Morihiro Oguma’s phone rang every day with calls from brokers representing foreign investors who wanted to buy his Japan Mineral water bottling business.

“In many cases, I was told I could name my price,” Oguma said in an interview, adding he had no interest in selling the Hokkaido-based company. “It seems what they really wanted was our rights to groundwater.”

A two-decade slump in real estate prices, an incomplete land registry and lax rules on buying forest with water rights are attracting overseas investors led by China and come amid a fraying of ties between the two countries over the Senkaku isle row. Some areas of remote woodland in Japan, the only country in the Asia-Pacific region that doesn’t regulate property investment by foreigners, can be bought for some ¥55 per sq. meter — including the groundwater.

Japan, whose population is shrinking, ranks in the top 10 percent of countries by water resources, while China and India, which face the opposite demographic trend, will face shortages from 2030, according to a U.N. report in August. Almost half of China’s economy is already based in water-scarce regions, HSBC Holdings PLC said in a Sept. 12 report.

The biggest spike in forest purchases by overseas parties is in Hokkaido, which is about the size of Austria and has triple the average water reserves of other prefectures, according to prefectureal figures. It has about 60,000 sq. km of forest, a quarter of the nation’s total, and supplies 20 percent of Japan’s food.

While the relative size of land owned by non-Japanese remains small — about 3,700 hectares — almost a third of it is in Hokkaido. The prefecture attracted 90 percent of forest purchases and non-Japanese investors bought 20 times more land in Hokkaido in 2009 than two years earlier, according to local government data.

Hokkaido Gov. Harumi Takahashi said the concern she has about some of the land purchases stems from a lack of information, especially about the development plans of overseas investors.

“There emerged cases where we weren’t sure about the reasons why investors were purchasing such vast areas of land,” Takahashi said in Tokyo on Oct. 18, stressing Hokkaido welcomes investment regardless of where the investor is from but needs to ensure proper use of water resources.

China leads the acquisitions of Hokkaido forest and water rights with 21 transactions out of a total of 57. Hong Kong buyers using Virgin Islands-registered offshore companies accounted for another nine and Singapore investors eight, said Masayuki Mitobe, head of water and land economic research for the Hokkaido government. He said he could not name the investors due to privacy laws.

A quirk in Japanese law allows buyers of nonagricultural land to report the transaction after it’s complete. Hokkaido closed that loophole in April after it found some addresses used by overseas buyers were false, raising concerns that dummy companies were being used for the deals.

While Hokkaido authorities now need to be notified of a deal three months before it’s agreed, so they can investigate the transaction, only three prefectures have followed suit. Even the new rule doesn’t allow blockage of land deals, as it lacks legal authority.

“Forests with abundant water resources are being bought and sold,” said Masaru Onodera, a member of the Hokkaido Prefectural Assembly. “Some land is vital to national security, some to protect food supplies.”

Investor interest in Japan’s water resources comes amid global concern about future supply. The United Nations has warned that two-thirds of the globe may be “water-stressed” by 2015, while places such as India’s Rajasthan region have banned new bottling plants and breweries to conserve aquifers.

A lack of conservation and monitoring may lead to conflicts over water resources, the U.N. said in its August report. “In many countries, national security has historically been defined as military security,” the U.N. said. “It is now understood that military might is only one element in the human security equation, and that water can play a determining role in international, national and transboundary conflicts.”

Chinese investors have been looking at Japan’s water assets with the idea of exporting the resource bottled, said Hokuto Okudera, head of M&A Support Inc., a Tokyo-based broker focusing on mergers and acquisitions for small and midsize companies.

“There was an especially overheated interest from 2010 through early 2011” in Japanese water bottling assets, Okudera said. “In countries like Canada and India, the governments are tightening regulations on groundwater extraction. Some investors targeted Japan as its rules aren’t as strict.”

Control of water resources is important for food security and national security. In Asia, Taiwan restricts overseas investment in land that has water or forest resources, according to a 2011 report on Asia-Pacific real estate by Jones Lang LaSalle Inc. and Blake Dawson. New Zealand requires buyers to get prior permission to purchase land with forest or water resources, while South Korea requires the same for areas close to military installations, the report said.

“In Japan, you can even buy land next to a military facility or an airport — there are no rules against it at present,” said Hideki Hirano, author of “Buying Japan” and an analyst at the Tokyo Foundation think tank, in an interview. “In today’s world you cannot stop foreign investment, but we must make sure the investment is regulated.”

On Sept. 28, U.S. President Barack Obama blocked a Chinese-owned company from developing a wind farm on land close to the Boardman naval base in Oregon, citing security concerns. Delaware-based company Ralls Corp. is suing Obama after he ordered it to remove all property from the land and sell the wind project within 90 days.

The town of Niseko, one of Hokkaido’s most famous ski and hot springs resorts, enforced two ordinances in May last year to restrain development of areas with water sources and the extraction of groundwater. The town plans to buy all land above water sources in Niseko to ensure stable supply, Noriyuki Higuchi, an official at the town’s planning and environment division, said Oct. 24.

Japan doesn’t have a complete land registry to keep track of ownership and boundaries. The nation only began compiling a nationwide registry after World War II, and just half has been completed. At the current pace, it will take another 30 years to finish, author Hirano estimates.

Hokkaido authorities have no address information for owners of around 40,000 hectares of forest land, assembly member Onodera said, adding that 10 percent of letters sent to foreign buyers of the island’s woodlands were returned with the listed address unknown.

China’s interest in Japanese land is a sensitive issue in part due to the territorial dispute over the Japan-controlled Senkaku islets in the East China Sea, which Beijing claims and calls Diaoyu. The conflict sparked nationwide protests in China this year and led to attacks on Japanese stores, restaurants and car dealerships.

Near Mount Fuji, Osaka-based Seven Yellow Ltd. pumps 500,000 liters of water a month from a well and exports as much as 80 percent of it to China.

“Some people know and some people don’t” know that the company’s biggest shareholder is a Chinese citizen, Katsuhisa Yoshida, its managing director, said at Seven Yellow’s office near Lake Shoji, one of the five lakes surrounding the famous mountain.

The Osaka-based textiles firm expanded into water and organic farming about 1½ years ago at the suggestion of its Chinese shareholder, who wanted to go into health foods, Yoshida said. The investment of Seven Yellow has helped create jobs in a rural area that’s starved of local initiatives and is losing young people to major cities, he said.

“We’re not just buying up Japan’s resources, we create local jobs,” Yoshida said. “We do need to protect our forests to save the water, and that’s a task for whoever the landowner is, be they a foreigner or a Japanese.”

In Japan, a landowner’s intake of water from rivers is regulated, yet the use of groundwater is entirely at the owner’s discretion, Hokkaido’s Mitobe said.

Go Okazaki founded the Tokyo-based Standard & Initiatives Properties three years ago to invest in forest land. “Japan’s land is cheap,” Okazaki said. “The water business is quite easy to get into, and from a commercial standpoint, it’s a limited resource.”

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