By Pater Tenebrarum at Acting Man blog
We sometimes try to imagine how Shinzo Abe and his cadre of economic planners are coming up with their cunning plans. Presumably when they meet for a brainstorming session, they get totally sloshed on Sake, and then pick whatever idea sounds like it could win the absurdity of the century award hands-down.
For instance, at one of their recent meetings the following conversation may well have taken place (just guessing here, mind):
“You know what would go really well with our bridges to nowhere?”
“Lotsh…hic… of completely empty houses”.
“What are you getting at?”
“We must build more houses.”
“Even better! Done!”
It sounds like a joke, but it isn't. As Bloomberg reports:
“Broken wood pieces dangle and sway like autumn leaves from the window frames of vacant homes in Inariyato, part of Yokosuka in the greater-Tokyo urban area, where taped-over mailbox slots tell a story of abandonment.
More than 50 houses and apartments, almost 20 percent of the quaint residential neighborhood of narrow streets and stairway paths leading into green hills, are empty here, an hour’s train ride south of Tokyo and 1,000 yards (900 meters) from the Yokosuka naval base, home of the U.S. Seventh Fleet. That hasn’t stopped developers from building at least eight new apartment blocks in the same city in the past two years.
Prime Minister Shinzo Abe’s plan to boost the economy in part by reviving the housing market and encouraging new home construction is in conflict with Japan’s demographics. Rural, suburban and less-desirable urban areas are becoming littered with empty homes as younger people moving to cities combines with one of the world’s fastest-aging populations. At the same time, tax breaks on mortgages favoring new-home purchases, recently extended to 2017 and increased to 50 million yen from 30 million yen, are spurring demand for new properties.
“Even when the number of vacant homes is on the rise, more and more new homes are being built,” said Hidetaka Yoneyama, a senior researcher at Fujitsu Research Institute in Tokyo who has written at least five books on Japan’s housing market. “That’s absurd.”
Home vacancy in Japan, estimated at about 18 percent of housing nationwide, may reach 24 percent by 2028, he said.
Vacant homes have risen one percentage point every year from 13 percent of housing stock in 2008, before Abe’s stimulus policies, according to Yoneyama’s estimates. With 57 million homes in Japan as of 2008, the last time the government counted them, at least 570,000 homes without occupants are accumulating every year, he said. Housing starts have increased by 31,462 units a year over the past three years, according to the Ministry of Land, Infrastructure, Transport and Tourism.
Helped by Abe’s policies since he took office in December, housing starts rose for the 11th month in July, the longest streak since February 1994, land ministry data show.
The recently constructed units in Yokosuka and its prefecture, excluding Yokohama, cost 37.7 million yen ($377,000) on average, according to a report by developer Haseko Corp. (1808) A vacant two-story, traditional gated house in Inariyato with five bedrooms is listed on Suumo, a real estate search engine, for just 6 million yen. Surrounding houses are empty, too.
We really thought nothing could possibly surprise us about the policies of this mad-cap bunch of Keynesian wastrels anymore. Live and learn. Color us appropriately slack-jawed after reading this.
“Sloshed as I am…” – Shinzo Abe devises housing policy after the third bottle of Sake
(Photo credit: Yuya Shino / Reuters)
The Crazies Are Loose
What is Abe's housing-related policy, if not a sign of full-blown insanity? Do Abe and his advisors believe that scarce resources just fall from the sky, that they can so to speak order manna to rain down from heaven, Moses-style?
It couldn't possibly be more obvious that this house-building mania in a sea of empty houses must be a complete waste. One would hope that the advice of an economist isn't necessarily required to realize that.
Just as it dawned on us that it was probably actually the advice of economists that persuaded Abe and his team to implement this particular scheme, we encountered the following howler in the Bloomberg report, which appears symptomatic of the economic views currently held in Japan:
“Is it really OK to continue to build more and more new homes?” said Wataru Sakakibara, manager of the real estate group at Nomura Research Institute Ltd. “We can’t stop housing stimulus because it revitalizes the economy, but we must consider ways to resolve this issue.”
Good grief! It is almost as though Japan were regarded as a kind of economic equivalent of the Vietnam war. Let us rephrase the above assertion accordingly:
“Is it really OK to burn down more and more of that village? We can't stop burning it down because we need to save it, but we must consider ways to resolve the issue” (points flamethrower at a hut that is miraculously still intact).
We will never cease wondering why this complete abandonment of even the tiniest shred of common sense has become so commonplace in economics. Sometimes one gets the feeling that when the good Lord distributed stupid, they all cried “gimme!”
While all this house building activity is going into overdrive, more and more towns in Japan threaten to turn into ghost towns. Interestingly this is acknowledged by the very same Nomura manager who insisted above that housing stimulus can't be abandoned because it allegedly “helps the economy”. Obviously this assertion is in the end nothing but a variation of the age-old broken window fallacy.
“About 20 percent of residential areas in Japan will become ghost towns — devoid of population — by 2050, according to a land ministry forecast. Once an area reaches a tipping point of 20 percent home vacancy, it quickly turns into a ghost town as remaining residents flee seeking improved access to services and shops that inevitably close, Nomura Research’s Sakakibara said.
20 percent of residential areas will become ghost towns by 2015, and the conclusion from this is that house-building must be boosted?
What makes all of this especially maddening is for one thing that these strategies have been tried over and over again over the past three decades in Japan. How often do they need to fail before their promoters realize that it is the policies themselves that are misguided, and that it is not a question of the zest with which they are implemented?
Secondly, although many skeptical observers have already written Japan off and are now merely waiting for its seemingly inevitable implosion, this fate could in theory still be averted given the country's large wealth. Unfortunately, just as his predecessors, Abe seems hell-bent on squandering it as quickly as possible.
The main source of the “wisdom” applied by Abe & co. – Yes dear readers, Keynes was indeed a Keynesian- propagating the prosperity of earthquakes, wars and plagues. Oh, and pyramid building of course, which is the course Japan is currently pursuing with great vigor.
(Photo via Wikimedia Commons)