Japanese elite oppose government proposal to cap skyrocketing land prices

November 04, 1990|By John E. Woodruff | John E. Woodruff,Tokyo Bureau of The Sun

TOKYO -- Japan's power elite has given a cold shoulder to a plan to get control of astronomical land prices, one of the prime issues in more than a year of wide-ranging Tokyo-Washington trade talks.

Presented last week as the final report of a prime minister's commission that has worked since last fall, the plan is the most sweeping official call in more than two decades for reform of Japan's land-use laws and land taxation.

It would impose a new tax on holding land without using it, close rampant zoning loopholes that allow commercial uses in residential areas, curb bank loans for land speculation and eliminate the tax privileges of farmers and corporations that now keep extensive tracts vacant in high-priced urban areas.

The commission thus laid out the first comprehensive proposal ever made for dealing with an issue that is a staple of political speeches and dinner conversations nearly everywhere in Japan.

The commission's work also was considered a key achievement of the Structural Impediments Initiative, the unprecedentedly broad trade talks in which Japanese and U.S. negotiators agreed on a wide range of policy objectives last spring.

But the land-price issue has been complicated by rising fears that Japan's banks, already rocked by huge drops in the value of their gigantic common stock holdings and deeply committed to real estate as collateral for outstanding loans, might have trouble withstanding a big drop in land values.

Aside from fears about the banks, the commission's report began to run into opposition even before it was completed, especially from powerful corporate interests that have become dependent on rapidly rising land prices as a form of ever-growing collateral in raising investment capital.

The Japan Chamber of Commerce and a half-dozen other powerful interest groups were close behind, and by the time the commission published its report last week, even the Cabinet of Prime Minister Toshiki Kaifu, whose creature the commission was, greeted the proposals with silence.

Japan's area is slightly less than that of California, but prices have risen so dizzily in the past decade that the country's land is now worth four times the entire land value of the United States. Ordinary two-bedroom condominiums routinely go for more than $1 million in any desirable part of Tokyo. In glittery commercial sections such as the neon-walled Ginza department-store district, land goes for $250,000 to $300,000 a square yard.

"It has become impossible for an ordinary Japanese businessman to buy his own house in a major Japanese city," Motoharu Okada, an editorial writer for the Asahi newspaper, wrote in a commentary last week.

Mr. Okada and other commentators say that the same rising land prices that now shut millions of Japanese out from homeownership also have created a highly visible class of newly and obnoxiously rich.

Those commentators worry that this new gap between "haves" and "have-nots," terms that have become newly commonplace in conversations here, could threaten one of the foundation stones of Japan's work ethic -- the sense that Japanese all share burdens and benefits more or less fairly.

After decades of proudly citing statistics that show more than 60 percent of Japanese households own their own homes, Japanese academics and politicians have expressed alarm as rising prices have forced large residential areas of Tokyo and other cities out of the hands of their residents and into the portfolios of corporate landlords.

In Tokyo, the number of corporate buyers of land increased from about 20,000 in 1976 to 320,000 in 1987.

In those same years, the percentages of land owned by individuals have dropped dramatically in every residential district of Tokyo and Osaka, the country's two main population centers.

In recent years, as government pressures on banks and other lenders have somewhat slowed the growth of land prices in Tokyo, many speculators have taken their profits and sunk them into land in other places, spreading their speculative fervor to Osaka and even as far away as Hokkaido, the sparsely populated northernmost main island.

Nationwide, residential land prices rose about 13.2 percent and commercial prices about 13.4 percent nationwide in the 12 months that ended last June 30, the greatest land inflation here since the early 1970s.

Much of that was concentrated in formerly reasonable areas outside Tokyo.

Overall, land prices went up 45 percent in Osaka last year and 48.5 percent in the second city's neighbor, the former imperial capital, Kyoto.

But many analysts have begun to worry that any big drop in Japan's land prices could create major problems for the banks that are heavily involved in real estate lending. The nation's banks, in general, already have been shaken by the 10-month crash that trimmed nearly 50 percent from the value of the Tokyo Stock Exchange before it began to recover last month.

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