Japanese Economy and Real Estate Market

1. The Japanese Economy

The scale of Japan's economy is third in the world behind the U.S. and China, at approximately US$5.4 trillion in terms of nominal GDP (International Monetary Fund, 2010), and third at approximately US$4.3 trillion after adjusting for purchasing power parity. Japan is recognized as one of the top global centers for innovation, offers attractive business and living environments, and its well-educated work force, high savings and investment rates, and highly efficient, diversified and competitive economy further enhance the country's allure.

Source: JETRO Newsletter, March 2010

Japan has also become a trendsetter; the country's activity, creativity and strength in the areas of fashion, digital content, food and related areas are also currently drawing considerable attention.

[ Factors Behind the Strengths of the Japanese Economy ]

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2. Investing in Science and Technology

A comparison of advanced countries shows Japan to be one of the global leaders in scientific and technological research and development investment. According to a recent report, Japan took the top spot in financial investment in science and technology as a percent of gross domestic product (GDP), with Korea – another Asian nation – coming in second. Japan is one of only two developed nations which invests more than 3% of its GDP into scientific and technological development.

Science and Technology Development Expenditure (Percentage of GDP)

Source: Ministry of Internal Affairs and Communications

Over the ten-year period from 2000 through 2010, Japanese scientists have been selected for three Nobel Prize awards in physics, and six in chemistry. Furthermore, Japan is second only to the U.S. in global share of PCT (Patent Cooperation Treaty) applications, accounting for 19% of all applications submitted worldwide.

Share of PCT Applications by Country of Origin

Source: "Japan Patent Office Annual Report 2009", Japan Patent Office

Japan makes a very strong showing among the top fifty most active companies in terms of PCT applications. A Japanese firm occupies the number one spot, as well as three of the top ten and eighteen of the top fifty positions.

PCT Applicants Ranking, 2010

Source: World Intellectual Property Organization (WIPO) Statistics Database

Over the past ten years, the strength and potential long present in Japan's scientific field has begun receiving worthy recognition internationally. Evidence suggests that, over the first ten years of the new millennium, the country has become even stronger.

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3. Japan's Real Estate Market

Overall land prices in Japan's three major metropolitan areas rose through 2007 and 2008, but, following the so-called Lehman shock, declined in 2009 and 2010. This trend was common the world over after the onset of the global financial crisis. Transaction volume in the 23 wards of Tokyo and Osaka Prefecture showed subtle growth in 2010, but this increase followed a severe, extended decline beginning in the second half of 2007 and continuing through early 2009.

In 2009, the first merger in the history of the J-REIT market was executed, and the year saw a total of three mergers. Further M&A activity ensued, and as of April 2011, there are a total of 35 J-REITs listed on the Tokyo Stock Exchange. The TSE REIT Index dropped sharply after peaking in May 2007, and after stabilizing somewhat in March 2010, began to rise following intervention by the Bank of Japan in the form of acquisition of investment units.

Tokyo Stock Exchange REIT Index and Total Market Value
Total Market Value in Trillions of Yen

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