Illustration by Phil Couzens
Seth Sulkin is the President and CEO of Pacifica Malls K.K., a Tokyo-based real estate asset manager specializing in commercial properties.
Having just come back from another visit to Shanghai, the contrast between Japan and China is starker than ever. Shanghai is in a speculative frenzy with locals and foreign investors assuming never-ending growth. In Japan, “wide shows” on television are predicting that Japan will soon be a vassal of China and are comparing the coming wave of Chinese investment in Japanese real estate with the Japanese companies of the bubble era that acquired U.S. trophy assets such as Rockefeller Center and Pebble Beach.
This month, Japan is drastically lowering the visa requirements for Chinese tourists. It is clear both from anecdotal discussions with friends and business colleagues in Shanghai, as well as official sources, that Japan is a very popular tourist destination for middle- and upper-class Chinese. A number of businesses have cropped up in both countries to serve the needs of Chinese individuals looking to invest in Japanese real estate, and property tours are becoming an important part of the Tokyo travel itinerary. Chinese investment in Japanese real estate is good for Japan, as is spending by Chinese tourists at Ginza department stores and Akihabara electronic stores, but it is not enough to turn around the economy.
As long as allowing large-scale immigration is off the national agenda and the government fails to take aggressive action to increase the birth rate, any spending in Japan by foreigners is welcome, but it won’t be enough to overcome Japan’s systemic problems. As is widely known, Japan’s regional areas are suffering far more than Tokyo. The lack of economic activity leads to a drain of population as young people move to big cities for jobs, becoming a vicious downward cycle.
Hida Takayama in Gifu Prefecture is an interesting example of both the benefits of tourism and the problems of a small town. In June, I visited Takayama for the first time in more than 20 years and I had forgotten what an architectural gem of a town that it is. Most people probably think of Takayama only for its famous thatched roof country houses, but the old part of the city is a remarkable collection of beautifully preserved buildings, including the former city hall, which is one of the best historical museums that I have ever seen in Japan.
Even though Takayama has a very inconvenient location (2 1/2 hours from Nagoya), the number of foreign tourists has risen substantially in the last several years. In a town with a population of only about 93,000, the number of foreign tourists is about 150,000 per year and about a third of those come from Europe, so they really stand out walking down the street. The problem is that while businesses catering specifically to foreign tourists are enjoying the benefits, the contraction of the Japanese economy more than offsets this growth. In the last five years, as the number of foreign tourists to Takayama grew by 250 percent, the number of Japanese tourists fell by 275,000 to about 3.9 million, so the total visitor count is actually lower than before the foreign surge started. Takayama’s population, meanwhile, which peaked five years ago as a result of a merger with surrounding towns, has been falling 0.5 percent or more per year. In a town of only 93,000 people, the loss of 500-800 people per year is devastating, and without a university to keep young people at home, there may soon be a shortage of people to take care of Takayama’s precious tourism assets.
Increasing the birth rate is the best solution to all of these problems, but at the moment, the Japanese government seems too distracted by the upper house election and the World Cup to focus on the future.
