1980 Japan Re Boom Case Study

Case Study: 1980 Japan RE Boom

The governments main purpose weathere local of federal is to put their influence on land use for the “highest and Best use”. There are a few possible ways it can do this, some are: deregulation, regulation, or higher and lower taxes. This essay will discuss the issues that caused the Japanese market boom. I will summarize an answer the case, analyze the situation, the incentives that were gained from the roles of credit, and the government influenc it had in the market.

In the article, “ The effect of bank credit on asset prices: Evidence from the Japanese real estate boom during the 1980s” it goes over on whether bank credits fuel assest process after seeing the comparision between banks losing their blue chip

Thereby having a positive flow of cash will increase land prices and overall net worth of firms; this is also the same for asset holdings (Nada, 2008). Iwaisako in “96” helped shine some light on the “debate on land price inflation, and banks roles in fueling real estate lending (Nada, 2008, p.59).” There was another paper that was written by Peek and Rosengren in 2000 that showed Japanese Markets and when their lending slowed down the construction projects in the U.S. fell as well (Nada, 2008). In the first part of the study it tested to see who was the main force in bank lending. The second part was how bank credit affected the value of land. Then third part was just the conclusion. In 2001 Hoshi, reported that individual bank data showed an “increase in the proportion of loans to the real estate sector in the 1980’s led to higher non-performing loans in 1998 (Nada, 2008, p.61).” A governmental factor that influenced the Japanese market is for example a decline that was seen in the 1980’s after a foregin exchange law. Hoshi and Kashyap debated that a change in deregulation, combined with the limited liability policy, could possible explain why banks didn’t get smaller when losing keiretsu (Nada, 2008). One way of looking at this study is that the saving options that were on the households had no effect because people were still putting money in their banks. The Japanese government applied interest rate controls, to guarantee profits, and definte deposits (Nada, 2008). Further into the study they created a convoy system that secured banks that no bank would ever go bankrupt. This allowed the government to take on that risk. However, according to Nada 2008, “this system was not made to monitor risk-taking by banks, or t o even evaluate them”. The increase in land values were track to the actions done by the “ Bank of Japan” and “Ministry of Finance”, who had a