Japan: Selected Issues
IMF Staff Country Reports, February 10, 2020
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- Japan: Selected Issues
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Bibliographic details
- Published: February 10, 2020
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513529424.002
Summary
- This Selected Issues paper assesses the relationship between demographic trends and housing prices in Japan.
- The paper focuses on regional differences in population dynamics to understand the extent to which demographic trends have influenced housing market prices in Japan in the past twenty years.
- Large cities, notably the Greater Tokyo area, are experiencing net migration inflows, while other regions are experiencing net migration outflows.
- Because housing is durable compared to other forms of investment, the magnitude of house price declines associated with population losses is larger than that of house price increases associated with population gains.
- Model-based predictions are likely to underestimate the actual fall in house prices associated with future population losses, since expectations of lower housing prices in the future could trigger more population outflows and disposal of houses, especially in rural areas.
- The paper suggests policy measures to help close regional disparities and avoid potential over-investment by taking account of demographic trends for housing supply.
Key findings and projections
- Regional population dynamics drive divergent housing market outcomes: net migration inflows are concentrated in large cities (notably the Greater Tokyo area), while other regions face net migration outflows.
- Durability of housing amplifies downside price effects: house price declines associated with population losses are larger in magnitude than house price increases associated with population gains.
- Model-based predictions may understate future declines in house prices because negative price expectations can reinforce population outflows and increase house disposals, particularly in rural areas.
Policy recommendations
- Adopt measures to help close regional disparities in population and housing demand.
- Integrate demographic trends into housing supply decisions to avoid potential over-investment.
- Focus policy attention on preventing feedback loops where expectations of falling prices accelerate population outflows and house disposals in afflicted regions.
Content in this bundle
- Japan: Selected Issues; IMF Country Report No. 20/40; January 14, 2020