Japan: Overview

RENTAL YIELDS

Last Updated: Apr 13, 2009

Expensive apartments, moderate returns

The gross rental returns on apartments in Tokyo, Japan, averages around 5.54%. Smaller units have the highest yields. A 40 square metre (sq. m) apartment generates a yield of 5.90% while a 250-sq. m apartment has lower returns, at 5.21%.

Due to a lack of space in overpopulated Tokyo, apartments in the city centre have always been very expensive. On the average, apartments sell for around US$13,328 per sq. m.

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TAXES AND COSTS

Last Updated: Dec 10, 2008

Effective rental income tax is low in Japan

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	3.4%	5.9%	5.9%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Rental income of non-resident individuals is subject to 10% tax. However, effective rental income tax is low, ranging from 3.4% to 5.9%.

Capital Gains: Net gains realized from selling short-term real properties, i.e. property held for less than 5 years, are taxed at 30%. Net gains on property held beyond five years are taxed at 15%.

Inheritance: Inheritance is based on residency status but foreign individuals inheriting property located in Japan are still subject to inheritance tax, which is levied at progressive rates.

Residents: A permanent resident is taxed on his worldwide income at progressive rates.

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BUYING GUIDE

Last Updated: Aug 16, 2007

Moderate roundtrip buying costs in Japan

The total roundtrip transaction cost is around 6% to 10%, inclusive of the 3.15% agent’s fee (inc. VAT and local taxes) plus an additional payment of ¥63,000 (US$526). The Acquisition Tax differs for land and buildings at 1.5% and 3%, respectively.

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LANDLORD AND TENANT

Last Updated: Jun 21, 2006

Japanese landlords get key money

Tenancy laws passed in 2000 shifted the balance of power from tenants to landlords, making Japan strongly pro-landlord.

Rents: Rents are freely negotiable. Aside from two to three month’s security deposit, landlords receive key money worth one to two month’s rent.

Tenant Eviction: Automatic renewals of leases were abolished in 2000, making eviction easier. If the tenant prematurely ends the contract the landlord can charge one month’s rent.

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ECONOMIC GROWTH

Last Updated: Oct 22, 2009

Fragile political and economic environment

After four consecutive quarters of recession, the economy grew by 2.3% in Q2 2009 from the previous quarter. The recovery is due to three stimulus packages announced by the previous Liberal Democratic government of PM Taro Aso announced in the second half of 2008.

Public investment increased by 33.6% in Q2 2009 from the previous quarter. Foreign demand returned as exports increased by 28.1% in Q2 2009 from the previous year, following the 63.9% plunge in exports in Q1 2009.

The economy is not yet safe from any future downturn. Private investment and private demand have continued to fall in Q2 2009.. Deflation in Japan has accelerated to 2.2% in August 2009, while in July 2009 unemployment rose to 5.7%.

Though a JPY15.4 trillion (USD173 billion) stimulus package was announced in April 2009, the victory of the Democratic Party in the August 2009 national elections casts doubt on the package’s implementation, as the Democratic Party wants a clean break with the infrastructure-spending led spending policies of the Liberal Democratic Party (LDP), which ruled Japan for 50 years.