Japan: a warning from history

crazygaijin

Dan: wrote: »

Sorry, I meant I would just let it get repo'ed and rent somewhere bigger.

Here in Japan (yes I live here as my name suggests) if you dont pay your debts you have a visit from the Yakuza and you have to sell a kidney or something.

The atitude of Dan which is so selfish is what will make our crash much worse.

Dont forget property fell up to 80% here and it wasnt an option to just give the keys back and default on your mortgage. Imagine how you would feel paying it off over your working life to know its only worth 20% now?

AHAR

Austin_Allegro wrote: »

Was there even mass unemployment?

They have ways of keeping employment levels up...

Cannon_Fodder

And an ex-MPC member has just stated on Newsnight that the UK is worse placed than Japan was...

...due to the high savings ratio in Japan which cushioned the problem

...instead of the high indebtedness that we have, which will delay recovery.


Of 3 pundits, instead of having 'positive', 'middleperson', and 'negative' - they all agreed recovery will be a long-time coming, despite whatever green shoot indicators there are.

One said, "its like falling off a cliff, you've landed on a ledge, so its stablised, but there's still a big downside risk"...

Thrugelmir

crazygaijin wrote: »

Here in Japan (yes I live here as my name suggests) if you dont pay your debts you have a visit from the Yakuza and you have to sell a kidney or something.

The atitude of Dan which is so selfish is what will make our crash much worse.

Dont forget property fell up to 80% here and it wasnt an option to just give the keys back and default on your mortgage. Imagine how you would feel paying it off over your working life to know its only worth 20% now?

When property fell 80%. Was it still expensive to buy in relation to average wages?

ruggedtoast

penguine wrote: »

Someone once posted on this board about young Japanese couples on good incomes who bought flats near the top of the boom. They were still living in them a decade later and raising their family in cramped conditions because they couldn't afford to move.

Pretty easy to see that happening in the UK.

Possibly me, I had students in this situation in Tokyo when I taught English there. I was often surprised when people would have 2 adults and one or more kids sleeping in one room.

Property in Japan isnt a great buy even now. The building quality is a bit worse than our new build efforts. The average life span of a house is 25 - 30 years. No one wants to live in an apartment building more than 15 years old. Places are very small too.

My wife taught one chap who had "the most expensive allotment." He'd bought it during the bubble for an enormous amount and then it had lost most its value.

He was in allotment negative equity for life.

Gloomy_Past_Bright_Future

Austin_Allegro wrote: »

We often read on these pages fears that the 'lost decade' of the Japanese slump in the 90s could be what awaits us.

But how badly were the Japanese actually affected?

There was a massive bubble in assets in Japan. Stock markets were bid up to historic highs, property even more so.

Property became so expensive that the land of the Imperial Palace (3.41 square km) was supposedly worth more than the entire state of California. The Australian Government paid of her national debt by selling an area of land next to her Embassy.

Bonds became so expensive that the Japanese govt starting issuing 100 year bonds because borrowing the money was so cheap.

Then equity prices started to fall a bit. This was partly because export markets were suffering due to recession. However, banks held a lot of their reserves in equities. As these started to fall in value, they had to sell more shares to maintain their reserve ratios and also reduce their lending.

This meant that equities started to fall further meaning that more had to be sold and few loans made. This then started to impact the real economy. Firms couldn't borrow to invest so stopped taking on new workers. Some workers were even made redundant (virtually unheard of in Japan).

Things now got really messy. Firms started to default on payments to banks and their share prices started to slide. The numbers had to be fudged to prevent the banks from going bust (although some did anyway). The prices of Japanese assets went into freefall. Interest rates were slashed. Then deflation kicked in.

Deflation increased the real value of people's debts that were secured against falling asset prices. People were kicked out of work in increasing numbers. Real GDP fell by about 13% between 1991-2000.

The banks have now been restructured. There is work available. However, the economy is still teetering on the brink of deflation and asset prices are still well below their values in 1990, 19 years later. Tokyo 2007 land prices are roughly 25% of what they were in 1990 (that's a fall of 75%). On average, house prices in 2007 were 50% of what they were in 1990.

The fear in this country is that losses in the financial sector from lending subprime and securitisation is going to have much the same effect. Lots of banks have got a load of rubbish on their books now that looks like it isn't set to increase in price any time soon (like the equities on the books of the Japanese banks).

kennyboy66_2

crazygaijin wrote: »

Here in Japan (yes I live here as my name suggests) if you dont pay your debts you have a visit from the Yakuza and you have to sell a kidney or something.

The atitude of Dan which is so selfish is what will make our crash much worse.

Dont forget property fell up to 80% here and it wasnt an option to just give the keys back and default on your mortgage. Imagine how you would feel paying it off over your working life to know its only worth 20% now?

But in recent other posts you say that you claim Job Seekers Allowance & Housing Benefit and live in London.

I doubt you could even point out Japan on a map.

dealsearcher

There is one major difference between the UK and Japan: the japanese put a lot of importance in personal integrity. There have been plenty of cases of men losing their jobs and yet still getting up and going off to town every day to give the appearance of going to work.

There are many in this country (Dan is not an exception) who find no shame in having their house repossessed and receiving benefit from the tax payer.

Walletwatch

Dan: wrote: »

Sorry, I meant I would just let it get repo'ed and rent somewhere bigger.

I am sorry, but that must be the most daft quote I've had from Dan, whose posts are normally sensible and a balancing factor to the majority of the bearish posters among us, me being one of them. If you were to find yourself in negative equity, even if your house were to get repo-ed, you'd still owe the deficit to the bank, so pray how would you manage to rent somewhere bigger?

vivatifosi

ruggedtoast wrote: »

Possibly me, I had students in this situation in Tokyo when I taught English there. I was often surprised when people would have 2 adults and one or more kids sleeping in one room.

I think that's already the case here and has been for some time. As the market rose people who weren't eligible for social housing stayed in overcrowded conditions because they couldn't afford to move up, now neg eq trapping could cause the same. Anecdotally, I know of two families in the town where I live where the children sleep in conservatories because that was the only way the parents had of extending the house. Further, where I used to live, the next door 1 bedroom house had a couple, two children and a grandparent living there (though they have now moved, thank goodness). They made a bed over the bath each night for the grandparent (who wasn't very tall)...

I was recently watching an article on the BBC news about the current recession in Japan. It showed how internet cafes were renting out private booths and people had turned them into their homes. Literally a desk width, no window, but a curtain across the front for privacy. I sincerely hope we don't follow that route too. Crazygaijin, please tell me it isn't true!

clip:
http://news.bbc.co.uk/1/hi/programmes/world_news_america/7953376.stm

article:
http://news.bbc.co.uk/2/hi/programmes/world_news_america/7951800.stm