By James Fink, SIOR
As China and India progressively capture the world’s imagination, it has become common for the media to reduce Japan
to a series of conflicting and oversimplified stereotypes for
mass consumption. This is particularly true in economics,
business and real estate, where Japan is often portrayed as
a neo-mercantilist nation of savers with some of the most
expensive real estate in the world. Alternatively it is purported to be a country in an unstoppable deflationary spiral,
whose businesses have lost their competitive edge to Korea
and China, with real estate values in perpetual decline.
Neither extreme is a fair representation of Japan today.
Japan is, however, the ultimate “canary in the coalmine”
for both the developed nations and China. The manner in
which the country tackles problems stemming from export
dependence, lower-cost foreign competition, an aging population, and high corporate, and individual taxation, as well as
national pensions and healthcare, will be a laboratory for the
To understand the inconsistent views, you must first
understand where Japan currently is in relation to the world.
The landmass is roughly the size of California or Germany,
but it sustains a population equivalent to 40 percent of the
United States. The density is similar to India. Much of the
country is mountainous and unsuitable for urbanization or
agriculture. Accordingly, most of the population lives in flatter plains, often near costal areas.
With the world’s tenth largest population of just over 127
million people, there are 12 cities of over one million peo-
ple and another 15 cities with more than 500,000 residents.
Germany has only 13 cities with 500,000 or more residents,
while there are only four such cities in California. Tokyo is a
city, federal district, and metropolitan area with a population
of eight million to 34 million, depending on which Tokyo
borders you select. It is the largest and certainly cleanest and
best-functioning metropolitan area in the world.
Japanese women have the longest lifespan in the world
(average age, 85.6 years), with Japanese men ranked third
(78.8 years). The Japanese are aging rapidly, with 23 percent
over age 65 today, stretching to 30 percent within 10 years
and 40 percent by 2050. The population is entering a gradual
decline. In recent years there have been 9. 6 deaths/1,000 of
population versus 7. 7 births/1000. On the bright side, the
adult workforce remains massive at 66 million. There are
only 19 countries that have even a total population greater
than the number of workers in Japan.
Japan has enjoyed its position as the second largest economy
globally for decades. It created over USD 45 trillion of GDP
in 2009 while experiencing - 1. 4 percent inflation (deflation).
It is the third largest importer and the fourth largest consumer
of oil. During 2010, Japan and China traded the mantle of
#2 economy back and forth. China will ultimately capture
the second spot behind the United States, given that China’s
population is 11 times larger, its landmass is 25 times larger,
and it has a massively larger pool of natural resources.
Japan remains a key source of manufacturing and intellectual property. Without the benefit of an “Intel Inside” brand-