Market Scene : Japanese Buyers Rue Their Brush With Wealth : Color them blue. The speculative art bubble has burst, causing bankruptcies, unveiling fraud and tipping the trade balance.


When Ryoei Saito paid $160 million one week in 1990 to acquire the world’s two most expensive paintings--a Van Gogh and a Renoir--his Daishowa Paper Manufacturing Co. empire was at its peak, and so was Japan’s surging economy. Saito’s dramatic purchases put him at the crest of a tsunami of art purchases that became a symbol of Japan’s new prosperity.

Now that the tidal wave has crashed, dragging art prices down as sharply as Japanese property and stocks, Japan’s huge art collection has become just another reminder of the worst excesses of Japan’s speculative bubble.

Investors have salted away their precious paintings in basements all over Tokyo waiting for the next art boom. But many may not be able to hold out that long. There is widespread speculation that Saito, who recently had to sell off assets and draw from his personal fortune to bail out his company, may soon be forced to sell his art treasures at a huge loss.


Already, a rash of bankruptcies by dealers and galleries has forced banks to take paintings in lieu of loan repayments. As a result, banks already suffering from huge inventories of hard-to-sell land are now also saddled with thousands of paintings valued at an estimated $8 billion.

Impressionist art prices are down more than 50% because of the sudden cooling of Japanese interest. But some dealers worry that if troubled Japanese banks and credit companies are forced to dump their art, prices could plunge even more sharply.

Another impact of the burst art bubble: a bigger Japanese trade surplus. In 1990, Japanese imported more than $4 billion in art, snapping up 40% to 50% of all Impressionist art put on the market and offsetting at least some of its exports. Although Japanese are still present at international auctions, they buy far less and pay much lower prices--this year Japan’s import of art is estimated to fall to $570 million, one-seventh of its peak level. Meanwhile, it is chalking up a worldwide trade surplus of more than $100 billion.

European and American dealers, hoping to make a killing by buying from dejected Japanese art collectors, are making inquiries but are being turned away because of their low offers. Auction houses, too, are finding art owners unwilling to face the reality of falling prices. “We are getting a lot of interest, but when they hear our estimates for what their paintings will bring, they are shocked. Not much business materializes,” says Koji Yamada, of the Tokyo office of Christie’s auction house.

Many date the takeoff of Japan’s art craze to 1987, when little-known Yasuda Fire and Marine Insurance Co. became world famous overnight by paying $39.9 million for Van Gogh’s “Sunflowers.” The painting, which now appears on most of the company’s advertisements, was seen not only as a good investment but also as a way to boost the company’s prestige.

As Japanese buyers bid up prices, auction houses such as Sotheby’s and Christie’s began bringing the artwork to Japan for special previews and publishing special catalogues in Japanese. At the peak, auction halls were filled with as many as 100 Japanese buyers.


Art, one saying went, was real estate that could be hung on the wall. You could buy the art with low-interest loans from banks, double your money in a year and avoid taxes to boot. Renoir paintings became a form of currency, changing hands as partial payment in real estate deals to avoid taxes. According to one account, a Renoir--virtually any Renoir--could be used as if it were a 1-billion yen note ($8 million).

Even contemporary Japanese artists benefited. Some were able to sell their paintings for close to $1 million--almost unheard of for a living artist here.

Masahiko Sawada, a Toyota dealer from Nagoya, opened his own gallery and began aggressively buying Impressionist paintings. “We are leading the business,” the company said at the time, boasting that it “controlled” the prices of Renoirs.

Sawada’s Urban Gallery borrowed money against his real estate to buy art that he then provided to big department stores on consignment. By 1989, the company had galleries around the world and annual art revenues of $170 million.

The real estate development firm, Maruko, went the furthest in turning art into a vehicle for speculation. Under its “Partners in Art” program, the company bought such paintings as Chagall’s “Arabian Night” and Renoir’s “A Young Nude Lying on a Sofa,” then sold ownership shares in the paintings for as much as $180,000 apiece. Although investors were paying a high premium, Maruko assured them their shares would grow tenfold in value in 10 years.

Today Maruko is bankrupt, and its investor certificates are worth a tiny fraction of their original value. According to Nikkei Art, a trade publication, creditors are chasing after Toyota dealer Sawada’s estimated $570-million inventory of 2,000 paintings in hopes of getting their money back.


Orix, Japan’s largest leasing company and, through a subsidiary, one of Sawada’s creditors, grabbed several dozen pieces of art, including a Kandinsky and a Chagall. Four pieces were put in their collection, on exhibit at a public museum in Tokyo. The rest are being sold through dealers.

The paintings aren’t easy to sell. In the swashbuckling days of Japan’s speculative boom, few looked at details. Many overpaid. “Japanese buyers bought the junk nobody else wanted,” says Naoki Wakabayashi, author of the book, “Those Bubble Days.” Wakabayashi says many investors were so eager to get their hands on big-name paintings that they didn’t even bother to have the paintings authenticated, resulting in the circulation of large numbers of imitations.

“Speculators would just look at the names on the paintings. They wouldn’t look at the pictures,” says Chieko Hasegawa, executive vice president of Gallery Nichido, one of Tokyo’s best-known galleries. “Renoir painted a lot of paintings, and a lot of the second-class Renoirs ended up in Japan.”

The fall of the big art speculators combined with the dogged pursuit of tax collectors has unveiled all manner of criminal schemes involving Japan’s largest companies. In one 1989 case, it was revealed that Mitsubishi Corp. paid $20 million for two paintings by Renoir that were reported to tax authorities as costing $28 million, then sold to the religious group Soka Gakkai for $33 million.

Some galleries resorted to trickery to convince their customers that prices were going up long after interest had waned. Fumi International, a Tokyo art gallery, for example, put up for auction in 1990 a painting sold to a group of customers for $1.8 million. To the investors’ delight, the painting sold for $2.4 million. Only after the gallery’s finances began falling apart did the investors discover that the gallery had hired a U.S. art dealer to bid up the price of the painting to give the impression that art was still a good investment.

Although Japanese overpaid for many of the paintings they bought during the bubble, they also acquired some of the best of the Impressionist era. But art lovers who think they can come to Japan to see these paintings will be disappointed.


Few of the pieces are on public display. Van Gogh’s “Sunflowers” has an honored, if lonely spot in a gallery on the top floor of the Yasuda insurance company’s Tokyo headquarters that otherwise focuses on contemporary Japanese painters. Kisuke Nagashima, a pinball czar, displays his collection of pieces by Picasso, Chagall and Renoir in a private exhibit hall in the distant southwestern city of Kagoshima.

Most of the art, though, is in corporate warehouses where neither dealer, collector nor layman art lover can see it. A European art specialist trying to put together a catalogue of Impressionists held in Japan was unable to track down more than a few of the pieces.

“It’s typical Japanese behavior to keep art in storage and to only bring it out on special occasions,” says John Tancock of Sotheby’s Tokyo office. Others contend that art has become another way for corporations to hide assets.

Collectors are pleased by the turn of events. “Art dealers were pushing art as assets, telling me I could triple my money, but I wasn’t interested in reselling,” says collector Saijiro Kita. Kita said he virtually stopped buying during the bubble days and is only now beginning to look around again.

Although there are fears that hundreds of paintings will be dumped on the market and depress art prices, dealers say that isn’t likely to happen unless their financial condition forces them to.

“If a company sells now, they have to put it down as a loss on their balance sheets and it looks bad for management,” says Hasegawa of Nichido. She predicts that such decisions must await new management, which can blame the purchases on predecessors and swallow the losses.


Although Nichido, too, has lost money on its inventory of art, Hasegawa isn’t unhappy that the bubble burst. Upstart galleries that popped up during the heyday of price inflation are mostly gone now and most buyers are collectors rather than speculators, she says. “Things are back to normal,” says Hasegawa. “That’s the way we like it.”

Shrinking Picture Japanese Art Imports Imports have dropped severly from their 1990 peak of nearly $5 billion. (In billions) 1985: 0.47 1986: 0.55 1987: 1.15 1988: 1.77 1989: 2.83 1990: 4.96 1991: 1.12 1992: 0.57 Source: Japanese Ministry of Finance