A wave of interest in investing in Japanese assets is building among China’s affluent middle class, driven by the weakness of the Japanese yen this year and concerns over strict coronavirus controls in China.
The Japanese yen has weakened considerably against the Chinese yuan this year and hit its weakest level against the US dollar at the end of April.
There have been many inquiries recently from Asian investors, including in Hong Kong, Singapore and mainland China, said Kin En, who runs a property agency in Tokyo.
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Most of the inquiries are from Chinese investors who want to buy urban properties in Japan at the currently weak yen level, for future immigration purposes, she said.
“Most of them are concerned about China’s increasingly stringent Covid-control measures. The lockdown in Shanghai has made them anxious about the risks of losing security, personal freedom, careers and dignity overnight,” Kin said.
“Meanwhile, they think it’s good timing to invest in Japanese assets. While housing prices in Japan’s major cities have risen considerably over the past year, it’s still affordable for middle-class investors from mainland China.”
The deteriorating and nebulous relationship between China and the West has unexpectedly increased the attractiveness of Japanese assets among wealthy Chinese individuals, including among business owners and middle-class residents in the Pearl River Delta and Yangtze River Delta, China’s most developed areas.
“Chinese wealthy individuals are not necessarily rushing to invest in properties in the West as they did in the past ... and from the perspective of investment security and cost-effectiveness, we start to think Japan’s assets are higher than those in Europe, and those in Europe are higher than those in the United States and Australia,” said Tina Chen, who works with a Guangdong-based consultant company helping wealthy mainlanders invest and immigrate overseas.
Though a firm ally of the United States, Japan is strongly connected with the Chinese market, and China-Japan relations are now more stable than China-US relations, she said.
The US dollar shot past the key level of 130 yen last week for the first time since 2002, after the Bank of Japan doubled down on its super-low-yield policy.
According to Tokyo Kantei, the average asking price of a 70-square-metre (753 square feet) second-hand flat in Tokyo’s 23 wards had climbed for the 21st month in a row to 67,840,000 yen (US$521,000) as of March.
This was a 1.2 per cent increase from February and a 10.5 per cent increase from March of last year. Some flat prices in Tokyo have exceeded bubble-era highs.
Apartments in major cities such as Tokyo can have a rental return of 4-7 per cent a year, which is a very stable and attractive investment for wealthy Chinese nowadays, Kin said.
“Those properties in good locations, with a price of around 70 million yen, are particularly in short supply, because according to the current exchange rate, it is about 3 million yuan, and an apartment in downtown Shanghai is two or even three times that price,” Kin added.
“Some clients decided to buy after just looking at the exterior of the flat and knowing where it is located ... Of course, it’s because they have been to Japan many times before and trust the Japanese spirit of contract.
“We should see at least a 150 per cent or 200 per cent year-on-year increase in our sales from Chinese investors [for April], and maybe more in the coming months.”
Other investment categories, including Japanese whiskies, artwork and collectable toys, and even cast-iron teapots, are also highly sought after as collectors’ items, as most of the younger Chinese generation is more attracted to works that blend both Eastern traditions and modern civilisation, instead of traditional Western art.
“Many Chinese shopping malls and wealthy families also like to choose artworks by Japanese artists to decorate their properties ... such as Takashi Murakami and Yayoi Kusama,” said Newman Liang, the founder of Guangdong-based Target Xplus Advertising.
Ben Deng, who has been collecting action figures and other rare items for more than 20 years, said: “Those limited-edition Japanese whiskies or art toys, or even luxurious golf bags – for every 1 million yen spent, it equates to a savings of 10,000 yuan compared with last year, because of the weak yen. That is very attractive to Chinese collectors.”
Liang echoed Deng’s sentiment after selling two Japanese whiskies for a large profit in March. They cost 1,600 yuan in 2020, but high demand pushed their value to 8,000 yuan.
“Two years ago, we were looking forward to ordinary Japanese whisky increasing in price by 10 to 15 per cent per year, while collection-level products could double in price in just two years. Now it’s just soaring more.”
Many Chinese are also looking forward to visiting Japan for shopping, investment and business opportunities, looking to take full advantage of the weak yen. China’s travel restrictions and high international parcel fees between the countries have been eating into the profits of collectibles.
“I feel that the younger generation in Japan is accommodating to such a new boom in foreign investors,” Kin said. “Of course, there is now a lot of capital, which was once invested overseas, coming back to Japan ... But faced with different buyers, Japanese sellers definitely give priority to Japanese buyers.”
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