Unlocking Housing Equity in Japan
Olivia S. Mitchell Insurance & Risk Management, The Wharton School, University of Pennsylvania
School of Economics, University of New South Wales
apan’s aging rate is uniquely high among the developed countries. The explanation rests on Japan having experienced a shorter period of high fertility following World War II than other Organization for Economic CoOperation and Development OECD economies. Births per family fell from 4.5 per family in 1947, to 2.7 in 1953, and to just 2 in 1957.1
Australia, by contrast, had a fertility rate greater than 3 for all years between 1947 and 1961.2
In Japan, the result has been a rapidly increasing dependency ratio, which in 2030 is predicted to be more than double the 1990 ratio of 21.6 percent. Some initial social security reforms have been recently enacted in Japan, and others proposed, including raising the eligibility age for the standard pension; nevertheless, projections suggest that these are not yet substantial enough to mitigate the expected cost explosion in public pensions as a result of demographic aging.3
The high value of residential real estate is another notable Japanese characteristic. An Economist survey recently showed that Tokyo and Osaka’s residential property prices are the second most expensive of all western cities: An average two-bedroom city apartment in 2002 cost over 800,000.4
More important, these real estate prices are high relative to Japanese average ...