Japanese Not Immune From Same Failings

It seems that there is a fundamental belief that Japan or the Japanese are somehow immune from the same failings and flaws which have caused problems in our own country (“Whither Japan Inc.?,” Sept. 17). There is no reason to assume the Japanese are any less prone to miscalculation, overreach or speculation than we are.

While there is certainly some validity to the argument that the Japanese “psyche” differs from our own, recent events show that they, perhaps to a smaller extent than in our society, are given to the same flaws. Speculation is a dangerous business which can lead to huge profits but equally large losses.

However, to simply state real estate loans went bad in Japan without analyzing the fundamental reasons gives a misleading impression of what caused the “bubble” to burst. In Japan, land is scarce. In order for entrepreneurs to invest in their own vision, they often have to resort to innovation which would seem almost anathema to a country such as ours.

Land is so expensive in Japan, many Japanese investors saw various U.S. properties as bargains, and by their standards they were. While the Japanese had learned well the real estate principle--location is everything--they had made the mistake many in our own country make.

They forgot that the real value of any property or business is based, first, on what someone is willing to pay for it and, second, the purpose for which it is used. Instead, they, as others, made the mistake of determining value based on their own purchase price.

There’s nothing wrong with buying trophy properties as long as you have some use for them. However, don’t forget the third rule of real estate, one which unfortunately has been overlooked by most real estate agents and brokers in an effort to maximize their own profits: Real estate is a long-term investment. Certainly, if the market moves up dramatically in a short time, there is nothing wrong with selling and taking your short-term profit.

But slumps in the market shouldn’t be cause for panic if you bought with a vision for how the property was going to be used as opposed to how quickly you could turn around and sell it for a profit. That was the big mistake of the Japanese real estate investors both here and in Japan.

MICHAEL D. SOLOMON

Los Angeles

*

Despite all your worrisome articles on the “mired” economy of Japan, I’ll be willing to bet any business editor of The Times that our annual trade deficit with Japan this year or next will still equal $60 billion, just like always--one of the most long-running voluntary transfers of wealth from one nation to another in all recorded history.

I personally do not plan to worry about the Japanese economy until its unemployment rate at least equals our “unofficial” rate of 8.6%. Of course, the local unemployment total does not count the hundreds of thousands of chronically unemployed, foreign refugees and illegal aliens, all of whom are in search and need of employment in the Los Angeles area.

A. DANIEL ELIASON

Santa Barbara