Japan Foreclosed Property 2015-2016 - Buy this 5th edition report!

Over the years, this ebook has been enhanced with additional research to offer a comprehensive appraisal of the Japanese foreclosed property market, as well as offering economic and industry analysis. The author travels to Japan regularly to keep abreast of the local market conditions, and has purchased several foreclosed properties, as well as bidding on others. Japan is one of the few markets offering high-yielding property investment opportunities. Contrary to the 'rural depopulation' scepticism, the urban centres are growing, and they have always been a magnet for expatriates in Asia. Japan is a place where expats, investors (big or small) can make highly profitable real estate investments. Japan is a large market, with a plethora of cheap properties up for tender by the courts. Few other Western nations offer such cheap property so close to major infrastructure. Japan is unique in this respect, and it offers such a different life experience, which also makes it special. There is a plethora of property is depopulating rural areas, however there are fortnightly tenders offering plenty of property in Japan's cities as well. I bought a dormitory 1hr from Tokyo for just $US30,000.
You can view foreclosed properties listed for as little as $US10,000 in Japan thanks to depopulation and a culture that is geared towards working for the state. I bought foreclosed properties in Japan and now I reveal all in our expanded 350+page report. The information you need to know, strategies to apply, where to get help, and the tools to use. We even help you avoid the tsunami and nuclear risks since I was a geologist/mining finance analyst in a past life. Check out the "feedback" in our blog for stories of success by customers of our previous reports.

Download Table of Contents here.

Tuesday, August 18, 2015

Political opportunities squandered in Japan - until now

Japan has over the last decade struggled to kick-start its economy, though the current round of Abenomics is certainly the most persuasive reform effort yet. On the last attempt Japan fell back into a "triple-dip" recession (recording two quarters of negative GDP growth) in 2014,[i] after the GST increase to 8%. The economy did return to growth by the end of the year (with GDP expanding 1.5% in the March 2014 qtr),[ii] however the growth was far below expectations given the stimulus supporting the program. There was simply no reason to expect stronger household spending as long as wages stagnate.

There has been a long-standing opportunity for Japan to reform. The task would have been far easier if the nation had taken such measures whilst the global economy was ‘humming’, but such opportunities were squandered due to:
  • Controversial corruption allegations (with respect to political donations) against a raft of PMs, political leaders and Diet members[iii]
  • Reticence on the part of Diet members to expose their constituents to reform
  • Historically an absence for a policy imperative outside of the bureaucracy
Abe was able to resurrect a party coalition with a substantial parliamentary majority, but was not able to achieve any concrete progress with structural reform, which led to his electoral demise in his first term. It was only the ineptitude of the DPJ and his resounding win in the December 2014 election[iv] that seems to have allowed him to mature as a political leader, giving him the time to challenge entrenched interests.

Latest efforts to invigorate Japan

Poor economic data in this latest July-2015 quarter has given market analysts reason to expect more stimulus from the Bank of Japan. Paradoxically, Japanese stocks rose on the announcement, which goes to show that investors are favorably disposed to any effort that supports asset prices, whether ‘real’ or ‘illusionary’. It does not matter if there is confidence in the reform process or not, as long a there is concurrent stimulus. Expectations for BoJ stimulus might prove wrong if instead it is the Fed that pursues stimulus. That is to say, there is a good reason to expect a concurrent Fed program to:
  • Raise interest rates by 25bp in Sept-2015
  • Quantitative easing in order to stimulate the US market
One might ask whether the US market actually needs such stimulus given that US employment is supposedly on the rise, and new vehicle sales are at record levels. There is other evidence however to suggest that not all is well in the US economy, namely:
  • US inventory levels - see the ominous signs of recession below
  • Stock and bond prices - note the tendency for stock indices to fall every 7 years (2001, 2008 and now 2015??)
  • Workforce participation - trending down for a long time
Source: Trading View & Federal Reserve; trend analysis by Andrew Sheldon

Japan's benchmark Nikkei-225 index rose 0.6% to 20,637pts in response to the poor data.[v] It is possible the Japanese government will resort to more stimulus in the belief that the corporate sector is in the process of boosting investment, as well as an expected ‘flow-on’ effect from lower commodity prices, as well as reduced coal and oil imports, thanks to the recommencement of nuclear energy production by the Japanese utilities, however the contribution is relatively minor.

There is every reason to believe however that any attempt to stimulate the US and Japanese economies will achieve nothing, and that both economies are destined to fall into recession, due to lax activity in the ‘real economy’. There can be expected to be concurrent weakness in asset market.
A muted economy is of course not terribly problematic for governments when you consider that they can have confidence in:
  • Their control of the process – with their limited majoritive mandate
  • Moral and political relativism – constituents have little choice – and Japan is not singularly a ‘weak economy’. There is also a global disdain for government.
  • Media support – the media and public are reticent to trust political opponents. Globally there seems to be a campaign of destabilisation by the media.

Evidence of slowing economy

The problem for Japan is that:
  • Without substantive reform, no one will have any confidence in the sustainability in the economic outlook
  • Without any expectation of a stronger global economy, more ‘currency competitiveness’ will do little to ignite export industries, since its competitors will simply resort to the same measures.
  • Without the tangible prospect of more jobs and higher incomes, the prospect of higher prices will just result in a decline in real wages.
This is precisely what we are seeing, with the results for the June quarter alluding to:
  • A slowing in economic activity – with a contraction in household spending and business investment resulting in an annualized 1.6% decline in GDP in the Mar-2015 quarter.[vi]
  • Household real incomes falling in the wake of the GST hike, as the cost of living rises.
There are hopes within the government and BOJ that growth will eventually prevail. Economists are forecasting a modest 2% annualised GDP for the Sept-2015 quarter.[vii]

Japan is not all bad news

It is not all bad news for Japan. Consider that:
  • Japan ran a current account surplus of ¥8.18 trillion for the 6 months to June 2015, the highest since late 2010.[viii]
  • Japan is a big beneficiary of lower crude oil prices, significantly reducing its trade imports
  • Japan is also destined to benefit from a substantial reduction in oil, natural gas (i.e. LNG) and coal imports as nuclear power generation is resumed from nuclear plants mothballed in the wake of the Tohoku tsunami disaster
  •  The weak Yen is destined to stimulate growth in national income as Japanese exports become increasingly competitive. The yen has fallen 50% against the USD since the end of 2012.[ix]
  • The Japanese property market is relatively ‘cheaply priced’ outside of the central business district
  • Japan retains a ‘trump card’ insofar as it is able to boost immigration to ‘grow its economy’, in the process increasing demand, serving as well to reduce the burden upon taxpayers in per capita terms.
  • Asset prices are bouyant, as is the case elsewhere in the globe. The Nikkei index has steadily risen to an 8-year high during 2015.[x]
Japan’s trade statistics are trending in the right direction, with the trade deficit falling to ¥422 billion (down from ¥6.2 trillion in the previous year) on the back of a 5.9% increase in exports and 8.8% increase in imports. Japan also benefits from stronger remittances of investment income as the Yen weakens, up 26.1% to ¥10.51 trillion.[xi]
The stronger trade balance is largely the result of stronger sales of automobiles and electronic parts, and yet these muted sales are largely the result of the weaker yen rather than stronger export markets. The concern of course is that Japan’s QE program is destined to see other competing nations simply resort to the same policy, rather than engaging in any steps to reform the economy, or the devaluation of their currency in the same vain. This has prompted some economists to expect a 'currency war', which will inevitably serve no one, but simply to undermine confidence in the political actors.

Another bonus for the Japanese economy has been the influx of tourists as the yen has depreciated. The Japanese government has achieved its target of 10 million tourists in 2015, having deferred the target in the wake of the Tohoku earthquake. The tourist bureau is now targeting 20 million tourists by 2020 – the year of the Tokyo Olympics, and 30 million of tourists by 2030. The trade surplus attributable to tourism was a record ¥527.3 billion in the period, on the back of a record 9.14 million incoming tourists and a concurrent 4.9% decline in departing Japanese nationals to 7.62 million. These economic statistics are based upon an average forex rate of ¥120.28 for the period – a 17.4% reduction over the previous period.[xii] Japan’s external accounts remain in good shape, with the nation recording its 12th successive monthly current account surplus – the latest being ¥558.6 billion.[xiii]

The overarching problem

The problem however is not Japan’s external relationship with the rest of the world, but rather the alienation of its unskilled workforce and savers, who are bearing the bulk of the state’s burden. Part time work and low interest rates are undermining the wealth and income prospects for a great many Japanese people. There is every possibility that Japan will eventually cope by:
  • Raising tax on assets
  • Raising immigration
  • Depreciating the currency
  • Retaining its mercantilist policy – if it can expect to rely on any growth in the export economy
  • Reforming the economy – to boost Japan’s long-term competitiveness.[xiv]
                    i.        Slashing business regulations
                   ii.        Reducing corporate taxes
                  iii.        Facilitating industry diversification

There is a great deal of concern about Japan’s debt levels. The fact is however that the debt is ‘national’ debt, just as the US debt is denominated in USD terms. Both countries are therefore not in a serious problem in these terms. 

The other problem is that the dispensation to date has been to undermine the financial viability of most Japanese people for the sake of asset-rich Japanese people who live in the middle of the cities. The central hubs of Japan have experienced an asset ‘bubble’ that has not extended into the suburban areas because their ‘negative real incomes’ and poorer job prospects don’t invite such property investment. Nor does their lack of financial literacy give them much change of raising their prospects.

The reform program to date

You could be forgiven for thinking that deflation is the intractable problem undermining Japan’s economy given the attempts to resuscitate inflation. The problem however is not deflation, just as inflation is not the solution. Deflation is actually natural and good. The problem is declining real incomes (or ‘stagnant wages’), that undermines investment and spending. There are of course economist theorists who will argue that ‘2% inflation’ is good for growth because it purportedly brings forward spending. In fact, such illusions are not valid. Certainly PM Shinzo Abe is not relying solely on stimulus. This is merely the ‘grease’ of 'monetary illusion' to lubricate the adjustment period by avoiding apprehensions. The key elements of the structural adjustment program can be expected to be:
  • Ending subsidies for the rural economy – curtailing spending – these burdens are being shifted to the ‘end of term’ of the government, so they are largely weighing upon any incoming government.
  • Labour market reform which was already adopted by the previous LDP PM Koizumi, and the corporate sector, when it wound back lifetime employment, and shifted a great many workers to casual labour terms.
  • Reducing material costs by reducing tariffs on trade and the costs of poor regulation. This has the benefit of reducing the size of government, and improving the sustainability of government, given that it shifts the burden of government to those who can afford (by virtue of profits) away from those who can't afford to carry it.
There are of course those who will argue that 'wealth needs to be placed in the hands of the rich in order to stimulate investment'. The truth is that this fails to acknowledge the disparity or 'wage gap' because Western and third world markets. We can say that the solution to Japan's dilemma, and every Western government is to 'slash the costs of living' by effectively ending all but the basic foundations for government, and thereafter privatising those, to ensure those services are performed efficiently. Efficiently demands consequences. If governments are free to extort wealth, they will not offer good service. No country in the West defies this 'truth', except Japan to the extent that Japan's bureaucrats are motivated by simple routines and an overarching sense of responsibility for the lives of others.

Further reform areas

In June 2014, the Abe administration offered its latest outline of comprehensive reform measures, including corporate tax cuts, agriculture liberalization and deregulation of the energy, environment, and health-care sectors.[xv] A broad online of the critical reform measures by PM Abe are:
  • Economic stimulus in the form of:
                    i.        Fiscal spending largely on infrastructure construction as well as ‘key strategic sectors’
               ii.        Quantitative easing to restore liquidity to the marketplace, so people can spend, and so that the resulting currency depreciation will make the export sector more competitive.
                  iii.        Corporate tax cuts to inventivise wage rises and business investment.

  • Political independence – Japan has long relied upon the US to preserve its political security, with the US still preserving a number of naval and air bases in Japan, such as Okinawa and Fussa. Proposed amendments to the Japanese constitution are intended to surmount that ‘military dependency’.
  • Executive disempowerment – Executive government in Japan has long struggled with a reliance upon the bureaucracy for information and analysis. Former PM Koizumi was the first to develop certain capacities within the PM’s Office to develop policy, with Cabinet having previously relied on the bureaucracy to advance policy initiatives.
  • Social reform – There is a need for Japan to revise the way constituents think about the government, society, and their relationship to it. There is an entrenched ‘collectivism’ (or tribalism) in Japan that diminishes intellectual independence. The pressing obstacles include:
                         i.        Attitudes to immigration – An influx of tourists might help that, or hinder.
               ii.     Attitudes to women in the world place that has seen the erection of glass ceiling that largely dissuade women from participating in economic activity – both in absolute and qualitative terms. Female workforce participation is 10% lower than the OECD average.[xvi] The government is intending to raise this level.[xvii]

  • Regulatory burden – The business sector struggles to achieve outcomes when they are subject to a litany of unnecessary impediments that undermine productivity and profitability. These impediments are largely to blame for the historic ascension of government-backed monopolies, be they private or publicly-owned, in sectors such as power and agriculture. The solution is perceived to be privatization (for instance – the utilities like TEPCO) and deregulation (i.e. competitiveness). Among these obstacles are:
                  i.        Restrictions on the hiring and firing of staff. Lifetime employment remains an obstacle to revitalisation of companies – particularly in the upper echelons of companies. There has already been a great deal of reform of the unskilled and lower echelons of Japanese corporations, however the incumbents in the upper echelons have avoided any burden. The implication is that there are about “5 million workers who can’t be laid off, even with severance pay” whilst concurrently 40% of the Japanese workforce is struggling to get regular or full-time work.[xviii] Considerable labour market reform has already seen a 6% contraction in the labour force over the last decade.[xix]
                 ii.        Certain highly regulated ‘domestic sectors’ like health. Japan's health-care providers argue the national health insurance system would be adversely impacted if Japanese citizens are forced to buy foreign-produced pharmaceuticals and medical devices.[xx]
               iii.        The construction sector still relies on its privileged access to government contracts
              iv.        The service sector is very inefficient because cultural practices are burdensome and labour-intensive methods.
            v.      Strategic changes in the tax incentives and investment model for government pension funds.[xxii]
           vi.  The Trans-Pacific Partnership Agreement (TPPA) negotiations are expected to transform, or otherwise curtail subsidies for the agricultural sector, which is small-scale, highly subsidised and inefficient. In Feb-2015, Abe reached a landmark agreement that diminished the power of the national agriculture cooperative, JA-Zenchu, to direct the electoral preferences of farmer-members, by offering short term concessions to farmers in exchange for reductions in cropping; that will facilitate the modernization of farming in Japan.[xxi]

The TPP is an ambitious plan to introduce a free trade agreement between 12 countries (The United States, Japan, Brunei, Malaysia, Vietnam, Singapore, Australia, New Zealand, Canada, Mexico, Chile and Peru) encompassing two-fifths of world trade. Abe has had to offer generous support to farmers for the next 5 years in order to advance the plan. The question is whether they will simply ‘take the support’ then sabotage the plan. In Abe’s favour is the fact that his opponents, the Democratic Party of Japan (DPJ), promoted the TPPA whilst in power. Japan has historically been reluctant to remove protection on the agricultural sector, particularly upon 5 “sacred” agricultural products. In negotiations to day, the US has been able to reduce steadfast support for protection to tariff protection upon ‘rice, wheat and sugar’ in exchange for more generous import quotas. The other contentious areas are tariffs on beef and pork.[xxiii]
The Trans-Pacific Partnership Agreement (TPPA)[xxiv] is a transformational regional free trade agreement for Japan and other Pacific Rim countries. Japan’s farm sector have lobbied against the deal, objecting to the removal of high tariffs and other protective measures.

The substantiveness of change

The problem for Abe is that all the good news for Japan harks back to ‘negative sentiments’ rather than his policy initiatives. Consider that:

  • The terms of trade is positive because Japanese people are not spending
  • The improvement in investment income and corporate incomes is because of currency depreciation. One need only look at production statistics. Factory output declined 3.4% in Feb-2015.[xxv]
  • The improvement in exports is due to currency depreciation
  • The fall in imports is due to currency depreciation, low confidence as well as curtailment of energy imports (as nuclear power stations are recommissioned).
  • Rising property and bond prices are due to ultra-low interest rates; themselves an attempt to buoy demand. In years to come, those asset prices will eventually ‘return to reality’.
Almost all the rise in corporate earnings is due to the effects of a weaker yen, for example. It is nice for shareholders to see prices rise as companies buy back their shares, but far better if companies saw a compelling reason to invest to expand their core business. Unfortunately, though, the population of Japan continues to dwindle.
“In some ways Japan remains less part of the world than it was in, say, the Taisho years almost 100 years ago. [Indeed] older people say they would prefer to be looked after by a robot than by a foreigner, according to one survey”.[xxvi]
As long as the robot is operated by a foreigner, just like Japan’s software, then everyone would be happy. Satisfying Japanese people is all about preserving illusions. And yet Japanese people perplexingly and tragically see the writing on the wall.
“Many people in Japan refer to Uber as the “black cars”, in the same spirit that harks back to the “Black Ships” of Commander Perry, which forced Japan to open its trade.[xxvii]
The fact is that, unless Japan takes significant strides to open up its economy, then a great many companies are destined to abandon the economy, despite its size. The economy is struggling for its lack of ‘openness’, its lack of population growth, and falling incomes. These tragic prospects have even caused a number of Western companies to curtail their investments in Japan, namely GE Capital and Citigroup.
Japan has even struggled in those arenas where it can side-step regulatory hurdles. Apart from the success of Rakuten, Japanese technology companies in hardware have struggled to move into value-added software services (i.e. Toshiba or Fuji Film doing better than Fujitsu). The bigger problem however is that ‘success’ is not commonplace, as most companies have clung to their natural market position; the security of the domestic Japanese market. A handful of large corporations have preserved their strong market position, relying on their privileged position, rather than evolving. For instance, domestic banks have been slow to adopt web-based services, which has reduced their capacity to close branches, reduce banking fees or reduce waiting times for services.

The problems are deep-set. Education is of course another arena requiring reform, however it is not a type of reform that is going to come easy because it harks back to the values that made Japan possible – political privilege and cheap labour. Those values can no longer sustain the nation, and the collapse in birth rates provide a clue as to why the economic growth has arrested. Japan without capitulation is destined to drift into oblivion. The realisation of this fateful path is inevitably the only realisation that can spare it from this fate. There is a need for a foreigner to drive the robot, whether that robot look Japanese or Western is less important.
Autocratic teaching methods which thwart the intellectual independence of Japan’s future wealth creators can only delay the hope of Japan’s resurrection, or place the onus upon imported labour to drive that restructuring. Without suitable education, ‘new age’ start-ups will be few and far between, as their exponents will simply go abroad. Already there is evidence of Japanese ‘thinkers’ finding opportunity abroad. Japan doesn't need more Western CEOs, it needs the 'spirit' of a Western CEO in the role of prime minister, just as the West needs. This is the popular realisation behind the appeal of Donald Trump. People are looking merely at the smoke, but the reality is that Trump would not retained his popularity if he engaged with people on issues. 

Abenomics - Reforming Japan

When PM Shinzo Abe assumed office in Dec-2012, he was unable to articulate a solid reform plan. His leadership was short-lived, however the Japanese people nevertheless gave him a 2nd term from 2006, at which point he outlined a new suite of policies to kick-start the stagnating economy. Japan was caught in the midst of a deflationary spiral for two decades, with successive leaders struggled  to revitalize the economy. Abe in in the midst of introducing a three-pronged approach, "Abenomics," combining fiscal expansion, monetary easing and structural reform, had the ultimately intent of concurrently boosting domestic demand and GDP, raising inflation to 2% and placing the economy on a competitive footing whence it could create ‘real jobs’ and expand ‘real incomes’.[xxviii]
So far the stimulus has only resulted in muted ‘growth’ as the market has not responded to the limited reforms to date. Inflation rose slightly, but in the wake of collapsing commodity prices, it has since failed to achieve the target. Abe however has not lost heart, though his support base has floundered somewhat. There is of course always the prospect of further aggressive monetary and fiscal stimulus, and further structural reforms. The fiscal measures worth Y20.2 trillion ($US210 billion) included Y10.3 trillion ($US116 billion) of government spending.[xxix] It was supported by concurrent quantitative easing by the Bank of Japan (BOJ) to provide much-needed injection of liquidity to support the spending needed to achieve 2% inflation. The structural reforms — including reductions in regulations, deregulation of labour markets, corporate tax cuts, have not achieved the much-vaunted competitiveness.
These are unprecedented levels of currency debasement by the BOJ. If you consider that:

  • The BOJ debt purchases are unprecedented[xxx]
  • The reliance of the Japanese government is concerning for a Western nation, and the world’s third largest economy. i.e. With the value of the BOJ assets equal to 57% of GDP in 2014 – that’s more than double the size of the U.S. Federal Reserve (25% of GDP) and ECB asset holdings (20% of GDP) respectively.[xxxi]
The fiscal stimulus has mirrored the policies of recent decades, with the primary benefactors being the construction companies that support the LDP, as well as building ‘critical’ bridges, tunnels, and earthquake-resistant roads. A relatively new aspect of the policy however was explicit measures to stimulate private investment in strategic sectors.[xxxii] Such stimulus has done nothing to rein in the public sector debt, as budget deficit persist at over 5% of GDP. [xxxiii] The deficit should fall below 3% after the GST is increased to 10%. There is every expectation of course that the GST and a revived economy will raise public tax receipts, however this has yet to prove the case. In fact, phase 1 of the GST hike to 8% in April 2014 correlated with reduced consumer spending and a recession.[xxxiv] For this reason the 2nd hike in the GST to 10% has therefore been delayed until 2017.[xxxv] Japan is drawing no support from the global economy.

For those readers interested in our Japan Foreclosed Property Guide, we are currently in the process of updating it. Readers can however avail of the current addition, and we will forward the new edition upon completion. There will be a price increase thereafter - and it won't be 2%. lol

Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
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[i] “Japan recession worse than first reported”, Financial Times, website, 8th Dec 2014.
[ii] GDP result, Dec-2014 Qtr, Cabinet Office, Govt of Japan, website, 9th March 2015.
[iii] “Shinzo Abe loses ally in TPP trade deal”, Financial Times, website, 23rd Feb 2015.
[iv] “The Abe habit: Shinzo Abe wins again, but what will he do with his mandate?”, The Economist, website, 20th Dec 2014.
[v] “Japan stocks rise on stimulus hopes after poor economic data”, NZ Herald, website, 17th Aug 2015.
[vi] “Japan’s economy shrinks as consumption, investment fall”, Japan Times & Bloomberg, website, 17th Aug 2015.
[vii] “Japan’s economy shrinks as consumption, investment fall”, Japan Times & Bloomberg, website, 17th Aug 2015.
[viii] “Japan logs largest January-June current account surplus since 2010”, Japan Times & KYODO, website, 10th Aug 2015.
[ix] “BOJ’s Kuroda Signals Desire for Stable Yen” by Takashi Nakamichi & Tatsuo Ito, Wall Street Journal, website, 18th Feb 2015.
[x] “Nikkei retreats from near 8-year high as Greek drama drags on” by Ayai Tomisawa, Reuters, website, Feb 16, 2015.
[xi],[xii] & [xiii] “Japan logs largest January-June current account surplus since 2010”, Japan Times & KYODO, website, 10th Aug 2015.
[xiv] & [xv] “Abenomics and the Japanese Economy” by James McBride, Council for Foreign Relations, website, 10th March 2015; “Shinzo Abe updates Japan’s Third Arrow”, Financial Times, website, 16th June 2014.
[xvi] “Japanese Economy”, Lowy Institute, website, retrieved 16th Aug 2015.
[xvii] “Attitude change needed to shake up the workforce” by Philip Brasor, Japan Times, website, 25th Nov 2012.
[xviii] “Which Parts of Japan’s Economy Most Need Reform Right Now?” by Stephanie Johnson, Market Realist, website, 14th July 2015; “Japan’s Third Arrow is more like 1,000 trial needles”, Financial Times, website, 18th June 2014.
[xix] “Abenomics can clear Japan’s demographic hurdle” by Andy Mukherjee, Reuters, website, 14th Mar 2013.
[xx] “Abenomics and the Japanese Economy” by James McBride, Council for Foreign Relations, website, 10th March 2015.
[xxi] “Abe’s Third Arrow Finds Its Mark” by Tobias Harris, website, 11th Feb 2015.
[xxii] “Abenomics and the Japanese Economy” by James McBride, Council for Foreign Relations, website, 10th March 2015.
[xxiii] “Japanese Economy”, Lowy Institute, website, retrieved 16th Aug 2015.
[xxiv] “The Trans-Pacific Partnership (TPP) Negotiations and Issues for Congress”, Congressional Research Service, website, 20th March 2015.
[xxv][xxvi] & [xxvii] “Reforms needed to lift Japan’s economy” by Henny Sender, Financial Times, website, 7th April 2015.
[xxviii] “Abenomics and the Japanese Economy” by James McBride, Council for Foreign Relations, website, 10th March 2015.
[xxix] “Emergency Economic Measures for The Revitalization of the Japanese Economy”, Cabinet Office, Govt of Japan, website, 11th Jan 2013.
[xxx] “Bank of Japan Beats Fed, ECB in Gulping Assets: Chart of the Day” by Toru FujiokaScott Lanman, Bloomberg, website, 8th Jan 2015. See chart.
[xxxi] “Abenomics and the Japanese Economy” by James McBride, Council for Foreign Relations, website, 10th March 2015.
[xxxii] “Japan’s Abe Unveils 10.3 Trillion Yen Fiscal Stimulus: Economy” by Keiko Ujikane, Bloomberg, website, 11th Jan 2013; “Shinzo Abe unleashes a (small) stimulus package”, The Economist, website, 30th Dec 2014.
[xxxiii] “Big Swings in Japan Government Bonds Raise Hopes, Doubts about Abenomics” by Eleanor Warnock, Wall Street Journal, website, 17th Feb 2015.
[xxxiv] “Defying expectations, Japan’s economy falls into recession” by Jonathan Soble, NY Times, website, 16th Nov 2014.
[xxxv] “Japan affirms pledge to raise consumption tax in 2017”, Financial Times, website, 12th Feb 2015.

Saturday, August 8, 2015

AirBNB poses risks and opportunities

We have long known that technology is disruptive. You have to ask however what impact technology will have on our lives looking forward. No where is such consideration more important that in the asset market. The reason why this is the case is because conceptually, the value of assets or wealth is to be measured in terms of 'the net present value of future incomes', or the potential for certain assets to yield those incomes. This is the quantification of value. What happens where there is too much money chasing too few assets, is that there is an economic imbalance, that is resulting in the financial markets trumping the real economy. We have the bidding up of asset prices in most 'aspirational' growth markets, prompting financial relativism. Money is undermining the yields on the assets being bid up. Lower interest rates are part of that, but consider the impact of AirBNB.

AirBNB is having two impacts:
a. It is collapsing yields through competition
b. It is introducing property stock to the market that would not otherwise be there.

Consider the Philippines for instance, or Japan. There are a lot of Filipino expats in the US or Middle East earning money, and the sales-spruiking agents from SM, Robinsons, are targeting the financially naive expats with 'yields' on investment, or property portfolios whilst they are cheap. In Japan, there are a lot of Chinese people buying up investment condos. The 'trade' is not as big as has been 'mooted' in the press, however it is occurring. There is no gross over-supply. In fact, the prospects for AirBNB to add utility and flexibility to property renting is a far bigger phenomenon.
The reality is that, whilst these markets are cheap compared to Western markets, they are in oversupply given the poor utilisation of those assets. The problem is that many of these units bought for personal use, or maybe rental, are going to find their way onto AirBNB, and their competitiveness is going to come under attack from other providers, whose profit motive might be marginal, because they only need to cover costs. Clearly those people holding stock as 'investors' are most vulnerable if they are indebted, and interest rates rise. There is no prospect of that. But is does suggest that the property market is a candle being 'burnt from both ends':
a. The yields on investor property are being undermined by increased stock and the greater ease of 'self-listing' properties through AirBNB.
b. The yields on hotel property portfolios are going to come under attack from AirBNB. Why stay in a hotel when you can stay in a more flexible 'short term' AirBNB accommodation for 7-day stints closer to your preferred location, with less sensitivity to price, and avoid the add-on costs of hotels like telephone, internet, food. This point makes more sense in a place like the Philippines where condos are increasingly integrated with malls.
c. Ultimately commercial properties are destined to come under similar attack as people become more mobile, there is greater use of contractors, and people working from home.

The entire property market is under a revolution and no one is talking about this phenomenon. In fact, governments are seemingly going in the opposite direction of making property even less enticing with higher costs, i.e. They are restricting zoning, driving up prices which raises property rates (taxes), and of course subsidising interest rates.

This is a gigantic crisis. There is no reason to expect imminent crisis. AirBNB will take years to work its way into a serious market phenomenon. Its still new, however the trend is clear. The interesting issue is that AirBNB will just make property prices go 'less high' by driving down yields. It might make one however question the 'validity' of statistics that might use 'traditional' rental prices as a measure of market health (i.e. yields).

It would not be surprising to see governments take the 'perverse' position of blaming AirBNB for the collapse of property in years to come. The reality is that AirBNB is a god-send for better asset utilisation. The problem is ultimately subsidised credit and the 'protracted' low unskilled wages that have become a 'drug' for the global economy. They were caused by the autocratic, statist regimes in 'the third world economies', which today we consider 'the emerging markets'. The problem is that we are going to see people blaming the market for these outcomes, however it was always a 'political crisis' in the making.

Japan yields are actually very reasonable, as as Philippines and Indonesian yields, so we are not singling these markets out as if they were 'overpriced'. They are going to rise in price. The issue is not the 'yields' on these markets, but the warning. There is a crisis in the future, and these markets are opportunities for the next decade. Most Western markets are in fact the 'risk markets'. They are already overpriced. When matters read a head, rental properties are competing with a friend on Facebook with a spare bed. More scary is the fact that AirBNB presents a more flexible scary risk to such property because AirBNB listings are everywhere. They are closer to any particular place you need to be, or want to be.

With so much human capital invested in this market, AirBNB represents a transformational change that will 'upset' property markets, to an extent greater than Facebook and Google Adwords transformed advertising. Why? The value of the underlying assets affected. This does not stop property prices going higher; it means that property prices will inevitably collapse to a lower yield when those lower 'competitive' rents work their way through the market.

Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook

Major cities of Japan

資料:各都市の推計人口(ホームページ) Japan's major cities:
札幌市 Sapporo 仙台市 Sendai さいたま市 Saitama 千葉市 Chiba
東京都区部 Tokyo-23 横浜市 Yokohama 川崎市 Kawasaki 新潟市 Niigata 静岡市 Shizuoka 浜松市 Hamamatsu 名古屋市 Nagoya 京都市 Kyoto 大阪市 Osaka 堺市 Sakai 神戸市 Kobe 広島市 Hiroshima 北九州市 Kitakyushu 福岡市 Fukuoka

Cities and towns of Tokyo

競売物件購入 keibai buttsuken kounyu 千代田区 Chiyoda-ku 八王子市 Hachioji-shi 羽村市 Hamura-shi 中央区 Chuo-ku 立川市 Tachikawa-shi あきる野市 Akiruno-shi 港区 Minato-ku 武蔵野市 Musashino-shi 西東京市 Nishitokyo-shi 新宿区 Shinjuku-ku 三鷹市 Mitaka-shi 文京区 Bunkyo-ku 青梅市 Ome-shi 郡部 Towns and villages 台東区 Taito-ku 府中市 Fuchu-shi 瑞穂町 Mizuho-machi
墨田区 Sumida-ku 昭島市 Akishima-shi 日の出町 Hinode-machi 江東区 Koto-ku 調布市 Chofu-shi 檜原村 Hinohara-mura 品川区 Shinagawa-ku 町田市 Machida-shi 奥多摩町 Okutama-machi 目黒区 Meguro-ku 小金井市 Koganei-shi 大田区 Ota-ku 小平市 Kodaira-shi 島部 Islands 世田谷区 Setagaya-ku 日野市 Hino-shi 大島町 Oshima-machi 渋谷区 Shibuya-ku 東村山市 Higashimurayama-shi 利島村 Toshima-mura
中野区 Nakano-ku 国分寺市 Kokubunji-shi 新島村 Niijima-mura 杉並区 Suginami-ku 国立市 Kunitachi-shi 神津島村 Kouzushima-mura 豊島区 Toshima-ku 福生市 Fussa-shi 三宅村 Miyake-mura 北区 Kita-ku 狛江市 Komae-shi 御蔵島村 Mikurajima-mura 荒川区 Arakawa-ku 東大和市 Higashiyamato-shi 八丈町 Hachijo-machi 板橋区 Itabashi-ku 清瀬市 Kiyose-shi 青ケ島村 Aogashima-mura 練馬区 Nerima-ku 東久留米市 Higashikurume-shi 小笠原村 Ogasawara-mura 足立区 Adachi-ku 武蔵村山市 Musashimurayama-shi 葛飾区 Katsushika-ku 多摩市 Tama-shi 江戸川区 Edogawa-ku 稲城市 Inagi-shi

Cities & Towns of Saitama

競売物件購入 keibai buttsuken kounyu 西区 Nishi-ku 北区 Kita-ku 大宮区 Omiya-ku 見沼区 Minuma-ku 中央区 Chuo-ku 桜区 Sakura-ku 浦和区 Urawa-ku 南区 Minami-ku 緑区 Midori-ku Cities (-shi) さいたま市 Saitama-shi 川越市 Kawagoe-shi 熊谷市 Kumagaya-shi 川口市 Kawaguchi-shi 行田市 Gyoda-shi 秩父市 Chichibu-shi 所沢市 Tokorozawa-shi 飯能市 Hanno-shi 加須市 Kazo-shi 本庄市 Honjo-shi 東松山市 Higashi-Matsuyama-shi 岩槻市 Iwatski-shi 春日部市 Kasukabe-shi 狭山市 Sayama-shi 羽生市 Hanyu-shi 鴻巣市 Kounosu-shi 深谷市 Fukaya-shi 上尾市 Ageo-shi 草加市 Souka-shi 越谷市 Koshigaya-shi 蕨 市 Warabi-shi 戸田市 Toda-shi 入間市 Iruma-shi 鳩ケ谷市 Hatogaya-shi 朝霞市 Asaka-shi 志木市 Shiki-shi 和光市 Wako-shi 新座市 Niiza-shi 桶川市 Okegawa-shi 久喜市 Kuki-shi 北本市 Kitamoto-shi 八潮市 Yasio-shi 富士見市 Fujimi-shi 上福岡市 Kami-fukuoka-shi 三郷市 Misato-shi 蓮田市 Hasuda-shi 坂戸市 Sakado-shi 幸手市 Satte-shi 鶴ケ島市 Tsurogashima-shi 日高市 Hidaka-shi 吉川市 Yoshikawa-shi 北足立郡 Districts (-gun) 伊奈町 Ina-machi or ko 吹上町 Fukiage-machi 大井町 Oi-machi 三芳町 Miyoshi-machi 毛呂山町 Moroyama-machi 越生町 Ogose-machi 名栗村 Naguri-mura

Cities &Towns of Kanagawa

競売物件購入 keibai buttsuken kounyu 県計 市部計 郡部計 横浜市 鶴見区 神奈川区 西区 中区 南区 港南区 保土ヶ谷区 旭区 磯子区 金沢区 港北区 緑区 青葉区 都筑区 戸塚区 栄区 泉区 瀬谷区 川崎市 川崎区 幸区 中原区 高津区 宮前区 多摩区 麻生区 横須賀市 平塚市 鎌倉市 藤沢市 小田原市 茅ヶ崎市 逗子市 相模原市 三浦市 秦野市 厚木市 大和市 伊勢原市 海老名市 座間市 南足柄市 綾瀬市 三浦郡葉山町 高座郡寒川町 中郡 大磯町 二宮町 足柄上郡 中井町 大井町 松田町 山北町 開成町 足柄下郡 箱根町 真鶴町 湯河原町 愛甲郡 愛川町 清川村

Cities & Towns of Chiba

競売物件購入 keibai buttsuken kounyu 県計 市計 郡計 千葉市 中央区 花見川区 稲毛区 若葉区 緑区 美浜区 銚子市 市川市 船橋市 館山市 木更津市 松戸市 野田市 佐原市 茂原市 成田市 佐倉市 東金市 八日市場市 旭市 習志野市 柏市 勝浦市 市原市 流山市 八千代市 我孫子市 鴨川市 鎌ヶ谷市 君津市 富津市 浦安市 四街道市 袖ケ浦市 八街市 印西市 白井市 富里市

Cities & Towns of Osaka

競売物件購入 keibai buttsuken kounyu 総 数 府 保 健 所 計 池 田 池田市 豊能町  箕面市  能勢町  豊中豊中市  吹 田 吹田市 茨木摂津市  茨木市 島本町 枚方枚方市  寝屋川 寝屋川市 守口 守口市  門真市 四條畷 四條畷市 交野市  大東市 八 尾 八尾市  柏原市  藤井寺 松原市  羽曳野市 藤井寺市 富田林 大阪狭山市 富田林市 河内長野市 河南町  太子町  千早赤阪村 和泉和泉市  泉大津市 高石市  忠岡町  岸和田 岸和田市 貝塚市  泉佐野 泉佐野市 熊取町 田尻町  泉南市  阪南市  岬町 大 阪 市 堺市 高槻市 東大阪市  

Cities & Towns of Hiroshima

競売物件購入 keibai buttsuken kounyu 県計 広島市 広島市中区 広島市東区 広島市南区 広島市西区 広島市安佐南区 広島市安佐北区 広島市安芸区 広島市佐伯区 呉市 竹原市 三原市 尾道市 福山市 府中市 三次市 庄原市 大竹市 東広島市 廿日市市 安芸高田市 江田島市 府中町 海田町 熊野町 坂町 安芸太田町 北広島町 大崎上島町 世羅町 神石高原町