The scene from Bubble economy

Daisuke Inoue

From 3 people, I have collected the episodes which he or she experienced during the Bubble economy and after the collapse of Bubble economy. Although economic activity is one aspect of the social living, individual lives are constrained by the state of the economy and money has the power to change the individual life dramatically both in good and bad way. The unprecedented rising price of real estates and stock can be seen throughout Japan during 1986-1991, which was called the Babble economy, and many people had participated the activity of selling and buying repeatedly the financial products in order to generate the profit. The people whom I have interviewed had experienced the event as both the player and the observer, and each episode shows the characteristics of Bubble economy.

First, I interviewed my mother and father who were living in Takarazuka, Hyogo-prefecture, during the Bubble economy.The golden year of Bubble had lasted 5 years since 1986 and I was born in March 1986. She remembers that many new building were constructed just before I was born. Obstetrician hospitals were not the exception and she could choose from the variety of hospitals ranked based on the hospital charges. Comparing the time when she was delivered of my sister in September 1984, she felt that there were large differences in the hospital service.

They purchased the old apartment at the price of 25 million yen before Bubble starts in Takarazuka. The railroad company called Hankyu was developing the new station building and new theater building for Takarazuka Opera Company in which they run, so the landscape was changing rapidly. Meanwhile, my father was working for the electrical appliance manufacturer and he applied to study in Boston in order to get MBA. The value of yen was soaring after the Plaza Accord in 1985 and the company could afford to support his tuition and living fee for the family. The peak of the Bubble was 1990-1991, and my family moved to Boston in 1990 for 2 years, so my parents was observing Japanese Bubble economy from the United States and also they observed the Japanese traveling abroad and the Japanese company such as Mitsubishi Estate Corporation buys the real estate in the United states. While they were being absent from the apartment in Japan, the price of the apartment soars 90 million yen. If they sold the apartment at the price, they could earn about 65 million yen, but they could not sell because they were in Boston. When they returned to Japan, the Bubble was almost collapsing, but they could generate profit 10 million yen by selling it.

At the same time, they look for the new apartment to move and found the favorable apartment built on the top of the hill where you can see the whole view of the Osaka plain and the Osaka bay. The applicants are more than 100 times as many as the fixed number and the lot did not fell on them, so they waited for a while to purchase the same used apartment at the price of 55 million yen. However, the Bubble burst and the Great Hanshin Earthquake happen in 1995. Not only they needed to pay for the reconstruction of damaged house, but also they experienced the rapid decline in the value of the apartment. The current price is almost one third of the original price and they have being paying the housing loan even now.

“Even though we made money during Bubble, we made loss after Bubble burst. I knew that there is always the risk involving to buy apartment, but this was beyond my imagination. It is extremely hard to control the risk”
my father commented.

Second, I interviewed the friend of my mother named Ms. Tajima who was high school teacher.She purchased the detached house in Chiba prefecture, 10 minuets away from West Funabashi station in 1983. The price was 40 million yen when she bought it, but it was assessed approximately 100 million yen in 1990. If she sold the house at the price in 1990, she could earn the profit 60 million yen, but she kept living there and decided to sell it in 1998 because she purchased the used house in Makuhari. However, it was hard to find the buyers, so she reduced the selling price from 41 million yen to 38 million yen and took about one year to finish the transaction. She said

“even though I did not profit from the investment for housing during the Bubble economy, I was lucky because I could live there with almost no rent for 14 years.”

The reason she moved to the used mansion in Makuhari is associated with the collapse of Bubble economy. She could purchase the house for 65 million yen in 1998 even though it was initially mortgaged to the bank for 150 million yen by the owner of the mansion. The mansion was under the possession of the bank because the owner of the mansion could not pay his loan. Initially, it was built by the manager of the design company in 1991. Calculating using the current value, the flexible mortgage was set 150 million yen by the bank when he made the loan. However, his company declined sharply and eventually went bankrupt after the collapse of Bubble, so all of his property including the mansion in Makuhari was dispossessed by the bank. In order to recover from the loss quickly, the bank posted the advertisement for a sell instead of putting the thing in auction. The price was reduced by more than 50% of its mortgage price, but buyers did not appear until she made a bargain with the bank.

Bubble economy had started collapsing since 1991, but many people did not recognize the fact and still kept seeking for attractive place to invest their money. She purchased the apartment with one dining room and kitchen in Ichikawa as the mean to reduce taxes during summer in 1991. She thought that the price will continually rise and could make the profit from the investment. Moreover, her sense of the value of money was numbed by being accustomed to the outrageously high price of the real-estate during the Bubble economy, so the apartment which cost 20 million yen appeared cheap to her. There was keen competition for buying the apartment and the lot fell to her.

“Joy and sorrow are today and tomorrow“

she uttered a sigh. Lying north part of Ichikawa city, the house was unfavorably located. Taking bus was only way to access the major station on Somu-line, connected to Shinjyuku and Tokyo station, and if you take a train from the nearest station, you need to exchange at Nishi-funabashi station from Musashino line. She could easily find the first lessor at a rent of 90,000 yen a month. However, the annual interest rate of the loan suddenly became 9% and she was astonished by the change and she was forced to lower the rent every time finding the next resident. When the housing loan left became 5 million yen the year before last, she attempted to vend the apartment at the price of 5 million yen and drop from the business, but the real estate agent estimated the value lower than what she expected, so she decided to pay back all her loan and keep renting the apartment. She learned from this painful experience that the value of the property is largely depended on the location condition and need to think in the long-term before purchasing the real-estate.

Another painful and regrettable experience was losing the money from buying the investment trust. She made an investment in the investment trust though the Okasan security cooperation during Bubble. However, the value of the investment trust decrease by 40% when it reached the maturity after Bubble burst. The volume of such product expanded at an extremely rapid pace during Bubble and when Bubble burst the stock price were plunging and there were many investors who made a loss. The bank can earn the profit though sales commission for the product such as investment trust. In contrast, it is the investor who takes the risk involved in the financial product and the risk of the investment trust is relatively high. After this experience, she is no longer show interest toward the investment trust. Instead, she invests money in the stock exchange because she can exchange the stock based on her own judgment and responsibility. She said that she can satisfy even if it is unfavorable result.

In conclusion, Bubble economy was unique time period that people were motivated to make the profit excessively. Even though people understood the risk, people believed that the price of real estate and stock keep soaring and made the irrational decisions. People could not control the unprecedented situation. Psychological factors contributed to constitute the insubstantial economy and accelerated to expand and destroy it.

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(EX) Lynch, Tim. "DSN Trials and Tribble-ations Review." Psi Phi: Bradley's Science Fiction Club. 1996. Bradley University. 8 Oct. 1997 .

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