Falling land prices are symptomatic of Japan's deflationary economy. Banks sell collateralized land to write off dud loans. Companies dump their land holdings to pay off debts. Land prices drop further as the property market weakens. As things stand, there seems to be no way to halt this vicious circle.
According to a recent survey by the Ministry of Land, Infrastructure and Transport, posted prices across the country declined for the 12th consecutive year in 2002. The rate of decline widened to 5.8 percent in residential areas and narrowed slightly to 8 percent in commercial areas. In the Tokyo, Osaka and Nagoya regions, however, the rate remained unchanged in residential areas but fell in commercial areas.
In local regions, posted prices, which serve as a benchmark for land transactions, dropped by a wider margin than in previous years -- 5.1 percent for residential land and 8.7 percent for commercial land. Particularly in large cities where prefectural governments are located, commercial land prices continued to decline more than 10 percent.