Real estate financing options, foreign and Japanese alike, have been getting better and better as the year progresses. And it’s a trend that looks to continue at least until the Olympics.
In January of this year, the Bank of Japan shocked economists worldwide by announcing a tiered negative interest rate policy compelling every bank operating in Japan to hold a certain amount of its cash reserves in the BoJ. Any capital held in excess of that will have a -0.01 per cent interest rate applied to it. This means that the value of this cash will dwindle if the banks continue doing what they have been doing for the past 20 years: which mainly is hoard cash in the Bank of Japan.
Why do this? A core tenet of Prime Minister Shinzo Abe’s – financial plan — or “Abenomics” — holds that corporations will reinvest their artificial profits from last year’s weak yen into their employees in the form of raises. The thinking went that if employees were receiving regular raises, the average Japanese consumer would be more con dent in planning their own future and thus would spend more of their savings. By extension, in addition to increased consumer spending, Mr. & Mrs. Tanaka would also be more apt to take on more debt in the form of loans — housing loans for example.
Unfortunately, the reality is that corporations and labour unions alike have agreed on less wage increases this year compared to the previous one. A main reason often cited was the perceived worry about the sustainability of economic recovery under Abenomics.
Abe, on the other hand, had basically done everything a government can conventionally do to assist the economy and blames the mega banks for strangling the country.
So when the Bank of Japan announced negative interest rates in January this year, it hit retail banks large and small right in the gut. The BoJ’s message — lend or lose money. The basic premise being: easier access to capital should spur large purchases and innovation, which in turn breeds sustained success and thus a maintainable economic recovery.
Why does this matter to you as a foreign individual or corporate entity in Japan?
Whether you are long on Abenomics or not, if you have a home or investment property loan taken out prior to January 2016, it’s time to call your bank and ask for an interest rate reduction. Lending institutions are now targeting their competitor’s clients and are approaching them with lower interest rates. What is happening now is basically a refinancing frenzy.
If you don’t own property and are put o from purchasing by rising prices in Tokyo (or Japan in general), remember that even without a permanent resident visa, you are still able to get financing that wasn’t available to international residents before.
Purchasing a million dollar property with only $200,000 down in equity makes the investment dynamic a lot different than what was available previously — and a lot more immediate.
Editor`s Note: This article originally appeared in The Canadian, Vol 16 No. 4 (November, 2017). The Canadian is the official magazine of the the Canadian Chamber of Commerce in Japan.