Japanese Housing Slumps Into Legal, Moral Quagmire

Reviewed by Takahiro MIYAO

Article:
Japanese Housing Slumps Into Legal, Moral Quagmire
The Japan Times (11/26/2007)
http://search.japantimes.co.jp/cgi-bin/nb20071126jp.html

Reference:
Kanseifukyo Threatens Koizumi Prosperity as Japan Re-Regulates
Bloomberg News (11/26/2007)
http://www.bloomberg.com/apps/
news?pid=20601080&sid=aoZ1Mc8y2IAQ&refer=asia

Comments:

As is well known, housing starts have recently declined both in the U.S. and in Japan, seemingly affecting the macroeconomic performance of the both countries. However, the backgrounds for the housing decline are totally different between the two economies, as explained in today's Japan Times article (see the link above).

While the subprime mortgage crisis is behind the U.S. housing decline, the implementation of the "revised building standards law," which took effect on June 20, appears largely responsible for the sharp drop in Japan's housing starts, now about a half in absolute number compared to a year ago. Japanese building standards were strengthened, because of a public outcry to avoid the repetition of possible fabrication of quake-resistance data for building housing and condominiums, known as the "Aneha incident." Here, the problems are: (1) public overreaction, demanding too high a moral standard, tends to result in too stringent regulations in the market, and (2) bureaucratic inefficiency and conservatism prevent the prompt implementation of revised laws, thus depressing market transactions.

Since housing is a large component of the nation's economy, it is only hoped that the decline in the housing market will not last too long. Otherwise, Japan's macro economy might well go down to a deep slump, as suggested in today's Bloomberg News article, "Kanseifukyo (meaning "bureaucratically created recession") Threatens Koizumi Prosperity as Japan Re-Regulates" (see the reference above).

Acknowledgment:
This review is adopted from the following blog (with its Japanese translation):
http://glocom.blog59.fc2.com/blog-date-20071126.html