Power from the Ground Up: Japan’s Land Bubble

For more than two years, Americans have heard distant rumors of unthinkable land price escalation going on in Japan. News reports indicate that in 1988, Japan’s theoretical land value surpassed by four times that of all land in the United States, a country nearly 25 times larger than Japan. Another real estate bulletin: the calculated cash value of a single ward in downtown Tokyo—Chiyoda-ku—could purchase all of Canada. And another: land in Tokyo’s Ginza shopping district is selling for $250,000 a square meter. Closer to home, the commercial real estate industry in the United States has felt some of the impact of these tremors in the rapid acquisition of “showpiece” purchases and properties in cities across the country by Japanese investors and corporations. The Rockefeller Center purchase captured the public’s imagination but was actually a relatively small transaction in view of the estimated $53 billion in United States real estate acquisitions made by Japanese investors. Nearly all of these purchases have been made since 1985; the total has been projected to reach $100 billion in 1992.