Untitled Essay Research Paper The Economy of — страница 2

home owner and large enterprise. Beside the method of calculating mortgage size, another reason why the size of loan was so large is probably that both the bank and the investor were behind the land speculation activity (banking scandal). Investors were paying some key money (sort of a bribe) to financial institution in order to obtain a larger size loan. Therefore many financial institutions were over loan during this period. Another form of raising cash flow for the speculate market was by braking down a loan that obtain from a large financial institution to a specific enterprise, then lend a small piece of this loan to those who was not eligible to obtain a loan from the bank. These companies that act as the funnel will earn a certain amount of interest from these smaller

companies (branch effect). Therefore all classes of companies and society can easily access in the speculate market. Other large corporate, construction company, organize crime group and even temple (religious) were also involve in land speculation. Another encouragement to the speculative market was because the government (liberal democratic party) had originally lower the capital gain tax in the early 80*s. Therefore the profit for owner to resale their land was large. Flaws in government policy also indirectly allow investor to get away of property tax expense. For example some land owner could just plant little crops over a large piece of expensive vacant land in urban city and declare them as agriculture land. As a result they will be tax very little. Therefore the

incremental of land speculative activities were due to over size loan, high accessibility to the land speculative market and indirectly by the government flaws.During the peak of the land speculation there is a quite interesting study of land price in Japan. (1) “If you sell the entire property of Tokyo you can actually buy the entire United state and by just selling the surrounding land of the Imperial palace you can buy Canada.” Although it might of been a little over exaggerate, but the point is that the land value in Japan compare to North America is much higher. Since there is no one side of a coin, Land speculation had create many social problems in Japan. Firstly, land speculation had rise the rent and housing cost tremendously. As a result many young couples and low

income families were unable to form their own house hold. In average the cost of a house in Tokyo had raise to about 500 million yen. The younger group with low income cannot afford it and the mid age workers may also not able to afford it. Primary is because they would have to give up at least three-fifth of their income in loan repayment. Also if they have a relatively low amount of down payment, there working age may not be long to repay a mortgage. The longer the amortization period, the larger the amount of interest they bare. The white collar had become the slavery or sacrifice of the never ending mortgage payment and high cost of housing. In 1990 the births live in Japan was 1.2 million, in fact the number is the lowest since 1893. Many analysts believe that one of the

reason that lead to this slow growth of population could be create by high house prices. So Japanese people have stopped having children and large family is rare. Therefore this is one of the causes of Japan is running our of Japanese. This is also a very big social issue of the modern Japanese society but the precedent of the slow growth of population has now move from high housing cost to other social problems. During this period, there were lots of cases regarding on the robbery and suicidal in the police force.(1) – Wood, “The Bubble Economy”, Sidgwick & Jackson, London 1992 pg. 50 This was mainly because of the heavily debts that these police bare and they have no other choice than to attempt to go above the law. Due to the financing problems in the real estate

market, it leads to the founding of what is program call “2 generations mortgage plan”. The founding of this plan was propose to suit the majority of the white collar in the Japanese society. This plan was develop since 1983 but it became more useful from 1985 onwards and the qualification of this program must be father-son that plan or already living together. (son must be older than 20 and must repay the loan by the age at 70) The size of the mortgage is determined by the borrower, interest is flexible and the applicants must purchase an life insurance in order to protect the risk of un collectible due to death. (Pay by the bank) Husband and wife can also join this program . Banker said that the applicant may able to repay this loan in 40 yr. and this type of program also