Japan (and its Real-Estate market) Rides Again

So the "misery index", a funky name for a measure of, simply, inflation plus jobless rate, will rise to its highest level in 33 years, in a country that's been suffering from deflation in the last 25 years. Is it just me, or does it actually sound like a good sign, with the deflationary cycle finally eliminated?

Interesting name, by the way – so a country that's been suffering from chronic deflation (or negative inflation numbers, in other words), would have virtually no "misery" indexing whatsoever, as long as it makes sure deflation is higher than jobless rates – brilliant!

Here are some interesting excerpts from that very same article –

as for for wages excluding overtime and bonuses falling down – nice way to try and ignore the fact that the total including them has actually gone up, as we've discussed here previously. Please don't make me rehash the same info.

Abe's just pandering to the elderly, nationalist vote – no apology will be retracted, but the "venerable historians committee" will pay lip service to those who want it done, that's all. If you really want to see how "racist" Japan is, feast your eyes on this –

J-LEAGUE SHAMES RACIST FANS IN THE MOST AWESOME WAY POSSIBLE

or this –

RACIST ANTI-KOREAN DEMONSTRATION MEETS 3 to 1 RESISTANCE IN TOKYO

go, Japan  

To reply to your latest comments, here and on that other thread –

The problem with Japan is that while you can make the numbers appear good right now going forward they can become extremely poor under what looks like an inevitable devaluation of the yen…If the yen heads to 200 as many are beginning to speculate…

This is the first in a long string of speculations you’ve put forth that are nowhere near a certainty – while I can’t profess to know what will happen to the Yen, Japan’s economy (nor any other country’s) or the price of eggs on Mars, your assumption seems to completely ignore the other global forces in play here. Abe is actually pushing as hard as he can, bending things to just shy of breaking point, to get the Yen to devaluate to around 120, which is his exports-driven goal, but is having quite a hard time of it – so far the US didn’t even have to retaliate with any QE, since their mellow recovery is actually doing the job for them – but they still have room to push if and when this becomes the case – and this doesn’t even touch upon China, Australia or other, closer countries and their respective economies. To say the Yen will go to 200, post-WW2 figures, is a bit of a stretch, to put it mildly, and when put forth with such conviction as you seem to have is mildly perplexing, to say the least.

…the wrong type of inflation…Incomes are declining in real terms and more in inflation adjusted returns which doesn’t support capital values…

Again, you seem to be speculating with great conviction here. Reality, while no where nearly as conclusive as your wishful thinking reasoning, is actually pointing, ever so slightly, in the opposite direction, as latest indicators seem to suggest (and this is just basic wages catching up to the complete package, including overtime and bonuses, which has already been rising for the better part of the last 12 months) –

Bloomberg – Japan Basic Wages Rise for the First Time in 22 Months in Response to Abenomics

…A 14% annual return may look somewhat anemic after 5 years given the current economic picture and that it will take around 13 – 15 months to claw your entry costs back…

Couldn’t quite follow this statement – what economic picture? If you look at the overall picture, and not at a temporary or single-quarterly currency of GDP fluctuation, which the sales tax and other regional issues will always bring about, things actually haven’t been this good since the bubble economy burst in the 1990s –

Market Realist – Japan Business Conditions Haven’t been This Good for a Decade

…As a result of the aggressive monetary and fiscal policies being employed, the Japanese yen has weakened 30% since late 2012 and has made a major contribution to the growth in profitability among Japan’s exporting companies…

the non-manufacturing sector (the green line) has made a significant recovery, outpacing manufacturers on the recovery for the first time since the bubble economy burst in 1990. This points to a fairly broad-based recovery in Japan…

corporate profits have begun to grow rapidly. Plus, the slack production capacity in Japan is out of the danger zone post-2008, and headed back to the 2007 levels. Should this trend continue, we might expect to see fixed investment data, as noted above, move back to the levels seen during the 2002–2006 period of expansion, when the Nikkei stood at 18,000—roughly 30% higher than the Nikkei is today…

the worst is over as far as excess capacity is concerned. Given the current trend, it’s conceivable that capacity levels could reach the levels seen during the recent 2006 peak, pushing the capacity utilization operating ratio back to the 2007 highs as well…

fixed investment recovery in Japan is finally accelerating and supporting growth…fixed investments as a percentage of corporate profits are at post-1998 peak levels, suggesting that there’s plenty of room for more investment…

the willingness of Japanese banks to lend—nearly the best levels we’ve seen since 2007. With ultra low rates, ultra high cash levels, and growing corporate profits in Japan, this data would suggest the growth of a positive environment for Japanese equities…

And it goes on and on…

As for your opinions on the shrinking population and its reflection on the tenant base – for starters, at the moment, there are droves of people moving out of the dying villages and teeny tiny towns, and into capital cities and formerly small towns which are slowly conglomerating into bigger and bigger townships – so even for the short-medium term, there are now far more substantial investment hubs in Japan that have seen population growth in recent years (which is where property investors purchase in the vast majority of cases, unless looking for a mountain or ski slopes holiday home etc) – So not only Tokyo and Osaka, but now Sapporo, Nagoya, Fukuoka, Kumamoto and even smaller, formerly unheard of towns/cities like Kikoochi, Utsunomiya, Fuji city, and others, are now experiencing a growth in population, in sharp contrast to national trends.

As for immigration, you write –

… not only is Japan’s population getting older but it is also contracting. Just to hold their population requires immigration to jump to some crazy figure like 17 million which isn’t going to happen in this lifetime. So buyer demand is progressively falling off a cliff so to speak…

Quite a long cliff to fall off, considering Japan is Asia-Pacific’s biggest property investment market. Not sure where you got your 17 million figure from, but regardless, not only has migration laws gone through two huge overhauls, the latest round of which has introduced skilled migration scheme to the country, but is now also officially considering increasing the number of migrants to around 200,000 a year, which government officials believe will keep the population stable –

Japan Times – Japan may Boost Immigrant Numbers

…The Sankei Shimbun reported Friday that the Abe administration has decided to consider accepting a massive number of immigrants, possibly as many as 200,000 a year, to make up for the rapid aging and shrinking of the Japanese population.

“It is true (the Council on Economic and Fiscal Policy) is now having discussions to promote mid- to long-term development of Japan, with an eye on structural changes such as the shrinking of the population,” Suga, the top government spokesman, said during his daily news conference…

Japan will be able to maintain a population of more than 100 million if it accepts 200,000 immigrants a year and the total fertility rate, a key indicator of a country’s birth trends, recovers to 2.07 by 2030 from the current 1.39…

The other point you forgot to mention – there’s more than one solution to Japan’s shrinking population – one is increased immigration, and yet another is re-enabling family support services, to allow women out of the vicious “Be a housewife or have a life” cycle they’re currently avoiding by remaining single in most cases – one of the major causes for population decline – this is an integral part of Abe’s latest policies as well.

Bottom line – it’s great to speculate, but really, we (and our clients) generally follow the three rules outlined time and time again – 1. Achieve reasonable monthly cashflow in reasonable tenant base localles
2. Don’t invest with money you’ll need back in a hurry (i.e. to pay a mortgage back home or live off, etc)
3. Pad your forex transfers and always leave extras behind, hedge your currencies and investments, and allow ample timeframes for transfers

Follow these three, and you’re guaranteed to ride the booms and busts of whichever market you choose to invest in. In fact, you’ll be utilizing the drops just as well (sometimes better) than the hikes. Japan is no different, and anybody’s crystal ball is as good as the next guy’s, really. I have no idea what tomorrow will bring (although I think Abe’s having the best go at improving things that Japan’s seen in decades) – but I position myself (and my clients) to benefit in the long term, and on any dips in the interim, as I’m hoping most people here do.

• This reply was modified 10 years, 7 months ago by  Ziv Nakajima-Magen.

Yes, you might be a tad premature, or just wrong, as bass and his cronies have been for the past two decades (at least as far as doom and gloom prophecies go – economies go up and down of course, but the Armageddon they describe is somehow not happening, much to their chagrin) ;) sorry but can’t delve deeply into this now – on my way to Tokyo, to meet a group led by a QLD gov mp who are here to develop new business with Japan’s collapsing economy (now with growth rates higher than China’s).

But promise to come back and play more shortly! I’d recommend going for “willy wonka” next time, since big brother (maybe paid off by a coalition of Obama, Abbott and Abe San???) seems to have something personal against you – or maybe it’s just that knocking everyone and everything out just for the sake of being argumentative doesn’t actually fly that well with most people, who prefer a more balanced and constructive approach to discussion (I know, I know, everyone’s so stupid except you, you just can’t help it, right?)

Yes, you’re exactly right, what I said was that this event will solve all of Japan’s problems. Oh, yes, and also I said that Japan’s growth this last quarter will last forever and also cures cancer. Thanks for the translations. Freckle, did you actually want to say something except “boo boo boo everything you say is boo and I don’t like it”? Getting a bit tired of this childish banter…