Deputy Governor of the Bank of Japan Highlights Demographic Trends as Key Drivers of Property Price Movements

Date Published 1/4/2013
Author Marja Hoek-Smit
Country Japan

January 4, 2013
San Diego, California

In a keynote speech at the special Panel on Property Markets, financial stability, and Macroprudential Policies at the ASSA/ AREUEA Meeting in San Diego, Deputy Governor of the Central Bank of Japan, Dr. Kiyohiko G. Nishimura, discussed the critical role of demographic trends as key drivers of the property price movements over the past few decades. In particular, he argued that a growing young population increases the likelihood of a property bubble. The increased demand for property from a growing young population is likely to induce the institutional change of a loosening of financial laws and regulations that pushes up prices further, thereby fueling a malign price bubble. In contrast, the negative effects of the bursting of a price bubble are all the more pronounced where there is an ageing population. Critically, this issue highlights the very fact of the “procyclicality” of institutional changes in laws and regulations induced by demographic change. The Deputy Governor draws three policy implications: firstly, the need, to recognize the significant effects of demographic trends, secondly, to avoid too loose a policy in the demographic bonus phase, and thirdly, to avoid too strict a policy in the demographic onus phase.

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