The real estate bubble of 1989 was one of the unforgettable markers preceding Japan's Lost Decades (1991-2000). According to Bubble Bubble, it was in the late 1980s that speculations drove real estate prices to very steep record highs. Japan's Nikkei stock average reached its highest in 1989, then crash abruptly, causing their real estate bubble to flop. It marked the beginning of Japan's very long period of economic stagnation.
The "Lost Decades" was then plagued by the prevalence of "Zombie Companies" or debt-ridden companies buoyed by government bailout. According to Bubble Bubble, residential properties in Tokyo sunk down to merely 10 percent of its late 1980s value by 2004, as prime properties in Tokyo's Ginza business district plunged to 1 percent, the lowest ever, of its value in the 1980s.
Now, The Financial Services Agency (FSA) in Japan is anxious after loans extended by commercial banks in fiscal 2014 totaled ¥10.1 trillion (more or less $82 billion) for real estate investment alone. According to Japan Times, a Bank of Japan survey proves that this is the first time in seven years that commercial banks have granted more than a total of ¥10 trillion of real estate loans.
Furthermore, the same survey says new real estate loans by "shinkin" banks (credit banks) are at ¥2.1 trillion (about $17 Billion), and it is also the first time that is has gone beyond ¥2 trillion.
The reason behind FSA's anxiety is because the current amount of new loans are close to the 1989 bubble levels.
The lending frenzy are caused by demand from big companies that are aggressively into redevelopment projects in and around Tokyo and from real estate investment trust fund managers, according to Japan Times. An official of a major regional bank said, "Demand for constructing apartment buildings and condominiums for rent is increasing." The same official noted that this is an effort by the companies to cut tax payments in prefectural resources.
With these concerns, the FSA is urging the regional bank heads to inspect their real estate advancing during a meeting this month, as the FSA reportedly will imply regulatory inspections.
