The latest data on land prices across Japan suggests that the benefits of Prime Minister Shinzo Abe’s fight against deflation have yet to reach many of the nation’s rural economies. While the recovery in land prices has become more evident in the three largest metropolitan regions in and around Tokyo, Osaka and Nagoya, and prices are beginning to rise in some big cities outside of these regions, prices in many parts of rural Japan remain stagnant.
As Japan’s population faces an accelerating downtrend, especially in rural areas, a nationwide increase in land prices such as the one experienced during the bubble boom of the late 1980s to the early 1990s is not expected in coming years.
The Abe administration has set an agenda of revitalizing the rural economies so that they share the fruit of the recent economic upturn. Such efforts should not end with the same old pork-barrel spending by the central government; they should be aimed at supporting the initiatives of local authorities to make their areas more attractive to people and businesses.
According to data posted by July 1 at 21,700 locations nationwide monitored by the Ministry of Land, Infrastructure, Transport and Tourism, average residential land prices in the three major metropolitan areas of Tokyo, Osaka and Nagoya rose 0.5 percent from a year earlier for the first increase since 2008 — before the collapse of Lehman Brothers triggered the global recession. The margin of increase in average commercial land prices in these areas widened from a year ago.
The nationwide average in residential land prices fell 1.2 percent for the 23rd straight year of decline, while commercial land prices dropped 1.1 percent for the seventh straight year-on-year fall. Prefecture by prefecture, however, land prices either increased or declined at a slower pace than in the previous year — for all of Japan’s 47 prefectures.
Officials attribute the recovery in land prices in urban areas to the monetary easing under Abe’s watch that fueled investments in commercial land as well as his administration’s tax breaks for home buyers. Residential land prices in some parts of downtown Tokyo close to the planned venues of 2020 Summer Olympic Games increased sharply due to robust condominium demand.
Outside of the three biggest metropolitan areas, however, land prices remain a mixed picture where polarization is becoming clearer between core cities in each region and other parts of rural Japan. An upturn in land prices in such large cities as Sendai and Fukuoka is picking up speed, and conditions are improving in many prefectural capitals.
Still, about 80 percent of all the locations outside the Tokyo, Osaka and Nagoya areas monitored by the ministry saw their land prices fall from a year before.
Many rural areas are struggling to revitalize themselves in the face of an aging and declining population. Land prices are not likely to pick up in depopulated areas where housing demand peters out. And falling land prices reduce fixed-asset tax revenues for those municipalities and tie their hands in local administrative services.
Aware of the criticism that the benefits of “Abenomics” have tended to focus on urban areas and big businesses, the Abe administration has begun to emphasize the need to spread the benefits across the country.
Abe pledges to take “radical policy steps of different dimensions” to revitalize the nation’s rural economies and cope with depopulation in such areas. Shigeru Ishiba, who was appointed minister in charge of regional revitalization in Abe’s reshuffled Cabinet, says he will seek to eliminate pork-barrel projects and vertical divisions among ministries in government spending to support rural parts of the country.
Fiscal 2015 budget requests reportedly feature many similar programs sought by different ministries under a special quota on spending for rural economies, including programs that appear to have been driven by political pressures to cater to rural voters ahead of the unified series of local elections next spring. Whether the Abe administration stays true to its words to introduce meaningful measures must be closely watched.
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