Abstract
This paper is part of the project of the international comparison analysis of household behavior of mortgage choice and its demand. It includes Australia, Japan and the United Kingdom. Before the estimation of the household mortgage choice and the mortgage demand functions using the pooled data of three countries, a brief survey of demographics, macro economy, financial conditions, housing market, and mortgage market in each countries are presented. This paper provides the case of Japan. Japan has been suffering from deflation for a long time and sluggish economy as well. Japan experiences population decreasing and rapid aging, jointly with fertility declining, which affect negative impact on potential growth rate. These demographic factors impact the timing of purchasing house, especially young households. Young homeownership rate has been declining for several decades and still low compared with other countries. On the other hand the homeownership rate on average is almost stable for decades. In the wake of population aging and fertility declining, vacancy rate is growing for several decades. Deflation still continues and GDP growth rates are still low, sometimes being negative. After the Great Financial Crisis (GFC) housing market has been stagnant and then also does mortgage market. There are various kinds of mortgage instrument in Japan; from ARM (Adjustable Rate Mortgage, Variable Rate Mortgage), short-term FRM to long-term FRM (Fixed Rate Mortgage). Therefore borrowers have potentially a large option for selecting instrument, which especially induces borrowers’ smoothing refinance jointly with lower fee for it. Recent historically low interest rate policy by BOJ (Bank of Japan) is supposed to induces household to take up housing loan, however, mortgage market is not so active. Under these condition, households intend to prefer ARM to FRM and ARM share has been growing largely. This trends is slightly depressed recently due to the negative interest policy, however, ARM share is still large compares to before GFC period. Taking into consideration the fact that, although interest spread has been narrow, borrowers select ARM, household behavior of mortgage choice depends not only mortgage rate but also other factors such as income variation and borrowers’ expectation on income, price and interest rates. As for household wealth, Japanese households prefer safe assets to risky assets. Housing wealth has a large part of household wealth in Japan, which is a common feature in developed countries. Taking account of that Japanese household is a risk averter, it should be noted that housing wealth becomes a risky one due to decreasing of the house price.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.