Terrie's Take 811 -- Are the Chinese Buying Up Japan? E-biz news from Japan.

Terrie's Take terrie at mailman.japaninc.com
Sun Jul 5 21:00:08 JST 2015

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan.

General Edition Sunday, July 05, 2015, Issue No. 811

- What's New -- Are the Chinese Buying Up Japan?
- News -- Eel-flavored soft drink
- Upcoming Events
- Corrections/Feedback -- Outcome for Toyota's arrested Julie Hamp
- Travel Picks -- Nana's Green Tea in Tokyo, Movies in Kyoto
- News Credits

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Back in April, the Tokyo Star Bank announced that it would start lending 
money to Taiwanese nationals to buy real estate in Japan. Given that the 
bank is now owned by CTBC, a large Taiwanese bank, this isn't a 
surprising development, but it does reaffirm the increasing level of 
interest by individual foreign investors in owning property in Japan. 
According to the Nikkei, Taiwanese can now lend up to JPY500m (a 
so-called "jumbo loan") at around 2% annual interest. We have no doubt 
that this is the first of a number of banks who will jump on the inbound 
investor trend.

Then just this last week, Bloomberg ran a rather sensational column 
about the Chinese "descending" on Japan and buying up loads of 
properties. As we have noted, the idea of rich Chinese buying condos in 
Tokyo is not really new, and three years ago we personally saw groups of 
15-30 wealthy individuals coming over on tours organized by a major 
Japanese trading company, where the buyers would go view 3-4 properties 
in the JPY70m-JPY150m range every day they were here.

Still, the Bloomberg article does throw up some interesting facts.

* Sales of residential property to Chinese and Taiwanese are up 70% in 
the first quarter of 2015, according to leading Taiwan listed realtor, 
Sinyi Realty.
* Actual sales by Sinyi Realty in Japan (mostly Tokyo) were JPY11.1bn, 
or about 400 properties during Q1 -- we imagine that the city-wide total 
by all agents is probably 3-4x this.
* Realtors say that about 10-15% of all new apartments in inner Tokyo 
are being sold to Asian buyers
* Chinese investors are primarily focusing on properties of RMB1m-2m 
(approx. JPY20m-40m)

As the Bloomberg article points out, even as the demand by foreign 
buyers is picking up, Japanese are finding property prices outside their 
reach and in December 2014, only 15.4% of Japanese adults in the seven 
largest cities were considering buying a property.

So does this mean that the Chinese (and others) are going to buy up Tokyo?

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[...Article continues]

Probably not. Firstly, most of the buyers are not resident here, and so 
what is driving the lower-end of the market is yield on the properties. 
Presently in Beijing, apartments yield about 2% return annually whereas 
in Tokyo they get about 5%. So if the supply increases because Chinese 
investors are flooding the market, then rental yields will fall because 
of limited rental demand and the market self-govern. The fact is that 
the number of young Japanese, those most likely to be renting a 
mid-market apartment, is falling, and because there is little to no 
immigration to change that situation, the demand-side of the market will 
remain somewhat limited. Although of course in a country with 127m 
people, "limited" is a relative term that could still mean tens of 
thousands of prospective tenants...

That said, there are some other interesting reasons driving higher-end 
foreign investors to buy Japanese real estate -- reasons which are 
unrelated to the actual tenanted return on investment.

1. Property availability. Japan is one of the few countries close to 
China where foreigners can freely and easily buy property. For this 
reason alone, Chinese wishing to preserve their family assets can do so 
by putting some of those assets to work in properties here. These buyers 
are not the same type of people who are looking to actually move their 
families, as we have seen in the pattern of buying and occupancy in 
Australia and Canada. In Australia, apparently about 25% of residential 
sales are to Asians, primarily mainland Chinese, and the objective is to 
let members of their family move there. In contrast, not that many 
Chinese in the mid-level wealth bracket have ambitions to send their 
kids to live and study here.

2. Ownership permanency. As we have mentioned in our newsletters 
previously, Chinese people cannot own their own land in China. Instead, 
land is owned by the state and local governments provide land rights to 
use it. Generally ownership of buildings after getting a land usage 
permit is limited to either 40 or 70 years. This ensures that no one 
group or family gets to accumulate or bequeath significant wealth -- 
part of the socialist ideal. So, yes, Japan does have its own 
socialist-leaning concepts, such as inheritance tax, which is supposed 
to provide similar lineal ownership disruption, but this is easily 
bypassed by owning the property through a corporation.

3. Although it is always risky to bet on exchange rates, there is no 
doubt that the cheap yen is one of the big draws for Chinese and other 
Asian buyers right now. Effectively Japanese property is selling at 
almost half price, and with a buy-and-hold strategy, there is a 
reasonable chance that buyers will come out with exchange gains in the 
future. If not, well the buildings are high enough in quality that the 
owners can afford to sit on them with minimal rent for several decades 
if necessary.

We do believe that all this residential buying activity within Tokyo, 
and to a lesser extent Osaka, Nagoya, and Fukuoka, will drive up 
property prices in the inner city. This isn't going to affect many 
mainstream Japanese, but it will provide some returns to people who 
already live in these areas and who are willing to move out. It will 
also ensure that your average Japanese salaryman is going to be stuck 
out in the suburbs for some time to come -- good news for traditional 
trains/property conglomerates like Tokyu, Seibu, Odakyu, and Kintetsu.

Lastly, it's interesting to see that other leading countries in Asia 
have much stricter rules on foreigner property ownership than does 
Japan, meaning that either Japan will feel justified in the near future 
in introducing some controls, or, more likely, that the Chinese buyer 
flood will morph into a general market increase of investors from all 
around the region.

1. Thailand: Foreigners cannot own land in Thailand, with one exception 
in some specified areas, and even then only after a Board of Investment 
review. Otherwise you need to have a strata title built on Thai majority 
owned land.

2. Taiwan: Foreigners are allowed to buy residential land ("jiandi"), 
subject to some minor restrictions. Foreigners are generally unable to 
buy farm land or land that contains a watershed. So Taiwan is relatively 

3. Indonesia: Foreigners are not allowed to have Right of Ownership (Hak 
Milik), since the right is hereditary and held only by Indonesian 
citizens. Furthermore, nominee ownership, such as by a holding company 
that you might control, is illegal.

4. Malaysia: Significant restrictions on foreign ownership, including 
not being allowed to buy low-cost properties or land set aside for 
Malay-only ownership. There is a retirement land category for 
foreigners, but the rules keep changing and have been getting 
progressively tighter and more expensive.

Oh, and btw, there is a really great (and free) source of information 
about real estate trends in Japan and around Asia from the Nomura 
Research Institute (NRI). Click here:


The last edition was published in July last year, so the next one should 
be coming up shortly.

...The information janitors/


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+++ NEWS

- Latest Tankan survey is optimistic
- Eel-flavored soft drink
- Congress passes fast-track bill for TPP
- New certification system for Japan-sourced food
- Raycop futon bug busting device hits 3m

=> Latest Tankan survey is optimistic

The Bank of Japan's Tankan survey for June shows that large exporters 
and manufacturers are having a good year and are positive about the 
future, while medium to small size companies are sliding back into 
pessimism. The large manufacturers portion of the index was at +15, up 
from +12 in March. For medium-sized manufacturers optimism was down to 
+2, falling from +4 in March, and for small companies it was zero, down 
from +1 previously. Non-manufacturing was a bit better for the SMEs, on 
average being up +2 and +1 for Medium and Small-sized players 
respectively. ***Ed: Diagnosis of this Tankan survey? Tourism revenues 
is helping the SME non-manufacturers -- another reason why tourism is 
probably a better long-term recovery strategy for the nation's SMEs than 
making things.** (Source: TT commentary from cnbc.com, Jun 30, 2015)


=> Eel-flavored soft drink

Apparently a soft drink maker in Shizuoka, Kimura Inryou, is about to 
launch an eel-and-cola flavored soft drink, called, what else? 
"Unagi-cola". The beverage will be flavored with a kabayaki-like extract 
and will be launched as a limited edition product available at highway 
rest stops, omiyage shops, and online. Price? Around JPY200 -- sounds 
like just the thing to send to your friends abroad! Cute labeling, too. 
(Source: TT commentary from thedailymeal.com, Jul 4, 2015)


=> Congress passes fast-track bill for TPP

In a major win for the Obama government to speed up its negotiations in 
the Transpacific Partnership, the U.S. Congress has just approved a 
fast-track bill that lets Obama's government conduct its TPP 
negotiations with minimum of conferring with law makers. TPP is 
supported by 12 member countries and a broad-based agreement is expected 
between the two main players, the USA and Japan, to occur as early as 
the end of this month. The actual final agreement, the one that includes 
all 12 members, could be in place by the end of the year. ***Ed: With 
all the side deals being cut between Japan and the USA, the TPP concept 
has been substantially watered down. But we suppose that some cave-ins 
are better than nothing at all.** (Source: TT commentary from 
japantimes.co.jp, Jun 25, 2015)


=> New certification system for Japan-sourced food

Ostensibly because of a flood of fake products emanating from China, the 
Japanese government is going to introduce a certification system for 
genuine Japanese food. The system will come with inspections, a logo and 
seal, and of course all the usual bureaucracy. The main food targets 
will be wagyu beef, soy sauce, and miso -- both those produced here and 
those produced abroad with Japanese ingredients. ***Ed: The 
accreditation body will apparently be JETRO, which we find exceedingly 
strange, since the food production business usually gets controlled by 
the Agriculture Ministry. For this reason, we're guessing that someone 
in government has decided to help create an independent income source 
for JETRO. Holy shades of Halal certification, Batman...! Does that mean 
that finally JETRO is going to be pushed out from the mother ship?!** 
(Source: TT commentary from asia.nikkei.com, Jul 5, 2015)


=> Raycop futon bug busting device hits 3m

If you sleep Japanese style, you'll probably have wondered at some point 
about keeping the mattress and covers free of mites and other bugs 
crawling up from the tatami flooring. That's of course the concern of 
every cleanliness-obsessed mother in the country (i.e., most of them) 
and it's the reason why Raycorp's groundbreaking bug-busting futon 
vacuum cleaner has done so well here. The company has now sold 3m units 
in Japan and demand shows no sign of letting up. The company is 
forecasting worldwide sales, of which 65% will be to Japan, of about 7m 
devices in the coming year. ***Ed: Great success story of a South Korean 
inventor moving to Japan and scoring it big.** (Source: TT commentary 
from asia.nikkei.com, Jul 4, 2015)


NOTE: Broken links
Some online news sources remove their articles after just a few days of 
posting them, thus breaking our links -- we apologize for the inconvenience.


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=> A reader comments on whether Julie Hamp, the ex-Toyota executive 
arrested for importation of an illegal drug, will get off with a 
reprimand as we suggested in TT-809:

*** Reader: I don't think that Ms. Hamp will be let off as easily as you 
suggest. That is, the cops will look at Ms. Hamp's mislabeling of the 
contents of the package as: 1) recognition that the drug, and the amount 
of it, were probably illegal, and 2) intent to deceive. Further, why did 
she have a month's supply for a business trip of one week or so 
(although I have not seen her trip's planned duration written anywhere). 
Most problematic, however, is that a physical examination of Ms. Hamp 
did not point to any tangible reason for her to be taking such strong 
pain management medicine. My gut feel is that she has dependency issues 
and if I was her boss I would be asking her how she/we should proceed. 
As you noted, though, great that Toyota is standing by her and assuming 
'innocence' until/unless proven otherwise. I see that Akio has gotten 
over his skittishness with the press. Contrast this case with how long 
it took him to talk publicly about the sticking accelerator crisis.

*** We respond: Now that Julie Hamp resigned a couple of days ago, this 
becomes a non-issue for Toyota, but not for her. Apparently she's still 
in jail. Our guess is that she will be released and allowed to return to 
the USA with suitable public contrition. It will be a huge career set 
back for her, and easily sufficient punishment for what happened.



=> Nana's Green Tea Cafe, Tokyo
The best place for your matcha needs

Green tea - or matcha - is a big deal in Japan, and wherever you are 
you'll notice green-tea flavored food and drink all over the place. 
Alongside sakura or azuki bean, it's one of the flavors you must try 
when you're visiting the country. Nana's Green Tea Cafe is an iconic 
destination for green tea aficionados and provides practically every 
matcha-flavored delight you can think of. Perhaps you want to try an 
iced matcha latte, or something savory? Then Nana's is the place to go.

You can find Nana's tucked away on the fourth floor in one corner of the 
Oshiage Skytree. This cafe has so much choice that it might take you 
forever to choose, even with the help of an English menu and time 
waiting in a short queue. It certainly took me a while to decide what to 
have, but when I received my order it was more than worth the wait.


=> Rissei Cinema, Kyoto
Independent movies and old school charm

Situated along Takase River, which runs from north to south in parallel 
to Kawaramachi-dori and Kamo River, Rissei Cinema show movies everyday 
on the third floor of former Rissei Elementary School. It is a compact 
movie theater showcasing independent movies, overseas and Japanese, old 
and new. You can enjoy not only the movies themselves but also the old 
buildings of the former elementary school as well, which remained intact 
even after the closure of the school in 1993. The gateway is a stone 
bridge over Takase River, which is the setting for "Takasebune" written 
by Mori Ohgai in Taisho Era.

Located in one of the famous downtown areas of Kyoto called Kiyamachi, 
it is a few-minutes-walk from the Shijo-Kawaramachi intersection. The 
school was originally constructed in 1928 and retains features from that 
period, such as an arched entrance, old-fashioned balconies, wooden 
corridors, and white plaster interior walls. There are photos of 
graduates of the school pinned up on bulletin boards along a hallway. 
Sadly, you can see from the photos that the number of graduates thinned 
out each succeeding year.




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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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