Many a tourist has wandered gape-mouthed through Tokyo’s Ginza, the shopping wonderland where such high-price marvels as $450 neckties confound the senses. Next to it, though, lies a greater treasure.
It is a vacant lot.
For three years, this 53.4-acre asphalt wasteland in the heart of the most expensive real estate in the world has gone virtually unused.
The government-owned former rail yard, worth an estimated $24 billion to $47 billion, is surrounded by headquarters of mighty banks and corporations. It is a jarring sight, somewhat as Manhattan might look with an empty space where Rockefeller Center now stands. But no one can buy it.
To find out why entails a Lewis Carroll-like journey through land policies that Western experts say defy economic logic and absurdly inflate Tokyo’s land prices, which run 30 to 100 times higher than those of other major cities worldwide.
Such government policies have left Japan’s huge landholding corporations swimming in assets and made many homeowners paper millionaires. But they have also created a large class of have-nots that threatens Japan’s prosperity.
Government officials say they cannot put the Shiodome rail yard on the market just yet because it is too valuable. The lot is as much as 50 times pricier than the approximately $850 million Japan’s Mitsubishi Estate Co. paid for a share of the 22-acre Rockefeller Center last year.
The rail yard’s sudden availability to speculators would bid up real estate prices to even more astronomical levels, officials say, although they acknowledge that such a policy runs contrary to the law of supply and demand.
“Normal economic theory doesn’t seem to work when it comes to land in Japan, because there is overwhelmingly more demand for land than supply,” said Hiroshi Yoneda, the Transportation Ministry official in charge of the yard.
Western experts, some of whom have lived here for years, are aghast at such reasoning.
“Raising supply usually lowers prices. Anyone who doesn’t know that should go back and take Economics 101,” scoffed Robert Feldman, an economist at Salomon Bros., a New York financial house.
But this is Japan, where an alchemy of postwar tax policy, easy money and Japanese “herd” behavior has turned land into gold.
Like gold’s fabled ability to inspire greed, the hunger for land on this small archipelago crowded with 120 million people has created rapacious speculators who have become the stuff of movies and TV dramas.
“Land sharks” eager to resell properties hire thugs who spend months banging noisemakers or setting fires to hound families from buildings they have occupied for generations. Real estate executives have been held hostage by extremists outraged over inadequate housing.
Worst of all, land fever has divided Japan into two economic classes--those who own land, usually through an inheritance, and those who cannot afford it. Too often, the landless are the younger, baby-producing generation.
That looms as a potential disaster. Japan had the world’s lowest birthrate last year at 10.2 babies per 1,000 people. In surveys, many women attribute their unwillingness to have children in part to the rented “rabbit hutch” apartments they must squeeze into with little room for family.
Ultimately, policy-makers worry, this so-called “child shock” could undermine the nation’s industrial might. Japan, already suffering a labor shortage, could become top-heavy with too many elderly pensioners supported by too few younger workers.
Up to now, the long-governing conservative Liberal Democratic Party has had little motivation to act. High land prices have been popular with its major constituencies: the 60% of Japanese who already own homes and the large corporations that have watched their portfolio assets swell.
But the catastrophic potential of the boom may nudge government into action.
On Oct. 30, a 1% tax on land holdings was suggested to drive down prices gradually. According to one survey, high interest rates and an economic slowdown already have reduced residential land prices by 10% to 30% in recent months.
The government is moving gingerly, fearful that falling prices would jolt corporations with large holdings of real estate and stocks. Many are already reeling from the Tokyo Stock Exchange’s nose-dive this year.
In addition, the government must untangle 45 years of often bizarre tax and lending policies that have made Tokyo a sea of two-story homes instead of desperately needed high-rise redevelopment.
Millions of “urban farmers,” many of whom tend nothing more than small vegetable patches or rice paddies, are exempt from property taxes if they declare their intention to farm for 10 years. Banks offer 100-year mortgages. Current landholding taxes are only as high as 0.2%, allowing small owners to sit tight and watch values spiral upward.
As a result, real estate experts say, the main reason for the land inflation is probably not a lack of space but simply that so little is traded.
Plans are also moving slowly for Shiodome, a remnant of the government’s 1987 selloff of the state-owned railway to private companies.
Yoneda of the Transportation Ministry, who is charged with developing a subdivision plan, said the rail yard is to be gradually sold off for commercial use after March, 1992. But that timetable may be impossible.
“It is extraordinary. If they had disposed of Shiodome several years ago, that land would have soaked up so much speculative money,” said Gregory Clark, a Sophia University economics professor who has advised the government on the land problem.
“They genuinely believe that by keeping a supply of land off the market they lower prices,” Clark said. “If you look at the situation with Western eyes you’d have to assume it was a government plot” to keep prices high.
Some Westerners do. An article in the October issue of the Atlantic Monthly, for example, accuses Japan’s government of “a conscious and even a brilliant strategy” to maintain sky-high land prices as a means of keeping foreign companies from buying into Japan, suppressing consumption of foreign goods and boosting savings.
Most experts conclude, however, that there is no evidence of such a scheme.
Makoto Utsumi, vice minister of finance for international affairs, looked surprised when asked whether his ministry was behind it all, as some conspiracy theorists contend.
“It’s totally wrong to think that Finance Ministry officials are happy to see higher land prices,” he said. Indeed, the ministry has been urging banks to rein in real estate loans, but to little avail.
Clark said he would “never rule out a plot entirely, because there are depths of this society we never get to.”
“If it’s a plot,” he said, “they’re very clever. If not, they’re very stupid. And I can’t believe the Japanese are so stupid.”