The Los Angeles Times from Los Angeles, California • Page 19

MONDAY, SEPTEMBER 26, 1994 B7 LOS ANGELES TIMES WASHINGTON EDITION Housing Rebound May Help Japanese Recovery Economic Snapshot Countries in the Asia-Pacific region vary widely in such areas as per capita Gross Domestic Product and indicators of standards of living. fc Hi Australia GDP per capita: $16,680 Industrial production: 32 (percentage of GDP) Private consumption: 62 (percentage of GDP) Motor vehicles: 54 (per 100 people) Telephones: 55 (per 100 people) Adult illiteracy: 5 New Zealand GDP per capita: $13,970 Industrial production: 26 (percentage of GDP) Private consumption: 63 (percentage of GDP) Motor vehicles: 52 (per 100 people) Telephones: 72 (per 100 people) Adult illiteracy: 5 Indonesia GDP per capita: $2,730 Industrial production: 42 (percentage of GDP) Private consumption: 55 (percentage of GDP) Motor vehicles: 1.4 (per 100 people) Telephones: 0.7 (per 100 people) Adult illiteracy! 23 Japan GDP per capita: $19,390 Industrial production: 42 (percentage of GDP) Private consumption: 57 (percentage of GDP) Motor vehicles: 45 (per 100 people) Telephones: 56 (per 100 people) Adult illiteracy: 5 Malaysia GDP per capita: $7,400 Industrial production: NA Private consumption: 56 (percentage of GDP) Motor vehicles: 12 (per 100 people) Telephones: 10.8 (per 100 people) Adult illiteracy: 22 Philippines GDP per capita: $2,440 Industrial production: 34 (percentage of GDP) Private consumption: 72 (percentage of GDP) Motor vehicles: 1.9 (per 100 people) Telephones: 1.7 (per 100 people) Adult illiteracy: 10 Thailand GDP per capita: $5,270 Industrial production: 39 (percentage of GDP) Private consumption: 58 (percentage of GDP) Motor vehicles: 3.9 (per 100 people) Telephones: 3.1 (per 100 people) Adult illiteracy: 7 FUMIYO ASAHI For The Time The rebound in home construction is a reason for hopes of a consumer-led expansion out of Japan's worst recession since World War II. improvement over 1992. As Japan slowly emerges from its worst post-World War II recession, analysts say that the housing market's strength is a factor contributing to hope for steady consumer-led expansion. "Housing construction promotes the purchase of consumer durables," Wada noted.

"And it's said that there's a broad foundation that supports real estate development. Lumber, steel and Concrete are needed. Then there's the effect on purchases of furniture, curtains and little things like that." An important factor contributing to the condominium boom is a 1991 tax law revision that boosted property taxes by 50 times on urban -area agricultural land rezoned for housing development. The effect of the changes was to increase the value of the land, but also to raise taxes so much that owners were almost forced to develop it rather than keep it in rice fields. Some owners have chosen to retain their land by building rental units rather than condominiums.

Daito Trust Construction Co. Ltd. is one firm that has enjoyed dramatic growth from building rental units on land put into development as a result of the 1991 tax law. But the company has recently seen the number of these special projects fade sharply. While many prospective buyers still hope for a further drop in prices, developers are afraid that oversupply may soon wipe out the profitability of condominium construction.

Nichiei Construction has seen profits go up sharply in the "past two years, but still views the overall environment as rather difficult. "After the bubble burst, land prices came down, so those who couldn't afford condominiums are now capable of buying them," said Nichiei spokesman Masataka Sato. "But on the other hand, there now is an oversupply of condominiums, and many customers are waiting for a further decline in prices." Timet researchers Chlakl Kitada and Meguml Shlmlzu in Tokyo contributed to this article. "if- it- peak of the overheated Rubble years have seen their equity ctisap-pear, leaving them trapped in Iheir current homes and generally Unable to take advantage of lower prices to move into bigger places. The fall in housing values, which began three years ago, was also a shock to developers.

Once Japan entered recession, condominium sales ground to a halt, Hirose explained. But in July, new condominiums put onto the market in the Tokyo area surpassed the mark for the first time ever, according to the Real Estate Economy Institute. The private research firm projects the total for the year will be about 80,000 units, far exceeding the previous Tokyo-area annual record of 54,700 units set in 1978. Nearly 90 of the new condominiums coming onto the market are selling within a month. Total housing starts nationwide, including rental apartments, condominiums and single-family homes, are now running at an annualized rate of 1.6 million.

This compares with total starts of 1.51 million last year, itself a sharp Real GDP per capita for 1 99 1 expressed in purchasing power parity dollars. Industrial production as a percentage of GDP for 1 99 1 Private consumption as a percentage of GDP for 1991. Motor vehicles per 100 people 1989-90. Telephones per 100 people 1990-92. Adult illiteracy rate for 1990.

Sources: Penn World Tables. United Nations Statistical Division, World Bank, International Telecommunication Union rum Real estate: Home builders are enjoying a profit after dismal 'post-bubble' years. By DAVID HOLLEY TIMES STAFF WRITER TOKYO Mitsuo Kon and his wife have talked of buying a new home for the past few years. This month, they decided the time had come to make a move. They found a "bargain" a $567,000 condominium under construction 45 minutes by train from downtown Tokyo.

"Prices are cheaper than two or three years ago. It looks like it's affordable for us," Kon, 56, said after filing an application to buy the unit. The couple were especially pleased by the overall design of the three-bedroom place, which will have bigger windows, higher ceilings and larger rooms than the typical tiny Japanese apartment. "The quality of condominiums is getting better," Kon said. "Before in Tokyo, even if you paid one 100 -million yen $1.01 million, you couldn't get something like this." Mitsuo and Seiko Kon are partic-'i ipants in and beneficiaries of a resurgence in Japan's housing industry.

Fueled by a reduction in land and construction costs, lower interest rates and tax law changes, the housing rebound is one reason for hopes of a consumer-led expansion out of recession. Japan's construction industry still faces hard times overall, but 1 companies active in the housing 'market are enjoying a profit rebound after the dismal "post-bub- ble" years of 1991 to 1993. Housing i construction-related firms were prominent in a survey completed 3 for The Times of Japan's fastest-, growing public companies. "The amount of profit on each unit has dropped some" compared 'to a few years ago, said Noboru Wada, manager of the real estate information division of Jutaku-Jo-ho magazine, a publication for prospective home buyers and renters. "But since there's more condo- TLAYJapan's Leisure lIVIf.ltKjri Jiv oo, Industry Continued from B5 According to a survey of Japan's public firms for The Times, Namco video game maker Sega Enter-uprises, respectively, had the highest average profit and revenue growth for the 1992-1993 two-year period.

But the leisure industry in general, including makers of recreational vehicles and camping equipment, is currently enjoying a boom in Japan, riding a wave of changing lifestyles. "The general environment has provided additional free time to seek leisure," said Nakamura, who 'served as chairman of the Japan 'Amusement Machine Manufacturers Assn. from 1981 to 1992. "Many companies have instituted five-day 'weeks. The national government has increased the number of holidays.

Young people have tended to move away from just pure materialistic amusement, and they are looking for more satisfaction from the games that they play." For entertainment firms, Nakamura said, this creates constant pressure to upgrade the quality of games and the environment in which they are used. Namco and other firms such as Sega have sought to meet this demand by producing ever-more-complicated and technically sophisticated games that can be enjoyed in a theme-park atmosphere. Brightly lit, attractive game centers are now so ubiquitous in Japanese cities that some critics say people are forgetting how to have fun on their own. "All over the city there are too many ready-made entertainment places run by big companies," complained Shinobu Omiya, 31, a publishing company employee. Most of these places present passive entertainment, she said, explaining that she prefers more participatory activities.

However, Omiya admitted that she is not immune to the lure of electronic amusement centers. "I like new things, so I'm not totally uninterested," she confessed. In that regard, Omiya has lots of company. The Leisure Development Center, an affiliate of the Ministry of -International Trade and Industry, estimates that 41 million a third of Japan's 124 million people, visited an amusement center at least once during 1993. In recent years, "listening to music, playing home video games, going to video game centers, and auto-camping have higher participation rates, frequency minium construction, overall profits are up for the companies building them." In the mid-1980s, a typical 700-square-foot three-bedroom condominium located an hour by train from downtown Tokyo sold for about $303,000 at today's exchange rates, Wada said.

The price soared to $606,000 by 1991, and has now fallen back to the range of $404,000 to $450,000, he said. Total sales have picked up dramatically, but competition between developers remains fierce. "It's a bit easier to sell now than it was a few years ago, but it's still not really easy," said Hitoshi Hi-rose, a manager in the real estate development department of Tobu Railway Co. builder of the complex where Kon is buying. Kon, a government employee, and his wife, a nurse, can afford a new condominium partly because they already own an 807-square-foot place they bought 10 years ago, before the late-1980s surge in real estate prices and subsequent collapse.

"I think we can sell it for a bit more than we paid for it," Kon said. But people who bought at the ii A Japanese family plays video and spending," the Leisure Development Center said in its report on recreation, which showed millions of Japanese enjoying a range of leisure pursuits from karaoke singing to visiting museums. These activities, the report said, "fit in nicely with the greater emphasis on family activities, now that the workweek is shorter, and they are very popular with the children of the baby boomers, who are now coming into maturity." The popularity of video games and amusement centers and the profitability of many companies in this industry is boosted by efforts to upgrade the quality of the games. One of the latest fads is fortunetelling machines. At the Hitech Sega Prime amusement center in Tokyo's Shi-buya district, nine fortunetelling machines are a major draw.

Human fortunetellers, who can sometimes be found operating near Shinto shrines or out of their own residences, have always been popular in Japan. But the 500-yen ($5.05) price of a Sega machine-made fortune is much cheaper. Some customers also note that if they don't like what the machine has to say, they can always dismiss it as just a game. At Namco's Wonder Eggs amusement park in suburban Tokyo, weekend visitors typically wait in line for 30 minutes or more for the fortunetelling attractions. Namco's X-Day machine, which predicts how long players are likely to live, is also selling far above expectations.

Since it went on the market last year, 1,000 units have been sold, double the company's initial projection. The machine asks players questions about their life FUMIYOASAHI ForTheTime games in one of the island nation's many amusement centers. Los Angeles Times global equities at Prudential Investment Advisors in Newark, N.J. Assembly will be subcontracted to Vietnam, India, Pakistan, China, Cambodia, even Myanmar, he said. A look at firms in Asian nations provides examples of these trends.

South. Korea's Pohang Iron and Steel the nation's largest producer of steel, and Korea Electricity Power Corp. recently sought listings on the York Stock a first for companies from that nation. The companies are seeking funds to help fuel further growth. CITIC-Pacific meanwhile, is typical of the Hong Kong-based conglomerate, with investments in a wide range of businesses and subsidiaries that are involved in trade, aviation, warehousing and distribution, real estate and telecommunications.

"Our company's strategy has always been to focus on three areas," said Chairman Larry Yung Chi-Kin last month in an interview with the South China Morning Post. "The first is infrastructure, which provides a fixed income. Trading is another because it generates a strong cash flow. And, apart from these two, we think property investment in Hong Kong is a major area that guarantees steady revenue." The economy of the Philippines accounted for a 65 rise in profits in the first six months of 1994 for Ayala one of that nation's top industrial conglomerates, the company reported. Ayala holds interests in food manufacturing, agriculture, banking and finance, telecommunications, office buildings, property management and other businesses.

Last month, the company announced that it would lead a consortium of private companies and government agencies in the Philippines and Singapore to bid for the redevelopment of an army base in Manila. In other ventures, the firm's Globe Telecom unit is installing a nationwide telecommunications network, and its Ayala Land Inc. subsidiary is the nation's largest property developer. To be sure, there is a downside to Asia's growth. "The biggest risk to these countries is I think twofold," said Bill Wilby, director of global equities at Oppenheimer Manage- ment Corp.

in New York. "The first is inflationary risk. The second is political, in that many of these countries have not yet made full transition to representative democracy." But some analysts point to the support of governments as a key factor in the region's economic growth, what one observer called "khaki capitalism:" the use of military or other public funds to finance infrastructure spending and other economic development. "They don't have enormous social spending programs," said James Ayer, one of Oppenheimer's portfolio managers. Moreover, analysts argue that a growing middle class will put pressure on more authoritarian governments to moderate their GROWTH Continued from B5 "Asia has the fastest-growing intraregional trade in the world," said Tom Robinson, chief international equity strategist at Merrill Lynch in New York.

"What has developed is a takeoff into sustained growth, where they are trading increasingly with each other, rather than outside the region, and are able to carry on their own business development." Such transactions are the logical next step for businesses in the world's most rapidly growing region, where national economies are expanding at a pace that the United States and other Western nations can only envy. A sampling of national economic growth rates in 1993, according to the East-West Center in Honolulu: Singapore (9.8), Malaysia (8.5), Thailand (7.9), Indonesia (6.7), Taiwan (6). That compares with between 2 and 3 for the United States. Much has been made of the rapid economic surge and huge potential of China, whose economy grew faster than 13 in 1993. But the Asia-Pacific region is multifaceted, encompassing the mature economies of Japan, South Korea and Taiwan; the rapidly developing manufacturing economies of Malaysia, Thailand and Indonesia, and the financial and service centers of Hong Kong and Singapore.

While the region is diverse, analysts say there are several trends converging in the 1990s: Rapid development is creating an explosive need for infrastructure, particularly electric power and telephones. As an example, Malaysian and Indonesian companies are signing an agreement to build a 500-megawatt coal-fired power plant in southern Sumatra, the Business Times reported this month. There is a burgeoning consumer class hungry for televisions, refrigerators and air conditioners. James Ayer, a portfolio manager of global fund at Oppenheimer Management Corp. in New York, observes that there is also a growing body of residents, particularly in Singapore and Malaysia, who can afford to own their homes.

"So much money is being made, and these economies are growing so fast, these countries in are becoming consumer markets for each other," he said. Asian nations are moving away from being a source of cheap labor and low-cost assembly work, increasingly becoming centers of high technology and engineering expertise in part because of a new class of professionals educated abroad. "In the 1990s in places like Singapore and Malaysia and Thailand, where what they were selling ten years ago was cheap labor, what they're selling now is moving up the technological scale," said Daniel J. Duane, managing director and chief investment officer for styles, then gives an estimate of their probable life spans. Any player already older than projected is issued a document officially certifying him or her as a zombie.

The Love Love Simulation machine created by Kyugo Trade an arcade game machine manufacturer, offers couples a chance to envision unborn children. When couples have their pictures taken by the machine, it produces an image that purports to show the face of the child they would produce together. The point of leisure activity in Japan is "to get as far away as possible from your daily state of mind," said Yoshiaki Takagi, 34. "Japanese people in general, including me, are so absorbed in the realities of life that our spirits have withered," he declared. "It seems to me that because of that, we've become good at escapism.

My work is in computer graphics, so I have no negative feelings about game centers and amusement parks. I have no objection to ready-made entertainment' Takagi added, however, that he also enjoys driving into the countryside, rolling up his trousers, sitting by a river and thinking about nothing at all. "When I do that," he said, "I feel a reaffirmation that human beings are part of nature." Such urges to escape to the countryside are another force powering the leisure industry in Japan. The market for various types of camping and other recreational vehicles has seen explosive growth in recent years, with sales jumping from 550,000 vehicles in 1989 to a projected 973,000 this year. Toyota Motor which makes 40 of the recreational vehicles sold in Japan, is even moving into the auto campsite business in an effort to support the continued growth of such sales.

The Construction Ministry is building an additional 180 such campsites throughout Japan, including 60 due for completion by early next year. Japan now has more than 2,500 campsites, which draw more than 13 million visitors annually, according to estimates by the Japan Auto Camping Federation. Interest in camping and other outdoor activities has sparked a boom in sales of all sorts of related products, including rugged fashions for urban wear. Even foreign firms have found a piece of the action. L.L.

Bean's 1993 catalogue sales in Japan were nearly $60 million, according to the Maine-based company, and it has just opened its third store in Japan. The total market for outdoor-leisure products, including camping gear, hiking boots, mountain bikes, backpacks and other items, is projected to hit $3.9 billion next year, up 80 since 1989, according to the Leisure Development Center. Namco's Nakamura, who shows a philosophical bent when he talks about his business, says the growth of leisure activities reflects the "spiritual" side of human beings. In contrast to stereotypes of the Japanese finding the meaning of life in work, Nakamura said he believes "man was placed on this Earth to play." "The ultimate objective for us," Nakamura said, "is to make people happy." Times researcher Meguml Shlmlzu In Tokyo contributed to this article..