managers in the disaster-hit area. “We are finding it difficult to take orders for building condominiums other than those in central Tokyo within the Yamanote Line,” said an executive at a second-tier construction company, referring to the prized area within the loop train line in the center of the capital.With both labor costs and material prices rising, construction companies are becoming more choosy in taking orders, focusing on highly profitable projects.

Some real estate developers are even deferring the placement of construction orders until after 2020. “We are refraining from starting new projects in central Tokyo,” said a senior executive at a major real estate developer.

Olympic drag

A declining workforce is already crimping the construction and service industries.The Tokyo Olympics will choke private-sector investment instead of stoking economic growth, predicts Ryutaro Kono, chief Japan economist at BNP Paribas, in a report he released in March. Kono said an acute labor shortage will make it hard for businesses to invest in plants and facilities. Even if the unemployment rate, which has just fallen below 3%, declines further to around 2% and people who are able to work but are not currently looking for jobs return to the workforce, the maximum number of workers who will become available in the coming years will be 990,000, which is half the number of jobs expected to be created due to the economic effects of the Olympics, according to Kono’s projection.

Kono warns that if work and jobs related to the sporting event are given priority, the operations and investments of other industries and businesses will be seriously hampered — in effect, clipping economic growth. Stuck in a bind, there is no way for Japan to prevent the looming labor crunch other than opening its doors to unskilled foreign workers.

Japan’s working population, the number of people aged 15-64, has shrunk by 10 million since it peaked two decades ago, sliding to 77.28 million. It will fall by another 3 million by the time the capital hosts the Summer Games, according to an estimate by the National Institute of Population and Social Security Research.

Deflation nation

In the retail and restaurants industries, a growing number of companies are downsizing their operations and services in response to a manpower shortage and the government’s policy campaign for reform of the nation’s work culture known for notoriously long hours on the job. The Royal Host restaurant chain, operated by Royal Holdings, ceased 24-hour operations at its outlets altogether at the end of January. “We have to expect a fall in revenue,” said Royal Holdings President Yasuhiro Kurosu.

And the situation will worsen. “Japanese companies have allowed the structure causing oversupply to remain unchanged despite the certainty of a long-term contraction of the population,” said Yasunari Ueno of Mizuho Securities. Ueno argues that companies in the service sector should adjust to the demographic decline by closing unprofitable stores and ending unpopular services.

Japanese companies’ efforts to adapt to the shortage, however, will not prevent the shrinking population from eroding the economy’s growth potential. Japan’s potential growth rate will decline to 0.4% during the 2016-2020 period, Mitsubishi Research Institute predicts. If nothing is done, the rate will sink further to 0.1% during the 2026-2030 period, with the labor shortage pushing it down by 0.5 percentage point, according to an estimate by the institute.

In the nursing care industry, which is facing a chronic shortage of workers, there is a growing trend toward hiring foreign nationals. Medical Care Service, which operates group homes for the elderly, has employed about 50 Filipinos and Brazilians who have permanent residence rights in Japan. Japan’s population decline is increasingly affecting the country’s economy. The nation urgently needs to develop a coherent strategy to tackle the challenge.

(Source – “Nikkei Asian Review“, Pic – Japan Visa / “tokyoform“)

Increasing Number of Foreign Entrepreneurs Call Fukuoka Home

Japan Cash Flow Properties

Japan Investment Properties

5 Apr, 2017 –

From the fifth-floor office of his internet startup, Kazz Watabe can see the sea bass jump in the bay as he works on his fishing website, to the sound of jazz and the waves washing on the beach below. It’s a scene that could be from any of the seaside startup hubs developing around the world — Seattle, Tel Aviv, Barcelona, Sydney — but Watabe’s Umeebe Inc. is in aging Japan, far from Tokyo, in the western port of Fukuoka.

“It’s not a bad idea to build your business after thinking first about what kind of environment you want to be in,” said Watabe, 30, who moved to the city in late 2013 from Tokyo to develop smartphone apps and software that help anglers find fish and share pictures of their catch. Fukuoka is the fastest-growing major city in Japan outside of the capital, which has been steadily draining talent and workers from the rest of the country for decades. This ancient port, hemmed in by mountains and as close to Shanghai as it is to Tokyo, is bucking that trend, drawing entrepreneurs like Watabe from Japan and abroad.

Soichiro Takashima, elected the youngest mayor in the city’s history in 2010, is leveraging its status as a national strategic special zone, cutting red tape and introducing incentives like Japan’s first “Startup Visa,” which gives entrepreneurs a six-month exemption from the investment and hiring requirements of a business visa. “We want to give it a try before anyone else,” said Takashima, now 42. “Others will come and see how we do it. That’s the fastest way to change Japan.”

The parallel with Seattle isn’t just geographic. Takashima visited the U.S. west-coast city in 2011 and said he was inspired to create an Asian equivalent in Japan. Key to Fukuoka’s ambition to become an Asian gateway is its location. At the airport, in the heart of the city, planes queue up to fly to destinations like Hong Kong, Singapore and Taiwan. More than 800 million people live within a three-hour flight of Fukuoka. Scrolling signs in Japanese, English, Korean and Chinese guide visitors in the subway, which takes less than 10 minutes to reach the main railway station downtown from the airport.

“It’s pretty hard to beat this location,” said Noritaka Ochiai, chief executive officer of the Fukuoka unit of LINE Corp., the South Korean-owned company that runs Japan’s top smartphone messaging app, in his office next to the station. LINE Fukuoka Corp. has added more than 600 jobs since opening in November 2013. Women make up half its workers and 30 percent of management roles. About half its engineers are foreigners. “We welcome anyone who has skills, fits our culture and is interested in us,” said Ochiai, 42.

Koji Lin, a 35-year-old Taiwanese engineer at LINE, chose Fukuoka over Tokyo in search of a better quality of life and because it’s a short flight to his home country. The city’s 7.2 trillion yen ($65 billion) economy is about 7 percent of the size of Tokyo’s and average office rents are 50 percent cheaper. While the capital sits in the middle of a conurbation of more than 35 million people, Fukuoka’s residents are a short drive from the beach or the mountains. “I wanted to change the environment and challenge myself,” said Lin, a father of two. “Fukuoka was the right size.”

Encouraging risk has made Fukuoka a make-or-break city. It has the highest ratio of new business starts among Japan’s 21 biggest cities and the second-highest rate of ventures closing, according to the Fukuoka Asian Urban Research Center. Nine out of 10 jobs are in services, compared with 71 percent nationwide. Boston-based financial services company State Street Corp. opened an operational center, which now has about 130 people from some 20 countries, in Fukuoka after the 2011 tsunami and nuclear disaster in eastern Japan.

“Keeping us only in Tokyo came with a number of risks,” said Richard Fogarty, head of State Street Global Services in Japan. He said the biggest factor in choosing Fukuoka was the large pool of college graduates. The inflows have helped support Fukuoka’s real-estate market while other cities are hollowing out. The office vacancy rate in Fukuoka has fallen to 4.3 percent, from about 15 percent in 2009, according to Miki Shoji Co.

Fukuoka REIT Corp., listed in 2005 as the first region-specific real estate investment trust, has more than doubled its assets under management to about 173 billion yen. “Real estate is a very local business and being here gives us greater advantage in the speed, quality and quantity of information,” said Takafumi Fujita, a manager at Fukuoka Realty Co., the asset manager of Fukuoka REIT. “Population growth energizes the city.”

Ringed by mountains and 200 kilometers across the Korea Strait from South Korea’s Busan port — a three-hour trip on the “Beetle” jet-propelled hydrofoil — Fukuoka’s development has been forged as much by geography as planning. The bowl of hills created a compact, commercial hub at the mouth of the snaking Naka River, with a broad lagoon that hosts one of Japan’s largest passenger ports. The city’s first master plan in 1961 aimed to build an industrial economy to join the factory boom that was sweeping the country. But it lost out to Kitakyushu, an hour’s drive to the northeast, where steel and automakers built mills and factories on the wide estuary of Dokai Bay.

Now the tables are turned. Fukuoka added about 75,000 people in the five years ended 2015, the most outside Tokyo, with the number of foreign residents rising by 22 percent. Kitakyushu lost more than 15,000 people, the most among Japan’s municipalities except for towns evacuated due to the Fukushima nuclear disaster.

Fukuoka, whose samurai warriors held off Kublai Khan’s invading Mongol army in the 13th century, was picked as a national strategic special zone for jobs and business creation. Kitakyushu was selected for elderly care. “When young people do something, they have to start with niche, small things,” said Kozo Yamamoto, 68, minister of regulatory reforms and regional revitalization. “Fukuoka is outperforming in that sense.”

Fukuoka faces a race against time to make the new economic model sustainable. The pool of youth from surrounding areas is dwindling and the city’s population is forecast to peak around 2035 at about 1.6 million. While Takashima successfully lobbied the central government to cut corporate income tax for Fukuoka startups, he’s aware that Japan’s demographic clock means that government revenue will inevitably decline as the workforce shrinks. “Using money as an incentive is outdated, not cool and has no future,” Takashima said. “Tax revenue will fall. It’s more important to encourage a business friendly environment with deregulation.”

The backbone of Fukuoka’s push to diversify the new-technology sector is Kyushu University, one of the most famous in the country and one of 13 chosen to be a gateway for more overseas students. Last year, Kyushu had over 2,000 foreign students with major research areas in medical sciences, engineering and information technology. A member of the university’s startup club is Kazutaka Okuda, a 22-year-old medical student who is starting two hospital-related businesses with money he made investing in stocks. “I used to think I could only start a business in Tokyo, but now I’m thinking maybe I can do it in Fukuoka,” he said. “There’s no return where there’s no risk. Pick your fight and bet big.”

Across the road from the vast, striped labyrinth of the Canal City shopping mall is an old galleried building containing The Company, an incubator where almost 200 workers from some 80 firms share facilities. One of them is venture capitalist Shota Morozumi, who runs F Ventures. “Fukuoka was calling for startups, but I saw a contradiction in terms of funding,” said the 29-year-old, who used to work for a VC firm in Tokyo. He said startups need investment, not loans, which discourage risk-taking. “I’m from Fukuoka and wanted to make it work for Fukuoka.”

A kilometer away across the Naka River, where office workers gather in the evenings to slurp the city’s famous ramen and spicy fish eggs among the restaurants and karaoke bars on Nakasu island, is the Tsutaya bookshop. Inside, entrepreneurs and venture capitalists meet at the government-backed Startup Cafe, which imparts free advice about everything from hiring to tax.

Among those to take advantage of the service were Yasmine Djoudi, 29, and Thomas Pouplin, 28, the city’s first recipients of the Startup Visa. They visited Fukuoka as graduate exchange students in 2014 from Bordeaux, France, and launched online job-matching company Ikkai Inc. in the city in 2016. “We really fell in love with the city,” Djoudi said. “It really made sense to start the company here.”
(Source – “Bloomberg“, Pic – Fukuoka / “かがみ~“)

Airbnb Japan Moves out of the Grey and into the Green

Japanese Investment Properties

Japan Real Estate

23 Mar, 2017 –

Airbnb Inc. is finally getting the green light to do business in Japan after years of operating in gray areas of the law. Prime Minister Shinzo Abe’s Cabinet approved rules on Friday limiting home-sharing by private citizens to 180 days a year, according to the final draft of the legislation. The bill, which also leaves room for local authorities to impose their own restrictions, is now submitted for deliberation and approval by the Diet.

Airbnb, which just closed a $1 billion funding round that valued the company at $31 billion, has found a more receptive audience in Japan, compared with the clashes it had with municipal governments in New York, Barcelona and its hometown of San Francisco. A tourism boom has cut into the supply of available hotel rooms and helped make the nation Airbnb’s fastest-growing market. Overseas visitors will probably continue to set records as Japan prepares to host the World Rugby Cup in 2019 and the Olympic Games the following year.

“What’s important is that there will now be clear rules governing home-sharing,” said Mika Yamamoto, public policy manager for Airbnb in Japan. “The impact on people will vary depending on their position.” The new legislation, which still needs to pass the Diet, distinguishes between those who share their own dwellings and absentee landlords, anticipating that the latter are more likely to be the source of friction in neighborhoods. While Airbnb doesn’t break down its 48,000 listings in Japan by type, a search on its site shows hundreds of houses available for rent, as opposed to rooms in occupied homes.

About 90 percent of hosts that aren’t present on the premises said the 180-day restriction would make their businesses unfeasible, according to a survey by the Japan Association of New Economy last year. Airbnb, like its ride-sharing counterpart Uber Technologies Inc., has faced resistance from local authorities. Still, Japan’s home-sharing limits are relatively lenient, compared with 90 days in London and 60 days in Amsterdam.

Still, for some hosts in Tokyo, the new rules may force them to choose between giving up a second source of income and committing to becoming a full-time rental property operator. Until now, high occupancy rates in popular neighborhoods such as Shibuya and Asakusa made it possible to make a profit on rented apartments, prompting people to take a second or third lease. The legislation would require a landlord’s permission and an operating license.

The regulations are already giving pause to Mark Chao, who rents out seven listings in Tokyo and Kyoto via Airbnb. The 39-year-old entrepreneur with a full-time job in IT owns about 40 percent of his properties and leases the rest. Chao said he is putting on hold plans to buy a resort property in Hokkaido, to see how the rules play out. “It really depends on how strictly they intend to enforce it, because I can think of several ways around the restrictions,” Chao said. “But if you follow the rules, the rental model is basically dead.”

For those hosts that decide to stick with it, the good news is that demand will only continue to grow. More than 24 million overseas tourists visited Japan in 2016, topping the record for a fourth straight year, according to the nation’s tourism organization. Airbnb accommodated 3.7 million of those visitors, according to the company. The number will hit 35 million by 2020, Goldman Sachs Group Inc. estimates.

Airbnb is also looking to be more than just a home-sharing platform, setting targets in luxury tourism, airfare aggregation, group payments and guest-management. In November, the company announced it had a flight-booking tool and an itinerary-planning feature in the works. Last month, it bought Luxury Retreats, Canadian manager of high-end rentals and services. The company began selling unique travel experiences last year. Among the packages offered in Tokyo, renters can take a tour of anime shops, do sake tasting or learn to make sushi.

(Source – “The Japan Times“, Pic – Apartment Share House / “JAPANKURU“)

Kawasaki Studio – High-yielding Gem Near Tokyo

06 Mar, 2017 –

Ziv Nakajima – Magen analyses the pros and cons of buying a tenanted studio unit in up-and-coming Kawasaki, Japan’s fastest growing city.

Kawasaki city, aside from its immediate proximity to central Tokyo – 15-20 minutes by train – is also Japan’s fastest growing city (over 20,000 people move to Kawasaki annually, which, considering its current population of just under 1.5 million, means approximately 1.5% growth per annum).

The city’s economy is extremely white collar, featuring mainly heavy industries, electronics and high-tech development – and it is considered one of the most attractive residential areas nationwide. And, while it still offers slightly higher yields than Tokyo itself, this is changing rapidly – and attractive deals are extremely rare and far between. Which is why one of our clients submitted an offer to purchase the property listed below within an hour of its listing, securing one of the best gems in his portfolio in the process.

Japan Investment Real Estate

Japan Property

ADVANTAGES

  • Exceptional yield for this location – just under 10% net pre-tax per annum!
  • Small unit (1 room, 16.73 sq m + balcony) – makes for minimum repair and maintenance fees, as well as for a discounted property tax bill, reserved for units under 200 sq m.
  • Nevertheless, in spite of its small size, the unit features a separate, walled off kitchen area, which is quite rare and attractive for units of this size.
  • Current tenant – single male in his mid-50s, employed as technical staff at a local college, in residence no less than 15 years – this may seem unusual in most countries, but quite common in Japan, and naturally points to a potentially even longer tenancy. No late payments or other issues over this entire period of time. Solid gold.
  • Tenant’s security deposit is non-refundable, and may be used for cleaning upon vacating –saving potentially hundreds of dollars if and when this occurs in the future.
  • Dedicated laundry machine area set-up in the unit – again, unusual for such a small property – which is a necessity for most modern residences. Its existence would, again, save the owner approximately USD800-900 in installation fees if and when the unit becomes vacant again.
  • Building is very well maintained, and quite small (only 20 units) – major renovations, including re-waterproofing of the roof and exterior walls renovation/repaint were all done within the last six years, thereby minimizing the risk of any significant out-of-pocket expenses or raising of building monthly fees in the near future.
  • Building built in 1991, which means it is quite young, and also up to the latest earthquake resistant building standards, introduced in 1981.

DISADVANTAGES

  • The tiny unit size means typical tenants would be exclusively singles. Generally speaking, this means shorter tenancies when compared with larger sized units, which tend to attract longer-staying tenants such as families – as singles may more frequently change their status via marriage, work dynamics such as relocation to a different company branch or, at some point, moving in with their elderly parents, as is often the case in traditional Japan.
  • The building’s accumulated funds pool, used for renovations and repairs, has a relatively low amount in it, compared to the number of units in the building and their approximate cost.
  • Building is located a 15-minute walk from the nearest train station – not a disaster, but out of the ideal 10-minute comfort zone which would guarantee a large tenant base.
Japan Properties

Kawasaki, Japan

DEAL ANALYSIS

Weighing the advantages and disadvantages, the client has decided to approve this particular deal, due to the reasons specified below –

  1. The high return, aside from being more lucrative, also means more potential manoeuvring room in future due to increased building maintenance/repair/renovation fees. Kawasaki properties very rarely yield anything over 7% net pre-tax per annum– so anything gained beyond that is a spectacular bonus, considering these central properties usually also tend to gain in value over time.
  2. Building profile is excellent – and coupled with its’ location, all but guarantees a steady stream of potential future tenants – this, along with the current tenant’s security deposit, more than covers for any potential vacancy expense risk.
  3. The fact that the unit is small isn’t really an issue, considering its location – Kawasaki city is one of the most sought-after residential areas in Japan, as mentioned, and its proximity to Tokyo adds value as a potential “bedroom community” for company employees working in Tokyo and far from home. The medium distance to the train station, considering all of the above, is more than surmountable.
  4. The low accumulated funds pool status is more than accounted for by the excellent renovation history – funds seem to be well managed, and risk of sudden large renovations, as mentioned, quite low.
  5. The small size of the building makes it easier for developers to purchase the land and compensate existing owners, in case of re-development or total-loss damages sustained by natural disaster – providing compensation to 20 unit owners is a relative “walk in the park” for any serious developer considering a new building or commercial project on this land.

SUMMARY

As mentioned above, the very existence of a Kawasaki property generating such high yields is extremely rare, so the scales in this particular case were tipped towards green-lighting the deal in any case – it would have taken a very red risk flag for us to pass on it. Considering the above, slight disadvantages, all of which were more than manageable and accounted for by other, positive mitigating factors, it was indeed an easy decision to make, and a worthwhile addition to any portfolio. Without a doubt, had we not acted upon this listing almost immediately upon receiving it, it would have been gone in a matter of days, if not hours – we were fortunate and responsive enough to get our foot in the door double-quick, netting an excellent deal for our clients, a young professional couple from Australia.

 

(Source – “First Published in ‘Asian Property Review’”, Pic – “Jun Takeuchi“)

Three Misconceptions about Japan’s Properties

28 Feb, 2017 –

Japan’s attractive property market draws real estate investors worldwide for its high yield, affordability, rental income cash flow and safe haven economic environment. While the real estate investment arena is undoubtedly attractive, and the second largest real estate investment market in the world, Japan is also one of the countries most affected by natural disasters. Therefore, before jumping in to buy up properties, foreign investors, new to the market, often test the waters by asking about the quality of Japan’s structures and their ability to weather the storm. Investors ask, “What is the risk associated with the age of Japan’s real estate?” To answer this question, we explore the common misconceptions of Japanese properties.

Misconception #1 – Properties are Made of Wooden Structures

Some investors have concerns about the materials used to build real estate in Japan and whether or not they can withstand the force of earthquakes and tsunamis. This misconception stems from traditional wooden houses which used to line the streets of Japan in the former imperial capital. Most investors focus on buildings for the cash-flow play, rather than houses. Therefore, the concern is an out-dated concept and no longer a consideration. Furthermore, wooden houses are being steadily replaced by earthquake-resistant, reinforced concrete apartment blocks.

Misconception #2 – Properties Built before 1981 are Risky

Japan Investment Properties

Japan Real Estate

In 1981, the Building Standards Law was revised to protect residential and commercial structures against earthquakes. In 2006, building certificates and inspections became even more regulated subjecting builders to inspections during the construction process for buildings above three stories. Because of the revisions to the Building Standards Law in 1981, some investors consider 1981 the turning point for sounder structure. Herein lies another misconception.

A building’s condition is affected by more than just its age. A properly managed accumulated funds pool can also affect its condition. With adequate funds, buildings built prior to 1981 can be retrofitted to bring them up to code by regularly renovating, repairing and re-strengthening exterior walls and taking care of unforeseen renovations. Alternatively, a newer building could be poorly managed with insufficient funds for renovations and maintenance. As you can see, investing in an older building under these circumstances could be the wiser choice to minimize risk.

As facilitators to foreign investors, we try not to source anything older than 1973. But, those that we did source were well-maintained buildings housing 50 to 200 units, showing no signs of deterioration, beyond normally acceptable and repairable wear and tear. Generally, since the cost for renovations and repairs are taken out of the building repair fund, if funds are insufficient, then apartment owners bear the extra costs. To ensure the risk to investors is minimal, when conducting due diligence on a potential purchase, we look into the status of the accumulated funds pool,  renovation/repairs/maintenance history and the building management company’s handling of the collected renovation/repair funds and provide a report to the investor for an educated investment.

Misconception #3 – Properties have Just a 20 Year Life-Span

Life-span of a house is sometimes referred to as approximately 20 years, while that of a building approximately forty years. From a value perspective, this is a misconception. This life-span refers to tax depreciation not the quality of the property. Japan Properties

There are other benefits to an apartment investment over a house. Houses require more maintenance and can present unexpected costs, whereas, in a building, structural expenses are known in advance and covered by pre-set building fees. And, the building management company’s monthly fees normally cover all or most maintenance expenses, so there are far less surprises.

Overall, risk is greater with speculative play for capital gain such as units in Tokyo or Osaka. Investing in Japan for its monthly cash flow environment in cities such as Sapporo, Fukuoka, Nagoya and other cities with stable or growing population can result in stable returns. For highest yielding properties, investors should focus their criteria on condo units under 200 sq. ft., one to two room units, for inexpensive interior maintenance. Alternatively, some of our clients aim for smaller and older buildings on large plots of land in key locations. The strategy in this case is to sell to a developer when the building becomes too expensive to maintain, in exchange for either compensation at a profit, or a new unit in a new residential project built on that land. The downside is that these units only have a small fraction of land attached to them, so appreciation potential is lower.

By P. Donnelly – Manager, Sales & Marketing @ Nippon Tradings International

Pic – Sapporo at Night / “Alpha 2008

Taiwan and Singapore Banks Offer Some Flexibility to Japan’s Daunting Mortgage Process

Japan Foreign Investment Properties

Japan Properties

20 Feb, 2017 –

TOKYO — Applying for a mortgage can be a cumbersome process in any country. For many non-Japanese looking to buy real estate in Japan, trying to get a loan from a Japanese bank is a daunting task. But with the right information and help, that job becomes much easier.

Even before you begin, however, there is a question of timing — is this the right moment to invest? Prices have risen 18% over the past three years and yields have dropped to the 4–6% range. When yields fall, it can be sign of a pending correction. But in the September 2016 edition of UBS’s Global Real Estate Bubble Index, the top four cities were listed as Vancouver, London, Stockholm and Sydney. Tokyo was regarded as experiencing a price boom, but not in risk territory.

Meanwhile, a Bloomberg article last October highlighted the turnaround in bond yields, which have sent fixed mortgage rates higher. A Deutsche Bank analyst has forecast that real estate prices will fall 20% by 2018. It is perhaps fair to say, then, that purchasing is still a good consideration, but buyers need to be careful of liquidity, avoid areas with over supply and consider their exit strategy.

Money matters

Mortgage rates have been falling steadily. According to a spokesperson from a mainstream lender Mizuho, fixed rates have fallen approximately 0.4% over the past two years. Last month, a client settled on a three-year fixed-term rate of 0.4%, which is the lowest I have ever seen. The remaining 32 years of the loan are fixed at 1%. This was a so-called Flat 35 loan, which carries a guarantee by a Japanese government institution. Long-term fixed rates are affected by Japanese government bond yields, since banks cover their mortgage book by purchasing government bonds. This means that if short-term interest rates are negative but long-term yields increase, fixed-term rates can become more expensive.

For non-Japanese, there are a few added complications when it comes to securing a mortgage. Applicants must have been in Japan for at least three years and have a valid “zairyu” (residence) card. Mortgages are not extended to those covered by the U.S.–Japan Status of Forces Agreement without a guarantor. For foreign nationals and Japanese alike, it is more difficult if you are self-employed or a company president, but the choice is wider if you have permanent residence or a Japanese spouse who can act as loan guarantor.

Proper approach

Overall, there are more choices available these days, and banks are more familiar with applications lodged by non-Japanese, so they are a bit more flexible than before. Some banks have responded to the demand from overseas buyers, especially in jurisdictions where the banks have a presence and are comfortable with reciprocal laws such as Taiwan and Singapore. That said, many foreigners underestimate the level of documentation required by banks in Japan and assume that lending practices common in their home country are the same in Japan. For example, in Japan it is difficult to refinance a property bought for cash, but in many countries it is not.

The most important factors, however, are visa status, length of time in Japan and salary — all more so than an applicant’s asset base. Some clients may want a big loan, but through tax mitigation strategies keep their salary low. This makes lending difficult, especially for representative directors of companies, where the bank usually wants to see three years of positive company tax returns and criteria is stricter.

Not having permanent residence, a Japanese spouse or sufficient language skills can limit the choice of banks and influence rates. Further, some banks can be reluctant to lend to applicants who cannot fully understand the loan contract in Japanese for fear of potential liability.

What you get

Having met all the criteria, what is available?

It is sometimes possible to get a full loan, that is, 100% of the money required for residential and investment property. However, most banks are more comfortable if the borrower can make a down payment of 10–20% of the property value. Most banks in Japan offer variable rates and fixed rates, both for up to 35 years for residential property. In October 2016, high street banks such as Mizuho typically offered variable residential rates of 0.625% and 1.47% for fixed rates over a term of 35 years.

For investments in real estate, these rates will vary according to the property, the size of the down payment and the loan size, but some common rates are between 1.5–2.65% per year.

(Source – “Japan Today”, Pic – Yen Bills / “Japanexperterna.se“)

Japan – 3rd Largest Economy in the World Sought for Trade Deals after TPP Demise

Japan Investment Property

Japan Real Estate

27 Jan, 2017 –

TOKYO — President Trump’s decision to pull the United States out of the Trans-Pacific Partnership trade deal should have been good news for Hitoshi Kondo, a Japanese rice farmer. The sweeping 12-nation agreement, negotiated by the Obama administration and formally rejected by Mr. Trump on Monday, would have opened swaths of Japan’s highly protected agricultural sector, and was bitterly opposed by farmers. Now, without American involvement, the deal looks as good as dead.

Mr. Kondo isn’t celebrating, though. “It’s actually scarier, because what comes next will be a lot harsher,” he said on Wednesday, as Japanese leaders scrambled to find a coherent response. What comes next, many in Japan believe, could be a bruising showdown between Tokyo and Washington. They fear a return to the trade wars of the 1980s and early ’90s, when many Americans saw Japan as an untrustworthy economic adversary.

The U-turn is a setback for Japan’s prime minister, Shinzo Abe. Mr. Abe viewed the Trans-Pacific Partnership as a way to advance two cherished goals: drawing the United States closer to Japan and other friendly Pacific Rim countries (the trade deal, known as TPP, does not include China, the region’s increasingly bristly superpower) and bolstering Japan’s lackluster economy. Such is Mr. Abe’s enthusiasm for the deal that his government finished ratifying it on Friday, just before Mr. Trump’s inauguration, despite Mr. Trump’s promise to withdraw.

Mr. Trump has repeatedly said he wants to alter the American trade relationship with Japan, in which Japan sells far more goods to the United States than it buys in return. In a meeting with executives from Ford Motor and other American manufacturers this week, the president again said that such an imbalance was “not fair.” And Mr. Trump says he wants to pursue trade agreements with individual nations, in lieu of group deals like TPP, which would have included countries comprising as much as 40 percent of the world’s economic output. Japan has long preferred multilateral rule-making to head-to-head deals, but pressure to go along with Mr. Trump’s approach will be strong.

“Japan may eventually agree to bilaterals with the U.S. to ensure that the U.S. stays engaged in Asia — both economically and to provide a security counter to China,” said Glen S. Fukushima, a former United States trade official who is now a senior fellow at the Center for American Progress, a think tank in Washington.

Officially, Japan has not given up on the TPP, or on keeping the United States involved. The day after Mr. Trump signed his executive order committing to withdrawal, Mr. Abe said in Parliament he would “resolutely continue to seek understanding” from Washington of the deal’s strategic and economic importance. Mr. Abe’s advisers express hope that members of Mr. Trump’s cabinet with business and national security experience will lend their voices to the effort. Sadayuki Sakakibara, chairman of Keidanren, the lobbying group representing Japan’s largest corporations, encouraged Mr. Abe this week to take a two-pronged approach. Mr. Abe, he said, should try to keep the deal alive while engaging the United States directly, if necessary, “with the goal of eventually broadening negotiations to a multilateral level.”

Barring a drastic change in Mr. Trump’s views on trade, however, that could mean stringing matters out for years — possibly until the next administration, if not longer. The TPP’s demise doesn’t pose an immediate threat to Mr. Abe, whose poll numbers remain high. About as many Japanese voters favored the trade deal as opposed it. But none of Japan’s other trade options serve Mr. Abe’s goals the way TPP does.

Japan and others could move on without Washington, which would require changing a condition that requires the United States to ratify the deal before it can take effect. Prime Minister Malcolm Turnbull of Australia said on Tuesday that he had been promoting that idea to Mr. Abe and several other leaders. Japan, with the second-largest economy in the group, after the United States, would be a crucial participant.

But it could be politically awkward for Mr. Abe, who sold the deal on the merits of American involvement. Even on narrow commercial grounds, he would have some explaining to do: Accepting more agricultural imports was supposed to be the price Japan paid for cheaper access to the vast United States market for cars and other manufactured goods. With the United States out of the picture, Mr. Abe could be accused of selling out farmers for little gain.

Japan is negotiating other deals. One, with the European Union, predates Mr. Abe’s embrace of the TPP, in 2013, but talks had been put on hold. European negotiators want concessions on agriculture, too — another reason Japanese farmers are not breathing sighs of relief. In at least one area, dairy products, European demands go beyond what Japan agreed to in the TPP.

Japan is also part of an Asian trade initiative, the Regional Comprehensive Economic Partnership. But that effort is being led by China, which has that partnership’s largest economy. China’s rise represents perhaps the biggest change from the United States-Japan trade battles of a generation ago. For Japan, it is both an added risk and a potential buffer. Many in the Abe administration hope that Mr. Trump will target China first, making Japan a lower priority, said a senior government official involved in trade matters, who asked for anonymity to discuss a sensitive issue.

Companies, however, are dusting off their 1980s playbooks. Japanese carmakers built factories in the United States to head off American protectionism then — investments that Akio Toyoda, president of Toyota Motor, and others have made a recent point of highlighting. Only about a quarter of the Japanese-brand cars sold in the United States are imported, though Japan remains the source for many high-value components as well as design work.

One of Mr. Trump’s complaints about Japan, repeated for decades by American trade negotiators, is that its economy is organized to keep foreign products out even without overt trade barriers like tariffs. By this logic, American carmakers have failed to penetrate the Japanese market because dealers and regulators collude against them. (Japan imposes no border taxes on cars; the United States adds a 2.5 percent levy to most imported Japanese vehicles.)

Japan has been addressing so-called non-tariff barriers — in some cases as a direct response to the TPP talks. It agreed during the negotiations to recognize some American automobile safety standards, for instance, and has narrowed a tax loophole that favors ultralight Japanese cars. In agriculture, Mr. Abe has moved to curb the power of Japan’s monopolistic farm cooperatives.

Under TPP, Japan agreed to phase out import duties on about 2,000 agricultural products, more than in any previous trade deal, but a smaller percentage of the total than other signatories. Sensitive products like rice were exempted. Mr. Kondo, the rice farmer, worries that Mr. Abe will concede more ground to the United States in order to appease Mr. Trump. “We have to sell cars to the U.S.,” he said, “and farmers will be traded away for access.”

(Source – “The New York Times“, Pic – World Trade Centre at Minato City / “Guilhem Vellut“)

Tokyo Area Condos Drop as Condo Market Expected to Rise in Suburbs

Investment Properties Japan

Japan Business/Property News

23 Jan, 2017 –

New condominiums put up for sale in the greater Tokyo area in 2016 fell 11.6 percent from the previous year to 35,772 units, the lowest since 1992, just after the implosion of the bubble economy, a private think tank said. The drop, comprising units in the capital and the three neighboring prefectures of Chiba, Kanagawa and Saitama, came as demand for new condos declined and real estate firms faced difficulty selling new units due to price hikes caused by labor shortages, the Real Estate Economic Institute said Thursday.

The figure for sales contracts concluded was 68.8 percent of all units, marking the first time it has fallen below the boom-or-bust threshold of 70 percent since 2009, when Japan was reeling from the global financial turmoil caused by collapse of U.S. housing market. The average price for a unit declined 0.5 percent to ¥54.9 million last year, reflecting a drop in luxury condos caused by competition with hotels, an official said.

The official also cited real estate firms’ strategies of avoiding suburbs in favor of developments in select urban areas, as well as home buyers’ growing interest in renovating used houses as reasons for the slump.

The institute estimates the supply of new condos in 2017 will rise by 6.2 percent to 38,000 units, thanks to a gradual increase in the suburbs. In the Kinki region covering Osaka, Hyogo, Kyoto, Nara, Shiga and Wakayama prefectures, the supply of new condos fell 1.3 percent to 18,676 units last year.

(Source – “The Japan Times“, Pic – Blue Hour Over Tokyo / “Balint Foeldesi“)