Japanese firms see land prices overheating in big cities, not regions

Tokyo

JAPANESE companies say land prices appear to be overheating in big cities but not in the countryside, a Reuters poll showed, highlighting a growing geographic divide even as the government seeks to spur inflation and revive regional economies.

The Reuters Corporate Survey found that 65 per cent of companies felt land prices in big cities are overheating relative to consumer inflation, while 80 per cent said that they do not see overheating in the regions.

Land prices have skyrocketed in many parts of Japan since Prime Minister Shinzo Abe took office in 2012 and introduced easy monetary policies to banish deflation and spur growth. That ended decades of declines in overall land prices that followed the bursting of a 1980s asset bubble.

The world's third-biggest economy is now increasingly a tale of two Japans, with huge urban centres like greater Tokyo and Osaka vibrant and growing, while the rapidly greying and depopulating hinterlands pacing an overall population decline.

This poses fresh problems of economic equality in a historically egalitarian society and where Mr Abe has made regional revitalisation, as well breaking free of deflation nationwide, focal points of his so-called "Abenomics".

Government surveys have shown a steady recovery of land prices, backed by surging numbers of foreign visitors and demand for office space.

The property rise has spread to regional cities that have tourist attractions. A survey by the National Tax Agency in July showed Okinawa Prefecture, with its tropical beach resorts, had the greatest increase in Japan in 2018.

"Land prices in regional cities such as Fukuoka and Sapporo have risen as fast as those in Tokyo and Osaka," said Shigeo Hirayama, a senior consulting fellow at Tokyo-based Urban Research Institute.

"But that trend has not penetrated into their surrounding areas, which is why people do not share the view price is rising evenly."

A manager at a service company wrote in the Reuters survey: "There is a deepening bipolarisation between bigger and smaller cities." This trend will continue as Japan's population falls, said Urban Research's Mr Hirayama.

The Reuters Corporate Survey, conducted for Reuters by Nikkei Research, polled 504 large and midsize firms with managers responding on condition of anonymity to speak freely. About 240 of them answered the questions on land prices. REUTERS