Spending some of it

Spending some of it

Every now and again, it seems like every 7-8 years. Japan goes through an economic cycle which stimulates all kinds of events that weren't previously imaginable. For example. in 1989-1990 it was sky-high valuations for land and where land became the main peg for personal net worth, getting loans, and of course making profits. Then in 1997-1999 the stock market made a brief but thrilling recovery on the back of some new companies that no one had ever heard of: Softbank, Hikari Tsushin, and Cybird - which drew a lot of new players into the markets and into speculation.

Now, in 2006, we have a combination of both the stock markets being powered by numerous Initial Public Offerings (IPOs) of young venture companies, and the reemergence of land as a viable investment. So if you have some cash from that great new job you got through DaiJob, what do you do with it? Stocks or land?

My personal feeling is that while stocks certainly let you make money quicker, land in fact might be a better bet for the next few months, for two simple reasons: land prices are starting to recover, and the banks are in a lending frenzy. This means that even if you are in your twenties, you can for the first time in 15 years start thinking about leveraging even a small amount of cash (say, JPY5m to JPY10m) into purchasing a nice property not too far from work and even with a bit of a garden.

According to the National Tax Agency, land prices rose inside central Tokyo in 2004 for the first time in 13 years. The same happened in Nagoya, Osaka, and several other major cities. Outside the central urban areas, prices still came slightly, but in the low single digits, compared to the double-digit drops of previous years. In other words, while the rest of the world - Europe, USA, Australia, China, etc. -- has experienced an unprecedented land boom over the last 10 years, Japanese land has lost 50% or more in value then done a Rip van Winkle over the same period.

Why are the banks in a feeding frenzy? It's hard to say, because certainly the more they lend, the more likely it is that we may re-enter another property bubble. However, at this early stage, the fact is that banks are feeling generous and are extending loans to people they never would have considered 5 years ago. For example, last year, Shinsei Bank introduced low interest loans for foreigners, even if they were not permanent residents. The loans are still available, but the conditions have now changed, and it's no longer possible to get the amazing initial offer of 1% fixed interest rates (with up to one increase if the nation's long-term interest rates exceed 3%) for 5 years.

The next hot home loan provider in the market is Resona. This bank that almost went under is now doing well by offering loans to people who normally wouldn't qualify, and in particular are focusing on professional single women. They are offering JPY40m home loans for lenders with deposits as little as 20%, i.e., JPY5m, providing you've held down a job for at least 2 years and make at least JPY3m a year in salary. I believe that most of our readers can meet those requirements...

Resona is having a free seminar for single women - yes it will be in Japanese - on February 28th at the Foreign Correspondents Club, on the 20th floor of the Yurakucho Denki Building. You can find out more at the following web page, and I suggest that if you're male, then talk to your significant other about the idea of investing in some property for the future. Just as with the Shinsei offer, these terms and conditions won't last for long, so it's worth checking them out while they are still available.

See: http://www.japaninc.com/kukan/kukan.htm