Tokyo real estate has become even more expensive, though it should be noted that it’s still reasonable when compared to other large cities in the world. An article that appeared Dec. 7 in the Tokyo Shimbun cited a survey about luxury condominiums where the price of a representative example in trendy Moto Azabu was pegged as the standard. If the Moto Azabu condo price is set at 100, then the price of a comparative condo in London is 181 and one in Hong Kong 218. (Masako: “And even with a luxury condo in Japan, you still get only one toilet.”)

Tokyo isn’t as expensive as most foreign media think it is, but even disregarding the usual markups for properties designed for so-called expats, condominiums in the capital are still out of reach for the average worker, and have become more so since the advent of the pandemic. According to the same Tokyo Shimbun article, the average price of a new condominium in the 23 wards in October exceeded ¥90 million. For sure, after COVID hit, more people decided that if they could telework, they’d rather live outside of Tokyo, but that didn’t really put any downward pressure on prices in the city center, which are not only popular, but extremely popular among rich people, the only socioeconomic layer that has seen an appreciable rise in income in recent years. In 2021, the average price of a new condo in the 23 wards went over ¥80 million for the first time since the bubble era, and in October the average was ¥93.65 million.

The main reason has less to do with COVID than with the Bank of Japan, whose president, Haruhiko Kuroda, implemented his infamous money easing policy when he assumed his position ten years ago. Since then, most of the cash that the BOJ has pumped into the money supply has ended up in the accounts of the very well-off, and they’ve used it to buy expensive property, thus pushing up prices across the board, but mainly in the high-end market. Add to this pressure the construction crunch that accompanied the Olympics, when labor and materials shortages made it more expensive to build anything, and prices of new apartments have outpaced the spending capabilities of the average Japanese family. Tokyo Shimbun quotes a 27-year-old “homemaker” who lives in Shinjuku with her husband and three children and frets that she wants to buy a new condominium in the area rather than “keep paying rent,” but that prices are way too high. “I want to move when the kids get settled in school,” she says, “but I want to live in central Tokyo and there’s nothing we can afford.” Dream on!

It may seem shortsighted to talk only about new condos in Tokyo, but the mainstream media has never been very interested in covering available stock anywhere but in the Tokyo metropolitan area. Still, for argument’s sake let’s leave the rest of Japan alone. If the woman cited above was herself employed and half of a “power couple” (at least ¥15 million combined yearly income), then she would not only be able to qualify theoretically for the down payment and loan conditions for a new condo in Shinjuku, but she’d be part of the demographic that was pushing up prices. Another demographic doing that is seniors with a lot in the way of assets. A real estate representative says that market growth is being spurred by people who already live in central Tokyo and want to “replace their present homes.” Redevelopment is progressing apace and the portion of the population that has this kind of money on hand remains stable. If these are mostly retired people, they are not the kind of retired people who sell their apartments and then move to the suburbs. They stay in the city center, and get a nicer place. They can afford it. 

A real estate agent who mostly represents foreign buyers and whose network extends to 70 countries told Tokyo Shimbun that through May of this year, the number of inquiries they’ve gotten from real estate companies in the U.S. for Tokyo properties has nearly tripled since the beginning of the year, owing mainly to the drop in the value of the yen against the dollar. To Americans, Tokyo real estate is like one big fire sale right now, and buyers are snatching up deals in the most famous neighborhoods in the city—meaning, the ones whose names they’ve heard before—Shinjuku, Shibuya, Ginza, Roppongi. The truly wealthy are buying condos in the ¥500 million-¥1 billion price range, which, as mentioned already, is still cheap compared to other world class cities. 

Regarding this gap and Kurodas role in it, as part of a series on the BOJ, an article in the Dec. 2 Asahi Shimbun analyzed how asset prices in general have been on the rise while benefiting a fairly narrow demographic. As already mentioned, for the past ten years the difference in standard of living between people with assets and people without has become more pronounced. The Nikkei average index has more than doubled since 2013. Moreover, the number of individual securities accounts in Japan has increased by 50 percent in the last decade to 31.8 million. But this growth is not organic. Asahi says that the BOJ’s influence has effectively “deformed” the market through its wholesale purchase of exchange-traded funds (ETFs). When Kuroda came on board, the BOJ bought, at most, ¥1 trillion’s worth a year. This increased to ¥12 trillion a year by the time COVID was raging, and presently, the BOJ owns ¥51.3 trillion in ETFs, accounting for 7 percent of all the stocks in the 1st section of the Nikkei. The BOJ also buys Real Estate Investment Trusts (REITs), thus boosting the property market directly. 

With interest rates kept artificially low by the BOJ, people with money not only can buy expensive properties cheaply, but investors of all stripes can borrow cash to invest easily. Asahi interviews a 32-year-old salaried employee who is now investing heavily in real estate. In addition to owning his own condominium in Tokyo, he owns three other properties that he rents out. These purchases were financed with money borrowed from net banks, more than ¥100 million at variable interest rates. He says that now he makes about ¥180,000 a year after taxes and loan payments, so, of course, he’s very worried that the BOJ will change its low-interest policy. If it goes up, even by a fraction of a percentage point, he could be ruined. His only fallback is his own condominium, which has actually increased in value by about ¥20 million since he bought it in 2012. 

But stock investors have an even better situation vis-a-vis the BOJ. One 45-year-old player from Kanagawa told Asahi that he just follows the BOJ—whenever he reads that they’re buying more ETFs, he immediately goes out and buys mutual funds and then sells them after a short period. Since 2017, his initial investment of ¥1 million has grown to ¥10 million. He’s used this windfall to buy property in Shimane prefecture, where prices are still cheap. He now owns 5 houses and 3 apartment buildings which he rents out. All were bought with the help of cheap loans from local banks.

At the other end of the scale are salaried employees who don’t have assets to invest, and in their effort to remain in the middle class are just barely keeping their heads above water. One, a regular employee who makes “more than the average ¥5.33 million annual salary as cited by the tax bureau” is looking to buy a condominium in Saitama Prefecture, just north of Tokyo. The size he wants, however, costs at least ¥70 million, which he doesn’t think he can afford because his wife just had a baby and he doesn’t see his salary increasing any time soon, so he’s given up. 

What this indicates is that the widening income gap is mainly being pushed by capital gains and not employment income. An economist who teaches at Hitotsubashi Univ. told Asahi that statistics show that the actual income gap itself hasn’t changed much in ten years, but as the BOJ easy money policy has persisted, causing the value of the yen to go down, even more companies have resorted to hiring non-regular workers to avoid paying benefits, which shrinks the middle layers of the income spectrum and swells the layers at its extreme ends—more lower income households on the bottom and richer layers on the top. The income gap with regard to salaries hasn’t changed that much, but there are more poor people and those who already have comfortable assets are getting richer. It is the asset gap that is widening. A recent government survey of home finances shows that in 2005, households of 2 or more people with assets of ¥30 million or more accounted for 51.6 percent of all household assets in Japan. In 2012, this portion had risen to 54 percent; in 2021 59.7 percent. None of the asset layers below this one increased at all. Currently, the average household has ¥15.6 million in savings, but median household savings is only ¥4.5 million. And the higher you go up, the greater the increase in asset value. The highest layer’s average household asset value in 2019 was ¥135 million, an increase of ¥10.3 million since 2014. The lowest layer, in contrast, has lost ¥2.15 million in assets on average since 2014, and many households in that layer are actually in debt, meaning they have minus assets. 

So there is no trickle down effect from the BOJ’s easy money, low interest policy, which is now in its tenth year and has no end in sight. At a press conference in July 2021, Kuroda was asked about the income/asset gap, and he said it is not the BOJ’s concern. That’s for the government to worry about. They can rectify matters with social welfare and tax policies. What the BOJ really worries about, he didn’t say.