Japan: the economic consequences of the fetish of space

Abstract

For a generation until 1991, Japanese land market enjoyed the rising property price that outpaced the rate of inflation. The ‘golden age’ of Japanese economy was kept aloft on the fetishism of land, which never perishes and believed to keep augmenting its capital value forever. The banks gladly financed investment as long as a corporation offered property as collateral. The current property boom in Europe and North America, which some believe would keep economy aloft forever, is simply the déjà vu of this past Japanese experience. In 1991, Japanese property market collapsed and the entire musical chair game turned into debt nightmare: once prime property became the source of non‐performing loans, which brought many banks into run for loan stripping out of their former intimate clients, forcing the corporation into more retrospective and conservative business strategies. The whole processs ended up with ‘the lost decade’ of Japanese macro‐economy, the stagnation that has lasted 13 years so far. After all, the fetish of space is never capable of acting as the lynchpin of a macro‐economy forever. This bitter Japanese experience should be a lesson which other economies currently brimful of property boom euphoria.