Real estate prices in Japan and Lewis turning point
This paper has done a model analysis from a long-term perspective about Real estate prices in Japan. In particular, we consider a Lewis turning point with the rise of land prices over time. It is analyzed by state space methods. Using the model, we examined how the real estate transactions were affected by the population growth and the technological progress. Furthermore, we have compared two types of models which consider banking sector and no banking transactions. In particular, population decline in Japan would have a significant impact to the long term recession since 1990. We are skeptical about the population declining effect using our model. A Summary of our model estimation is as follows. (1) The Lewis turning point with both technological progress and population growth is confirmed. Japan has passed the Lewis turning point in the second half of '70. (2) Since then, banks played an important role in the formation of real estate prices. (3) A trend that has lowered the price of real estate with declining population cannot be confirmed clearly. (4) In the bubble period, real estate price exceeds the reality of the macro economy due to the bank loan behavior. The Japanese experience of the rise in land prices is very interesting in considering the future of the Asian countries. Asian countries have made remarkable economic development. However, these benefits of growth would be absorbed by the increase in asset prices and real estate investment. This is very similar to the past experience of Japan.
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