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The Land/Housing Problem in Japan: A Macroeconomic Approach


  • Ito Takatoshi


This paper presents an overlapping generation model for the framework of analyzing the long-run trend in land prices, with the following propositions: First, it is possible to define a steady state in which land price measured in terms of the commodity price is rising. The land price increase in this case is due to "fundamentals". In the model, there is no room for deterministic bubbles. Second, when there are two countries, one with a land supply constraint and another without it, the real exchange rate of the land-constrained country appreciates. When a combination of a tax on residential use and a subsidy for productive (non-housing) activity is introduced to this economy, the ratio of residential use will decrease. Moreover, the size of current account imbalance will increase by the tax-subsidy program. The Japanes and U.S. data were examined for the implication of the model, namely the land value and GNP would increase at the same rate. Data for the U.S. data and Japan before the mid 1970s look consistent with the theoretical prediction. Since the mid-1970s, a large fluctuation and an increasing trend are prominent in the Japanese land value/GNP ratio. Several possible reasons for this phenomnenon were discussed without pinpointing to the cause.
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Suggested Citation

  • Ito Takatoshi, 1993. "The Land/Housing Problem in Japan: A Macroeconomic Approach," Journal of the Japanese and International Economies, Elsevier, vol. 7(1), pages 1-31, March.
  • Handle: RePEc:eee:jjieco:v:7:y:1993:i:1:p:1-31

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    References listed on IDEAS

    1. Ito, Takatoshi & Roley, V. Vance, 1987. "News from the U.S. and Japan : Which moves the yen/dollar exchange rate?," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 255-277, March.
    2. Nanto, Dick K & Takagi, Shinji, 1985. "Korekiyo Takahashi and Japan's Recovery from the Great Depression," American Economic Review, American Economic Association, vol. 75(2), pages 369-374, May.
    3. Ito, Takatoshi, 1987. "The intradaily exchange rate dynamics and monetary policies after the group of five agreement," Journal of the Japanese and International Economies, Elsevier, vol. 1(3), pages 275-298, September.
    4. Ito, Takatoshi, 1988. "Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 296-305, May.
    5. Mussa, Michael, 1979. "Empirical regularities in the behavior of exchange rates and theories of the foreign exchange market," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 11(1), pages 9-57, January.
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    Cited by:

    1. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    2. Takatoshi Ito & Keiko Nosse Hirono, 1993. "Efficiency of the Tokyo Housing Market," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 11(1), pages 1-32, July.

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