Jesper Koll, former chief economist of Merrill Lynch Japan and author of two books in Japanese, Towards a New Japanese Golden Age and The End of Heisei Deflation, has teamed up with Global Treehouse, a global community of leaders dedicated to what it calls “mind-fit-ness” and innovation, to release the first in an eight part deep dive into the positives of Japan’s economy.

Koll is unique as he tends to be one of the few consistent optimists about Japan’s approach to economy building and has spent a career presenting and interpreting lesser known facts about Japan’s economy often overlooked by other media.    

This third session talks about how 20-something Japanese people are looking at the best employment conditions the country has seen in decades and why that is promising for Japan's overall economy.

What does this have to do with real estate?  Everything happens in real estate and learning more about overall macroeconomic trends helps in deciding whether or not to purchase.

In this session's case, Koll is specifically referring to young Japanese people's borrowing capability.  Increased lending means increased demand which translates into rising prices. 

Quoteable Quotes:

People say “Oh my god, how dare you be bullish on a country where in 300 years, only 11 people are going to be left?”  Now, quite frankly, who cares about what will happen in 300 years?  For us as business people, as investors, or just as people, what matters is the next 5 to 10 years.

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Everyday, over the past 3 years, the population of Japan shrank by about 1,200 people.  But at the same time, everyday, the number of people employed went up by about 3,000 people.

And I ask you, what is more important?  Death, or the fact that the number of people employed is actually increasing?  We are seeing sharp increases in the participation rate of both female employment and male employment and that's a good thing and that’s a structural thing that will continue to keep going.

Now, when you look at the Japanese labor market, yes you've got the positive demand and supply, a shortage of skill, a shortage of labor, that's good for wages, that's good for employment. 

But at the next level down there's an even more powerful driver that is going on, which leads me to think that Japan is in the demographic sweet spot because it's not just the quantity of labor that is improving but more importantly, the quality of the contracts that labour gets.  

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The young generation is in scarce supply and as a result of that, their wage bargaining, their contract bargaining, is improving.  And you are seeing it, this is no longer a forecast, this is reality.  You see that leading companies like Toyota, like Hitachi, like Mizuho Bank, are actually re-hiring part time and contract employees on a full-time basis because they know that structurally, labor is going to be in increasingly short supply, so that's good news and you do see that for the first time, now in 20 years, since 2015, it is full-time employment that is actually starting to grow.

A full-time job gives you job security.  It gives higher pay, higher income stability.  And very importantly, it also gives you access to leverage.  Japanese banks, you know, are quite tough.   If you don't have a full-time job, getting a credit card or getting a mortgage is practically impossible, so the more full-time employment you get the greater the access to leverage gets. 

As a result of that you are seeing right now an increase in mortgage lending, you're seeing an increase in the transactions of condominiums and land here in Tokyo and elsewhere in Japan, and the driving force is exactly the fact that the generation in their 20s, the generation in the 30s, are now seeing improved quality of contract which is driven by the demographics of Japan.

Further Reading:

The New Japan Inc. (REthink Tokyo; September, 2021)

Japan’s Elite and Leading by Example (REthink Tokyo; August, 2021)

Famed Japan-Based Economist Stars in First Installment of Fresh Take on Japan’s Economy (REthink Tokyo; July, 2021)

Tokyo Legacy (Hulu Japan; 2020) 

Japanese Version of the Same Presentation.