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Land Investment by Japanese Firms during and after the Bubble Period

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  • Toshitaka Sekine

    (Bank of Japan)

  • Towa Tachibana

    (Bank of Japan)

Abstract

This paper investigates (i) what has determined the land investment behavior of Japanese firms since the latter half of the 1980s; and (ii) how the current market prices of their land assets diverge from their shadow prices (marginal values of land investment). To do so, we estimate nonlinear land investment functions using micro panel corporate data, and calculate the partial q for land assets taking account of their collateral role. The land investment functions reveal that firms, in particular those in the real estate related industries, have been net sellers of land in the 1990s, mainly in response to the decline in sales and the deterioration in financial conditions after the bursting of the bubble. Moreover, manufacturing firms have also sold land because of the hike in the overseas production ratio. Partial q shows that the market price of land held by the real estate related industries has exceeded its shadow price since the latter half of the 1980s. For other industries, market land prices declined to the level of their shadow prices around the middle of the 1990s. However, since then market prices have once again found themselves above their shadow prices, in the face of the pessimistic expectations revealed by distressed share prices after 1997.

Suggested Citation

  • Toshitaka Sekine & Towa Tachibana, 2004. "Land Investment by Japanese Firms during and after the Bubble Period," Bank of Japan Working Paper Series 04-E-2, Bank of Japan.
    • Handle: RePEc:boj:bojwps:04-e-2
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    References listed on IDEAS

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    Cited by:

    1. Toshitaka Sekine & Towa Tachibana, 2004. "Land Investment by Japanese Firms during and after the Bubble Period," Bank of Japan Working Paper Series 04-E-2, Bank of Japan.
    2. Sohei Kaihatsu & Mitsuru Katagiri & Noriyuki Shiraki, 2017. "Phillips Curve and Price-Change Distribution under Declining Trend Inflation," Bank of Japan Working Paper Series 17-E-5, Bank of Japan.
    3. Takashi Nagahata & Yumi Saita & Toshitaka Sekine & Towa Tachibana, 2004. "Equilibrium Land Prices of Japanese Prefectures: A Panel Cointegration Analysis," Bank of Japan Working Paper Series 04-E-9, Bank of Japan.
    4. Toshitaka Sekine & Towa Tachibana, 2007. "Land as Production Input and Collateral: Land Investment by Japanese Firms," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 497-526, November.

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    More about this item

    Keywords

    land investment; multiple q; friction model;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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