A traditional Kyoto townhouse-style inn near Kinkaku-ji, or the Golden Pavilion, a condominium for investment near a train station... "Shenjumiaosuan," a Japanese real estate information app for investors in Greater China, shows an array of properties in Kyoto City with prices ranging from tens of millions of yen to over 100 million yen.

Many of the users sizing up properties on the other side of the ocean with their smartphones in hand are Chinese in their 30s and 40s who have built up their assets through the real estate bubble and other economic factors. They invest in Japanese properties, which are less expensive than those in Shanghai and other Chinese cities, for long-term investment purposes. Many of them make a lump sum payment without taking out a loan, and some even complete contracts without coming to Japan. Though this may seem to be surprising financial sense, Zhao Kiyoshi, the CEO of the company operating the app and a native of Shanghai, said frankly, "In Chinese cities, it is not unusual to own real estate worth 100 million yen. People who Japanese consider wealthy are actually middle class."

Non-Chinese foreign investors are also eager to invest in the market, even in large properties in prime locations. Rihga Royal Hotel Kyoto and Miyako Hotel Kyoto Hachijo near JR Kyoto Station have already been acquired by U.S. investment fund groups, with their management entrusted to Japanese companies. The sale of the Prince Kyoto Takaragaike, a hotel in Sakyo Ward, Kyoto, to a Singaporean fund was also decided this year.

While the number of traditional Kyoto townhouses has been on the decline, an increasing number of them have been purchased by foreigners as vacation homes or investment properties in the past 10 years. Some Chinese companies are attracting large investments to revitalize dilapidated townhouses. A real estate agent in Kyoto murmured, "It would be best if the original owners continued to live in them and pass on the culture of Kyoto townhouses to the next generations, but it is also true that many of them have been saved by the inbound foreign investment boom."

Foreigners are buying houses that local young people cannot afford even with a loan, or expensive properties that Japanese companies had to part with... What has been happening in Kyoto shows us the "cheapness" of Japan, a country where prices and wages have remained stagnant for about 30 years.

"It is normal in Europe and the U.S that wages rise 3 percent per year, and prices about 2 to 3 percent. Japan alone has been in an unusual situation for more than 20 years. Consequently, the gap between Japan and other countries has widened, and the prices of goods and services are too low," pointed out Tsutomu Watanabe, professor of macroeconomics, at the Graduate School of the University of Tokyo. Japan has been left behind in global economic growth due to the vicious cycle of consumers who are unwilling to tolerate price rises and companies that cannot change the price of goods or raise wages.

Meanwhile, as consumption recovers from the COVID-19 pandemic and supply shortages due to the situation in Ukraine, cost-push inflation caused by rising energy and food import prices is directly impacting people's lives. While Europe and the U.S. are tightening monetary policy to counter inflation, Japan has no choice but to maintain monetary easing due to its sluggish wage growth. The interest rate differentials have been rapidly weakening the yen. On June 13, the yen temporarily fell to 135 yen level to the dollar, hitting a 24-year low.

Will Japan's "lost three decades" of stagnation be further prolonged? Prof. Watanabe pointed out, "Many companies have begun to raise prices of their products. Consumer sentiment is changing, and the tide of chronic deflation is turning. It is the role of politicians to send messages to both sides, asking businesses to raise wages, and consumers to accept the price increase."