Is Tokyo really a YIMBY success story?

It is common lore in YIMBY circles that Tokyo is such an inexpensive city because Tokyo/Japan has allowed so much freedom to build.  Sometimes it is mentioned that Japanese building and regulatory decisions are made at higher levels than the strictly local, which lowers the power of the NIMBYs to restrict building.

I don’t doubt the key elements of this story, namely that Tokyo real estate is relatively cheap, and also that it is relatively easy to get a certain kind of construction through, including vertical construction, both up and underground.

Yet the more I think about it, the more I tend to believe a very different proposition: Japan is in key ways a very NIMBY country, and its brand of NIMBYism has keeps real estate prices down.

A corollary is this: YIMBYism gets much less credit for low Tokyo real estate prices, and furthermore the low real estate prices are a sign of something having gone wrong on the productivity side, in large part due to regulation.

As a piece of background information, note that Japanese productivity levels are about 60 percent of the United States.  And few have claimed that is because the Japanese do not work hard, or cannot coordinate well.  It is not a low-trust society.

Here are some key ways that Japan has been a NIMBY country, noting that I am not referring so much to construction per se, but rather to high-value, high-productivity construction:

1. Japan has had very tough immigration restrictions.  This has eased considerably, but a) the stock matters not just the flow, and b) current Japanese migrants often are from countries such as Thailand and the Philippines, which fills in for some mid-level jobs, but does not massively boost rents.

2. It is extremely difficult to learn written Japanese.  Among its other effects, this discourages high-value immigrants from settling into very high productivity service jobs in Tokyo or in Japan more generally.

3. Various regulatory and legal decisions have prevented Tokyo from developing into the financial capital of Asia (haven’t you wondered  about this?).  I won’t go into all the detail here, this is the modern world so just ask ChatGPT.  I’m sure you all know that major financial centers usually lead to exorbitant rents, due to the opportunity cost of the land.

4. So, so much of Japanese regulatory policy and culture is geared toward maintaining small retail businesses, super small in scale, and low in productivity.  They do not place much upward pressure on rents.  By the way, this is one reason why tourists find Tokyo so wonderful, but those enterprises lower productivity considerably relative to say Walmarts.  It is no accident that so many Japanese examples populate “Markets in Everything,” that they have cat and furry cafes, and so on.

Now, those are not building restrictions in the sense of passing a law “no such new building may be placed here.”  But they are significant — yes very significant — legal, institutional, and cultural restrictions on building out high productivity, high rent real estate options.  (Are you reminded of the 1980s debates on trade restrictions, when it was pointed out that so many of the Japanese trade barriers were indirect rather than upfront tariffs?  History is repeating itself here.)

The YIMBY movement just doesn’t talk about those indirect NIMBY-like Japanese restrictions so very much, at least not in the context of how they affect rent levels.  Instead, YIMBY wants to take credit for low Tokyo rents, but a much less regulated Tokyo market would in fact be considerably more expensive, not less expensive.

One accurate way to describe Tokyo would be: “They allow a lot of construction, yes.  But they make high value, high productivity construction extremely difficult to pull off.  They have their own Japanese unique blend of YIMBY + NIMBY, where the NIMBY parts of that equation are really a very important reason why Tokyo real estate prices stay so low.  So many factors push construction toward lower productivity construction options.”

And there you go.  Again we see that true YIMBY adds value, or can add value, but it very often raises rather than lowers rents.