Faced with stringent controls imposed by the Chinese Communist Party (CCP), a growing number of wealthy Chinese citizens are taking steps to protect themselves and their assets by purchasing real estate in Japan.
Data from the CCP’s State Administration of Foreign Exchange reveals that the net outflow of funds from China in September 2023 reached an unprecedented $53.9 billion, its highest level since 2016. The prevailing political and economic uncertainties in China, exacerbated by the CCP’s revised anti-espionage law, escalating tensions in the Taiwan Strait and South China Sea, and a mass exodus of foreign enterprises, have fueled the transfer of assets overseas by affluent Chinese individuals.
In 2021, the CCP’s increased emphasis on “common prosperity” heightened anxiety among the wealthy, prompting many to shift their assets overseas, with Japan emerging as a particularly popular destination.
Hiroki Kanazawa, owner of the real estate agency Hwasunsha, located in Osaka, also highlighted the surge in interest in Japanese real estate among Chinese groups, citing a $5.15 million 11-story apartment building in Osaka tailored to “bed-and-breakfast” investments targeting foreign tourists.
The relative affordability of Japanese real estate, coupled with the significant depreciation of the yen over the past year, makes it an attractive investment opportunity for affluent Chinese individuals seeking substantial discounts.
The peak periods for Chinese individuals acquiring Japanese real estate can be divided into two phases. The first, from 2014 to 2015, was driven by optimism surrounding the economic impact of the 2020 Tokyo Olympics. The second, starting around April 2022, coincided with the implementation of the CCP’s zero COVID policies, prompting a surge in asset transfers to Japan amidst lockdowns and uncertainties.
Increasingly, Chinese buyers want to live in Japan, not just to invest in real estate. This is partly due to stricter restrictions on real estate acquisitions in Europe and the Americas.
Beyond investment opportunities, Japan offers a public healthcare system that is ranked among the best in the world and a highly regarded social security system.
Japanese real estate agents report a growing interest among affluent Chinese individuals in high-end apartments priced between $687,000 to $2.06 million or more, with some considering the acquisition of entire buildings. This surge in demand has, in turn, contributed to escalating property prices in Tokyo’s bustling areas.
Chinese are now the main buyers of Tokyo apartments listed at $3 million or more, Zhao Jie, the CEO of an online real estate listing service, told the New York Times in November. Moreover, they often pay with suitcases of cash, Mr. Zhao said. “It’s really hard work to count this kind of cash,” he added.
Chinese capital flowing into Japan is a boost to the retail market there. However, some Chinese in Japan are turning a profit by exploiting tax exemptions for foreign tourists. Recent investigations by Japan’s Internal Revenue Service have revealed instances of Chinese tourists going on buying sprees in order to resell Japanese goods. If tourists are found to be reselling goods, they are liable for taxes on their purchases; but collecting those taxes is difficult.
The estimated outflow from China in 2023, pegged at around $50 billion per month, came primarily from Chinese households and private enterprises. The massive influx of Chinese capital underscores Japan’s status as a preferred destination for affluent Chinese individuals seeking to safeguard their funds.
