| <Extended
Recession and Asset Deflation>
Until the beginning of
the ’90s, real estate
values in Japan soared
higher than the GDP growth.
Since the collapse of
the bubble economy, this
trend has been reversed
and real estate values
have continued to decline.
At present, they have
fallen back to the level
of 1983. Due to the long-term
decline in real estate
values, financial institutions
are beset with a significant
amount of bad loans to
process, and this is having
a major effect on the
general economy. For the
Japanese economy to emerge
from its current depressed
state, it is necessary
to overcome this asset
deflation.
<The Japanese
Government’s Economic
Measures and Their Effects>
The Japanese government
has taken large-scale
efforts to remedy this
situation. In addition
to issuing a large amount
of government bonds, the
Bank of Japan is maintaining
a financial relief policy
of cutting the interest
rate for unsecured overnight
call money to an effective
rate of zero percent,
and has completed the
funneling of public funds,
totaling more than seven
trillion yen, to banks.
For promoting acquisition
of individual houses,
a large tax reduction
has been implemented.
Housing loan deductions
have been extended from
six years to fifteen years,
and there have been some
reductions in real estate
acquisition tax, registration
tax and transfer tax.
For the Japanese government,
these measures seem to
represent the limit to
efforts that can be made
to stimulate the economy.
As a result of these economic
stimuli, the Nikkei-225
index, which was less
than 14,000 yen at the
end of last year, had
risen to above 18,000
yen by the month of July,
and the contract rate
of newly supplied condominium
has reached a high level
of more than 80%. |
