Japan

Japan Residential Real Estate Market Analysis 2025

Lalaine C. Delmendo

Residential property prices in Japan, especially in the Tokyo Metropolitan Area, are increasing amidst improving demand and weakening construction activity.

Table of Contents

Housing Market Snapshot

In January 2025, the residential property price index in Tokyo Metropolitan Area, which consists of the five prefectures of Tokyo, Saitama, Kanagawa, and Chiba, rose strongly by 8.14% as compared to the same period last year, according to figures released by the Japan Real Estate Institute (JREI). However, when adjusted for inflation, the house price growth was more modest at 3.95% over the same period.

Japan's house price annual change

This followed annual increases of 8.44% in the whole year of 2024, 3.13% in 2023, 7.3% in 2022, and 11.55% in 2021.

By prefecture:

  • In Tokyo, the home price index was up by 10.7% y-o-y in January 2025 (6.42% inflation-adjusted).
  • In Kanagawa, the home price index rose by a moderate 4.19% in January 2025 from a year earlier (0.16% inflation-adjusted).
  • In Chiba, the index increased by a meager 1.36% y-o-y in January 2025 but actually declined by 2.56% in real terms.
  • In Saitama, the index was up by 3.12% over the same period but dropped slightly by 0.87% when adjusted for inflation.

Japan JREI Home Price Indices Graph

Though figures from the Land Institute of Japan (LIJ) showed wide price variations in terms of location and property type.

In Tokyo Metropolitan Area:

  • Existing condominium average prices rose strongly by 7.8% in January 2025 to JPY 819,000 (US$5,439) per square meter (sqm), following y-o-y increases of 4.4% in 2024, 7% in 2023 and 9% in 2022.
  • New condominium average prices fell by a modest 3.3% in January 2025 from a year earlier, to JPY 1,116,000 (US$7,411) per sqm, following y-o-y price growth of 2.4% in 2024 and 23.5% in 2023 and a slight decrease of 0.3% in 2022.
  • Existing detached house prices were up by 3.5% y-o-y to JPY 42.13 million (US$279,760), following annual growth of 3.7% in 2024, 1.8% in 2023, and 8.4% in 2022.

Japan Tokyo Condominium Price Graph

In Osaka Metropolitan Area:

  • Existing condominium average prices rose by 9.4% to JPY477,000 (US$3,167) per sqm in January 2025 from a year earlier, after increasing by 6.8% in 2024, 5.5% in 2023 and 8.7% in 2022.
  • New condominium average prices were down by 5.3% y-o-y to JPY875,000 (US$5,810) per sqm in January 2025, in stark contrast to the annual increases of 14.8% in 2024, 2.1% in 2023 and 3.1% in 2022.
  • Existing detached house prices fell slightly by 0.6% y-o-y to JPY24.33 million (US$161,561) in January 2025, in contrast to annual growth of 1.9% in 2024, 3.3% in 2023 and 5.9% in 2022.

Japan House Price Annual Change Graph

Demand is showing signs of improvement. In Tokyo, sales of both existing condo units and detached houses rose by 3.5% and 7.5%, respectively, in 2024 as compared to the previous year. In Osaka, sales of existing condominiums increased by 4.5% last year while detached house sales rose strongly by 11.1% over the same period.

Residential construction activity remains weak. During 2024, the total number of authorized housing starts in Japan fell by 1% to 792,133 units as compared to a year earlier, following annual declines of 7% in 2023 and 0.6% in 2022, and an increase of 6.6% in 2021, according to the MLIT.

During 2024, the Japanese economy grew by a meager 0.1% from a year earlier - a sharp slowdown from annual expansions of 1.5% in 2023, 1.2% in 2022 and 2.7% in 2021 - as external demand remains weak and as a "megaquake" alert in August and one of the fiercest typhoons in decades had dampened economic activity.

Economic conditions are expected to gradually improve, with both the Bank of Japan and the IMF projecting a real GDP growth rate of 1.1% this year. The government's 2025 growth forecast is slightly higher at 1.2%.

Demand Highlights

Demand is growing again

Demand is improving again, with residential property sales in both Tokyo and Osaka increasing last year.

During 2024:

  • In Tokyo, the number of existing condominiums sold rose by 3.5% y-o-y to 37,513 units during 2024, an improvement from a meager growth of 1.5% in 2023 and a contraction of 10.8% in 2022, according to LIJ. Likewise, existing detached house sales increased by 7.5% y-o-y to 19,270 units last year, following annual declines of 0.7% in 2023 and 13.1% in 2022.
  • In Osaka, existing condominiums sold increased by 4.5% to 17,119 units in 2024 from a year earlier, in contrast to annual declines of 2.6% in 2023 and 1.6% in 2022. Similarly, existing detached house sales in Osaka increased strongly by 11.1% to 11,854 units last year, following an annual growth of 4.7% in 2023 and a contraction of 3.6% in 2022.

This was partly due to robust foreign demand, buoyed by the weak Japanese yen and the country's ultra-loose monetary policy. Moreover, there are no legal restrictions on foreigners buying and owning real estate property in Japan.

Overall demand continues to strengthen this year. In January 2025, existing condo and detached house sales in Tokyo surged by 19.7% y-o-y and 79.3%, respectively. In Osaka, the number of existing condo units sold soared by 19.2% and by 11.2% for detached houses.

Japan Existing Condominium Sales Graph

Residential land sales increasing sharply, land prices more or less steady

Land sales in Japan are increasing strongly. In Tokyo, land sales were up by 13.5% y-o-y to 10,755 units in 2024, a sharp turnaround from annual declines of 2.9% in 2023 and 20.7% in 2022, according to LIJ.

Likewise, in Osaka, land sales increased strongly by 12.3% to 7,251 units in 2024 from a year earlier, following an annual growth of 6.1% in 2023 and a decline of 14.2% in 2022.

In January 2025, there were 1,090 land sales in Tokyo and 510 land sales in Osaka.

Surprisingly, residential land prices were more or less steady. During 2024, the nationwide residential urban land price index rose slightly by 0.7%, following annual increases of 0.7% in 2023 and 0.6% in 2022 and a slight decline of 0.2% in 2021, according to the Japan Real Estate Institute.

  • In six major cities (Tokyo, Osaka, Yokohama, Nagoya, Kyoto, and Kobe), residential land prices rose by 0.8% in 2024 from a year earlier, after increasing by 1% in 2023 and 0.7% in 2022 and declining by 0.6% in 2021.
  • For the rest of the country, residential land prices were up 0.7% in 2024, following increases of 0.7% in 2023 and 0.6% in 2022 and a slight fall of 0.3% in 2021.

Japan Urban Land Price Graph

Supply Highlights

Residential construction activity continues to weaken

During 2024, the total number of authorized housing starts in Japan fell by 1% to 792,133 units as compared to a year earlier, following annual declines of 7% in 2023 and 0.6% in 2022, and an increase of 6.6% in 2021, according to the MLIT.

In major areas:

  • In the Tokyo Metropolitan Area, which accounts for about 36% share of total residential construction, the number of housing starts declined slightly by 0.4% y-o-y to 285,460 units in 2024, following an annual fall of 5.2% in 2023, and increases of 1.8% in 2022 and 4% in 2021.
  • In the Osaka Metropolitan Area, housing starts rose by 4.2% y-o-y in 2024, to 113,836 units, following a contraction of 10.1% in 2023 and annual increases of 5.5% in 2022 and 4.9% in 2021.
  • In the Nagoya Metropolitan Area, housing starts fell by 2.8% y-o-y to 63,870 units in 2024, following annual declines of 1.9% in 2023 and 6.2% in 2022, and an increase of 13.7% in 2021.
  • In other areas, housing starts also dropped by 2.8% y-o-y to 328,967 units in 2024, following annual declines of 8.5% in 2023 and 3.2% in 2022 and an increase of 8.1% in 2021.

Then in January 2025, the number of authorized housing starts in Japan fell further by 4.6% to 56,134 units as compared to the same period last year.

Japan Housing Starts Graph

Available supply of new condo units down in Tokyo, but up in Osaka

The supply of new condominium units available for sale shows mixed trends.

In Tokyo, the number of newly-built condo units put on the market fell by 13.2% y-o-y to 23,159 units in 2024, following annual declines of 12.5% in 2023 and 11.3% in 2022.

In Osaka, on the other hand, new condominiums on the market rose strongly by 15% y-o-y to 16,621 units last year, after falling by 18.5% in 2023 and 7.9% in 2022.

The total number of new condominium units put on the market has been generally falling in the past three decades.

In Tokyo, newly-built condo units available in the market fell from an annual average of 80,900 units in 1994-2007 to 42,300 units in 2008-2018, and further to just an annual average of 28,900 in 2019-2024.

Likewise, in Osaka, new condo units put on the market declined from an average of 35,200 every year in 1994-2007 to 20,900 units in 2008-2018 and to below 16,900 units annually in 2019-2024.

Japan New Dwelling Units Put On the Market Graph

Japan's shrinking population continues to produce a surplus of housing

One of Japan's biggest problems is its declining population. It is estimated that Japan will lose a third of its population over the next 50 years, and the population will more than halve from 126.8 million in 2017 to just 50.56 million in 2115, according to the National Institute of Population and Social Security Research. In addition, about 40% of the population will be over 65 by 2060.

During 2024, the country's total population fell to 123.87 million, down by 617,000 people from the previous year. It was its fourteenth consecutive year of decline. Japan's population is expected to fall by another 600,000 people this year.

The shrinking population is already producing a surplus of housing units. There are many sightings of abandoned homes in Tokyo. Latest figures showed that the total number of unoccupied homes, known in Japan as akiya, reached a record 9 million units - up by more than half a million units since the previous survey in 2018, according to the Ministry of Internal Affairs and Communications. This represents about 13.8% of all residences in Japan.

"At the root of the issue is rural depopulation combined with many of those who inherit such properties being unable or unwilling to live in them, refurbish or even demolish them. Cities are not immune though, and there are hundreds of thousands of long-term empty houses in urban areas," said an article published by The Guardian.

This has been supported by an article by The South China Morning Post: "The combination of a shrinking population, falling land values, patchy registration records, and a tax system ill-suited to the current situation has left ownership unclear on an estimated 4.1 million hectares, an area larger than Taiwan."

The number of abandoned homes is expected to rise to more than 20 million by 2033.

Japan Total Population Graph

However, declining household sizes may mitigate the situation. The average household size is expected to fall to 2.37 by 2025, from 2.67 in 2000, and 5.0 in 1950. More Japanese are living alone, and fewer are in multiple-generation households.

To reduce the total number of abandoned homes, some abandoned houses and apartments are being put back on the market by the Ministry of Land, Infrastructure, Transport and Tourism. In 2017, the government also introduced a scheme aimed at making vacant homes available to rent to low-income and single seniors. However, the initiative has failed to attract homeowners to register on its database, despite subsidies being offered.

The government is also trying to stop the Japanese population from shrinking:

  • Childcare provision was boosted by the Child and Childcare Support Act of August 2012.
  • Early school education, childcare, and child-rearing support services in local communities have been promoted by the Comprehensive Support System for Children and Child-rearing, introduced in April 2015.
  • Local governments are being encouraged to offer speed dating and other forms of matchmaking.
  • The government is expanding free nursery care.
  • Fertility treatment counseling centers in major cities are promoted.

The Japanese government also amended its immigration policy, which took effect last April 1, 2019, to attract overseas workers. The reforms created two new visa categories for migrants - Technical Intern Class 1 and 2. The first category targets marginally skilled workers willing to work in Japan for a period not exceeding 5 years without the benefit of family reunification. The second is directed to semi-skilled workers in certain fields, who are permitted to bring their families as well as make them permanent residents at the end of their 10-year initial working period.

The immigration reform law aims to attract 345,000 foreign workers into the country over the next five years. However, due to the Covid-19 pandemic and the subsequent lockdown and travel restrictions measures imposed worldwide during the said period, the target was not realized.

Then in June 2023, the Cabinet approved a plan to expand the scope of industries covered by the blue-collar skilled worker visa from the current 2 to 11 industries, creating a path to permanent residency for foreign nationals working in Japan, many from Vietnam and China, and allowing them to bring their children and spouses into the country.

"It is important to promote smooth acceptance of human resources. To address the severe labor shortage, Japan will expand the (visa's) scope," said former Prime Minister Fumio Kishida.

Recently, the government unveiled its plan to more than double the number of foreigners eligible for skilled worker visas in the next five years to over 800,000 to address labor shortages in industries such as manufacturing, construction, and agriculture. There were around 200,000 foreigners working under this visa framework.

As a result, the total number of foreigners working in Japan increased by 12.4% or a huge 250,0000 to a record high of 2.3 million during the year to October 2024 - the biggest y-o-y growth since records began in 2008. The biggest y-o-y growth came from Myanmar (61%), Indonesia (39.5%), and Sri Lanka (33.7%).

By nationality, Vietnam accounted for the largest number of workers in Japan, at around 570,000 (or 24.8% share), followed by China (17.4%) and the Philippines (10.4%).

Currently, foreign nationals make up about 25% of its working population.

Rental Market

Moderate rental yields

Japan's gross rental yields - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - averaged 4.2% in Q1 2025, slightly lower than the 4.33% in Q2 2024 and 4.36% in Q1 2024, according to a research conducted by the Global Property Guide.

In Tokyo's central districts, gross rental yields are relatively lower than the national figure, ranging from 2.54% to 5.22%, with an average of 3.44% in Q1 2025. Surprisingly, yields seem to be higher for bigger apartments. It's not great, though not untypical for a city like Tokyo.

Besides Tokyo, the rental yields remain more or less similar in other cities and areas.

  • Osaka's rental yield, on average, is 4.47% in Q1 2025, at par with the prior year's 4.5%.
  • Nagoya's rental yields averaged about 3.54% in Q1 2025, down from 4.2% in the same period last year.
  • In Yokohama, the average rental yield was 4.43% in Q1 2025, up from 3.97% in Q1 2024.
  • In Fukuoka, the average gross rental yield is 4.22% in Q1 2025, slightly down from 4.34% in the previous year.
  • Sapporo's average rental yield was 4.96% in Q1 2025, lower than the previous year's 5.56%.
  • In Kobe, rental yields averaged about 4.22% during the latest quarter, down from 4.78% in Q1 2024.
  • In Kawasaki, the average rental yield for apartments was 4.34% in Q1 2025, up from 3.55% in the previous year.

Residential rental growth continues, occupancy rates increasing

Residential rents continue to increase. In Tokyo's 23 wards (23W), the average mid-market asking rent was JPY4,332 (US$29) per sqm in Q4 2024, up by 1.3% as compared to the previous quarter and by 6.4% from a year earlier, according to Savill's Tokyo Residential Leasing Q4 2024 report. Accordingly, rents increased in all wards, both on a quarterly and annual basis.

Japan's rent price index rates:

"Optimism continues to grow in the 23W residential market, with all constituent wards having experienced both quarterly and annual rental growth," said Savills. "Net migration continues to hit new highs, while supply constraints for new for-sale condominiums should continue to shift some demand to the rental residential market, bolstering confidence in the sector for the year to come."

Positive net migration and strong wage growth are the two main drivers of the residential rental market in Tokyo's 23W.

"Net migration into the 23W remains strong. Between September and November 2024, a net total of 22,000 new residents were recorded, with foreign nationals comprising a significant majority. The net migration figures mark a 3% and 50% increase compared to the same period in 2023 and 2019, respectively, highlighting robust and consistent population growth in the 23W, which continues to support demand in the Tokyo residential market. In particular, foreign nationals should continue to play a bigger role," said Savills.

Savills also added that Japan saw record wage growth in 2024, its highest in 33 years, with winter bonuses rising. Young professionals in Tokyo benefit the most, strengthening the residential market alongside steady population growth. High condo prices drive more people to rentals, boosting leasing demand.

Likewise, mid-market rents in the central five wards (C5W) in Tokyo strengthened for their sixth consecutive quarter, increasing by 6.7% y-o-y in Q4 2024 to an average of JPY 5,250 (US$35) per sqm. Quarterly rents were up by 2.2% in Q4 2024.

"At the ward level, Chiyoda and Shibuya witnessed the largest quarterly rental growth of 3.1%. Average rents in Chuo and Minato saw moderate increments of 2.8% QoQ and 1.7% QoQ, while Shinjuku's rents increased marginally by 0.1% QoQ," said Savills.

By key locations:

  • In the South, rents reached an average of JPY4,452 (US$30) per sqm in Q4 2024, up by 1.7% from the previous quarter and higher by 5.8% from a year ago.
  • In the Inner North, rents were up by 7% y-o-y to an average of JPY 4,457 (US$30) per sqm in Q4 2024. Quarter-on-quarter, rents increased by 1.4%.
  • In the Inner East, the average rent increased by 0.7% q-o-q and by 6.5% y-o-y to JPY4,197 (US$28) per sqm in Q4 2024.
  • In the West, rents increased by 2.3% q-o-q and by 4.8% y-o-y to an average of JPY3,967 (US$26) per sqm.
  • In the Outer North, the average rent rose by 0.7% q-o-q and by 7.8% y-o-y to JPY3,808 (US$25) per sqm in Q4 2024.
  • In the Outer East, average rent stood at JPY 3,598 (US$24) per sqm in Q4 2024, up by 2.5% from the previous quarter and higher by 7.9% from a year earlier.

The average occupancy rate in Tokyo's 23W registered an uptick of 0.3 percentage points q-o-q to 96.6% in Q4 2024, according to Savills. In C5W, occupancy stood at 96.2% in Q4 2024, up by 0.3 percentage points from the previous quarter.

Occupancy rates are expected to remain high in the coming months.

"Foreign nationals are expected to continue migrating to Tokyo and should become an even larger proportion of rental demand, particularly due to their higher propensity to rent rather than buy. As a result, occupancy levels should continue to increase," said Savills.

The outlook for Japan's rental market remains positive. "Tokyo's residential market demonstrated consistent strong performance in 2024, and this positive momentum looks to continue moving into 2025," noted Savills.

"As companies continue to scale back remote work policies, demand for housing near centrally located offices is expected to rise, supported by meaningful wage growth," added Savills.

Mortgage Market

Home loan rates rising, amidst key interest rate hikes

The BOJ's key rate has been below 1% since the mid-1990s. In its July 2024 meeting, the central bank raised its policy rate to around 0.25% from the previous range of 0% to 0.10%. It was the only second time in 17 years that the central bank hiked its policy rate. This was followed by another 25-basis-point increase in January 2025. Currently, at 0.50%, the policy rate is now at its highest level since October 2008, when it was last set at the same rate.

Despite the rate hike, the BOJ noted that "real interest rates are expected to remain significantly negative, and accommodative financial conditions will continue to firmly support economic activity."

"If the outlook presented in the January Outlook Report will be realized, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation," added the central bank.

As a result, major banks in Japan have been gradually increasing their interest rates on housing loans. Recently, Mizuho Bank and Sumitomo Mitsui Trust Bank announced plans to raise their short-term prime rates to 1.875%, while Resona Bank will increase its rate to 2.125%. Meanwhile, MUFG Bank and Sumitomo Mitsui Banking Corp. have already confirmed a 0.25 percentage point hike in their short-term prime rates.

The short-term prime serves as the benchmark for determining interest rates on floating-rate housing loans, which account for around 70% of all housing loan contracts.

Japan Policy Rate Graph

Housing loans continue to increase

During 2024, the total amount of new housing loans drawn increased by 8.5% y-o-y to JPY 17.32 trillion (US$116 billion), an acceleration from a modest growth of 3.2% in 2023 and a decline of 1.5% in 2022, based on figures from the BOJ.

Japan New Housing Loans Graph

As a result, the total amount of housing loans outstanding to households reached JPY 151.47 trillion (US$1.01 trillion) in 2024, up by 4.1% from the previous year, according to BOJ figures. It was higher than the annual average growth of 2.7% recorded from 2013 to 2023.

As a percentage of GDP, the size of the housing market stood at about 24.8% in 2024, almost unchanged in the past five years. But still an expansion as compared to its average market size of 21.7% of GDP in 2009-2019.

Japan Housing Loans Outstanding Graph

Historic Perspective

Brief history: the housing market, Abenomics, and politics

Japan's housing market grew from 2004 to the first half of 2008 on the back of improved economic conditions. In Tokyo, existing condo prices increased 30.2% (27.3% inflation-adjusted), while new condo prices rose by a more modest 17.5% (14.8% inflation-adjusted).

However, the housing market was adversely impacted by the global financial crisis. From H2 2008 to 2012, prices of new and existing condominiums dropped 12.1% and 3.7%, respectively, amidst weak demand and prolonged economic recession.

Then former Prime Minister Shinzo Abe came to power in December 2012 and implemented his economic policy dubbed "Abenomics". While the impact of Abenomics on the wider economy is debatable, the policy has undoubtedly helped prop up Japan's property market in the past years.

Abenomics stimulates the economy by increasing public infrastructure spending, devaluing the yen, and implementing aggressive quantitative easing by the Bank of Japan (BOJ). Since the introduction of Abenomics, real estate prices have accelerated strongly. Transactions started to pick up in 2012 and rose rapidly in 2013 as monetary policy kicked in.

From 2012 to 2019, existing condo prices in Tokyo rose by 43.2% (34.1% inflation-adjusted), while new condo prices increased by 33% (24.5% inflation-adjusted).

In October 2017, Abe was re-elected again for a third consecutive time as head of the ruling Liberal Democratic Party (LDP,) which made him Japan's longest-serving Prime Minister.

In September 2017, the government unveiled a new JPY2 trillion (US$13.4 billion) stimulus package - the fourth in a row.

Then, in December 2019, Abe approved another stimulus package worth US$120 billion to buoy the ailing economy and cushion the impact of the sales tax rise.

Before resigning in September 2020 due to health reasons, Abe introduced two rounds of stimulus packages, which added about US$2.2 trillion in extra spending (equivalent to about 40% of GDP) to help households and businesses adversely affected by the pandemic.

Abe was succeeded by his deputy, Yoshihide Suga, whose focus remained on stimulating the ailing economy and asserting Japan as a regional power after the post-war decades of avoiding strategic commitments.

In December 2020, Suga unveiled another economic stimulus package worth JPY 73.6 trillion (US$492 billion), amidst the spike in infections in the country. The aid, the first since Suga took office, included incentives for digitalization and carbon reduction, extensions of subsidy programs aimed at promoting domestic travel, buoying consumption, and helping businesses.

However, after just a year in office, Suga resigned over his handling of the pandemic, allowing former foreign minister Fumio Kishida to take over. Having officially assumed office in October 2021, Kishida is seen as more liberal than his predecessors. However, his government has been hit by a political scandal related to the link of his conservative Liberal Democratic Party to the Unification Church that came to light after the assassination of Abe in 2022.

The political tension was aggravated recently by the escalating scandal involving allegations of unreported kickbacks from the ruling party's fundraising proceeds. In December 2023, several ministers resigned over the said corruption scandal, and Kishida announced that he will be revamping his government to restore the public's trust. Based on public opinion surveys conducted in May 2024, approval ratings for Kishida and his government remained low, ranging from 18.7% to 28%.

In June 2024, the Kishida government's much-touted tax cut of JPY 40,000 (US$267) per person came into effect. The said tax cut is a temporary measure that will reduce income taxes by JPY30,000 (US$201) and residential taxes by JPY10,000 (US$67) over one year. It applies to taxpayers with an annual income of JPY20 million (US$133,693) or less and their spouses and dependents. Its effect on private consumption and the overall economy is yet to be seen.

In August 2024, Kishida resigned and announced he would not seek re-election as leader of the ruling LDP. Shigeru Ishiba was elected as the party's new leader and was formally appointed as Japan's new prime minister by parliament in October 2024.

Following the October 2024 elections, Japan faces political uncertainty as the ruling LDP lost its parliamentary majority for the first time since 2009. Prime Minister Ishiba, who took office before the election, admitted voters had delivered a "severe judgment" and pledged reforms on money in politics. The LDP and its partner Komeito secured only 215 seats, falling short of a majority.

Ishiba has vowed to revitalize rural Japan and tackle inflation.

Socio-Economic Context

Sharp economic slowdown, inflation still elevated

During 2024, the Japanese economy grew by a meager 0.1% from a year earlier - a sharp slowdown from annual expansions of 1.5% in 2023, 1.2% in 2022 and 2.7% in 2021 - as external demand remains weak and as a "megaquake" alert in August and one of the fiercest typhoons in decades had dampened economic activity.

"The economy contracted in the first half of 2024 due to temporary supply disruptions but gained momentum in the rest of the year. Domestic demand, private consumption in particular, has strengthened, while net external demand has been sluggish," said the International Monetary Fund (IMF).

The Japanese economy is expected to improve gradually, with both the Bank of Japan and the IMF projecting a real GDP growth rate of 1.1% this year. The government's growth forecast is slightly higher at 1.2%.

"Growth is expected to accelerate in 2025, with private consumption strengthening further, as above-inflation wage growth will boost households' disposable income," noted the IMF. "Private investment is also expected to remain strong, supported by high corporate profits and accommodative financial conditions."

But even before the pandemic, the Japanese economy had been adversely affected by the US-China trade tension and the introduction of a consumption tax hike from 8% to 10% in 2019, not to mention the added risks posed by semiconductor chip shortages and rising prices of energy and resources. Then, the Covid-19 pandemic aggravated the situation, causing the economy to shrink by 4.2% in 2020, far worse than 2019's 0.4% contraction and the biggest decline since 2009.

Some say that Japan has never fully recovered from the great bubble of the late 1980s. However, Japan's economic performance is sometimes over-criticized, the truth being that over the past decade, Japanese growth has been at par with, or better than, Europe's older economies, especially in GDP per capita terms.

The world's fourth-largest economy expanded by an average of 1.1% annually from 2012 to 2019, an improvement from an annual average growth of just 0.6% from 2001 to 2011.

Japan GDP Growth and Inflation Graph

In December 2024, the government approved a JPY 115.5 trillion (US$767 billion) budget for FY 2025, marking a 2.6% growth from the previous year. After a slight decline last year, the budget reached a new record, surpassing JPY110 trillion for the third consecutive year.

The country's primary fiscal deficit was equivalent to about 2.1% of GDP last year, following shortfalls of 2.1% in 2023, 3.9% in 2022, 5.6% in 2021, and 8.4% in 2020, based on IMF estimates.

The IMF projects Japan's deficit to increase slightly to around 2.2% of GDP this year.

"The fiscal deficit is projected to increase slightly in 2025, with additional spending planned for defense, children-related measures, and industrial policies (IP). There is a significant risk that the deficit will widen further, given the political demands on the minority government," said the IMF.

Japan's debt burden is considered the world's biggest. The country's gross public debt has soared to more than 250% of its GDP since 2020 and remained at around that level since. This year, gross public debt is projected to stand at about 249% of GDP.

Japan Government Gross Debt Graph

The labor market remains tight. In January 2025, the overall jobless rate was 2.5%, slightly up from 2.4% in the same period last year, according to the Ministry of Internal Affairs and Communications. Unemployment averaged 3.3% from 2010 to 2024.

Inflationary pressures remain high. In February 2025, nationwide inflation stood at 3.7%, down from 4% in the previous month but up from 2.8% a year earlier. It remains above the BOJ's target of 2%.

Japanese companies worry over the impact of U.S. President Donald Trump's policies on global trade, with fears that U.S. import tariff hikes could drive up inflation. Recently, Trump announced his plan to impose tariffs on imported cars.

Before surging to 2.5% in 2022 and further to 3.3% in 2023, persistently low inflation had been a long-standing problem in Japan, with inflation standing at an average of just 0.1% from 2000 to 2021. During 2024, inflation stayed at around 2.2%.

Weak yen benefits exporters but hits consumers hard

The Japanese yen continues to depreciate against major currencies. The domestic currency lost nearly 34% of its value against the US dollar in just four years, reaching an average exchange rate of US$1 = JPY156.427 in January 2025. Over the same period, the yen also depreciated against the Canadian dollar, the pound, and the euro by 25%, 26.7%, and 22%, respectively.

But even before the pandemic, the yen had been generally declining. One aspect of former PM Shinzo Abe's famous Abenomics was an attempt to boost the economy by reducing the domestic currency's exchange rate. The Japanese yen was made to depreciate by almost 37% from US$1 = JPY 78 in 2012 to US$ = JPY 123 in 2015. After regaining 4.7% of its value in 2016-17, the yen stabilized in the succeeding three years. Then, in 2020-21, the yen depreciated by 4% against the US dollar.

Unsurprisingly, Japan's exports rose by 6.2% y-o-y to JPY 107.09 trillion (US$711.11 billion) in 2024, the highest level recorded since comparable data became available in 1979, driven by chip-making equipment shipments to China and US-bound hybrid vehicles, according to the Finance Ministry.

On the other hand, imports were up by 1.8% to JPY 112.42 trillion (US$746.52 billion) in 2024 from a year earlier, mainly due to personal computers from the US and copper ore from Chile.

This resulted in a trade deficit of about JPY 5.33 trillion (US$35.4 billion) in 2024, down by a huge 44% from a year earlier.

In fact, the current account surplus surged by 29.5% to JPY 29.3 trillion (US$194.6 billion) in 2024 from the previous year. It was the largest surplus seen since records began in 1985.

While a weak yen normally benefits exporters, it may be hurting Japanese households now more than in the past, as the country's increasing reliance on more expensive raw material imports pushes up the cost of living in the country, said former BOJ Governor Haruhiko Kuroda.

Japan Monthly Average Exchange Rates Graph

Sources:

Get Full Access

Pay $99/month. Cancel anytime.
Subscribe Already a subscriber? Sign in.

Stay updated with global real estate markets

Get the data behind 88 countries for $99 per month.
Latest Market Reports
Rental Yields
House Price Indices
Rent Price Indices
Square Meter Prices
Median Property Prices
Median Rent Prices
Mortgage Rates
Property Taxes
Quarterly Trackers
Quarterly Market Overviews

Subscribe to Global Property Guide

Access up-to-date real estate data and statistics.
Subscribe Now Already a subscriber? Sign in.

This page requires a Professional plan

Get the data behind 80+ countries for $39 per month.
Historical & Current Rental Yields
Historical & Current Purchase Prices
Historical & Current Rent Prices
Historical & Current m2/sqft Prices

More data and information on Japan

Rental Yields in Japan
House Price Index in Japan
How to Buy Property in Japan
SQM Prices in Japan Compared to Asia