Japan in the 1980s: when Tokyo’s Imperial Palace was worth more than California and golf club membership could cost US$3 million – 5 crazy facts about the bubble economy
The mid- and late-1980s were the years of Japan’s “bubble economy”, a time when the country was at its economic peak. It was awash with money, fuelling evermore conspicuous consumption, and Western scholars, spurred on by books like Ezra Vogel’s Japan as Number One (1979), sought to predict when Japan would surpass the United States as having the largest economy in the world.
Of course, that story never came to pass. At the end of 1989, the Nikkei 225 stock market reached 39,000, a historic high. Three years later, more than half of that had been wiped out with the market at just 17,000 by the end of 1992.
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However, while the good times rolled, Japan enjoyed unprecedented wealth. Here are five crazy facts from that time.
The Imperial Palace in Tokyo was worth more than all of California
Between 1956 and 1986, the price of land increased by as much as 5,000 per cent in Japan. At the peak of the bubble economy, Tokyo real estate could sell for as much as US$139,000 per square foot, which was nearly 350 times as much as equivalent space in Manhattan. By that reckoning, the Imperial Palace in Tokyo was worth as much as the entire US state of California.
The Japanese property market was worth four times more than the US property market
It wasn’t just Tokyo that was super expensive, though. Despite Japan occupying the equivalent of only four per cent of the land mass of the entire US – Japan is about the same size as California – the value of the Japanese property market was four-times greater than that of the USA.
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Land-price inflation was so distorted that land constituted 65 per cent of Japan’s national wealth, compared to just 2.5 per cent for the UK at the time.
Golf club membership could cost millions – and became a tradeable asset worth a combined US$200 billion
As the Japanese economy prospered there developed an increasing appreciation for the sport of golf. With their aura of exclusivity, golf club memberships were in high demand – and came at attendant high prices. It has been estimated that the value of club membership, as a tradeable commodity, shot up by 400 per cent between 1982 and 1989 – and then an additional 190 per cent in 1989 at the height of the bubble.
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Membership of the most exclusive country clubs could cost as much as ¥400 million (US$3.7 million) – the cost of entire golf courses in other countries. As a result, the Nikkei Golf Club Membership Index was created to monitor the value of golf club memberships – and at its zenith the total market value of memberships was estimated at an astounding US$200 billion.
Japanese companies went on a spending spree described as an ‘economic Pearl Harbour’
In 1985, Japan, France, West Germany, the UK and the US signed the Plaza Accord, which aimed to lower the value of the dollar in relation to the Yen and German Deutsche Mark. The intention was to make American exports cheaper, easing America’s trade deficit.
The plan worked, but almost too well. With the dollar so weak, Japanese companies began snapping up any US assets they could get their hands on. New York’s Rockefeller Center was bought by Mitsubishi Group, while on the other coast a Japanese consortium bought the historic Biltmore Hotel in downtown Los Angeles and Hollywood studio Columbia Pictures was bought by Sony. Such ostentatious spending led American radio broadcaster Paul Harvey to warn of an “economic Pearl Harbour” if his country did not shape up.
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A restaurant owner used a ceramic toad to foretell the movements of Japan’s stock exchange
Though she died relatively unannounced in 2014, Nui Onoue was once a figure of fame, and later infamy. Ostensibly a humble restaurant owner in Osaka, Onoue had forged certificates of deposits and convinced the Industrial Bank of Japan and its affiliates to lend her up to ¥240 billion (US$2.2 billion). The result was Onoue became the largest player in the Tokyo Stock Exchange, the largest in the world at the time. Reportedly, she bought as much as ¥120 billion (US$1.1 billion) of stock in one day, owning millions of shares in prestigious companies such as Fuji Heavy Industries and Toshiba and became the largest shareholder in the Industrial Bank of Japan itself.
Known as the “Dark Lady of Osaka”, Onoue was supposedly highly accurate in her stock market predictions and held occult midnight ceremonies in her restaurant, beneath the watchful glare of a ceramic toad (a symbol meant to attract wealth), that would be attended by high-powered bankers seeking to divine where they should invest next.
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When the bubble economy burst, Onoue’s fortunes went with it. As the market plunged, Onoue was forced to borrow more to cover her existing losses. After collecting more fake deposit certificates, her fraud was uncovered.
In the five years before 1991, Onoue borrowed ¥2.8 trillion (US$26 billion), which attracted interest payments of about ¥130 billion (US$1.2 billion). With notable understatement, the Japanese court trying her declared that these amounts were “extremely unusual” for an individual. It was the largest investment fraud case in Japanese history.
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From fraud fuelled by a stock market-predicting ceramic frog to the ‘economic Pearl Harbour’ which saw Japanese companies buy up New York’s Rockefeller Center and Hollywood’s Columbia Pictures, East Asia’s economic golden age was one wild time for those at the top