Mighty Yen and the New Japan, Inc Buying Spree

Those of you old enough remember the Eighties when Americans lived in mortal fear of the Japanese (just as they do nowadays of the Chinese). US carmakers were unable to produce automobiles that were competitive with Japanese designs in terms of economy and reliability, resulting in local yokels literally taking sledgehammers to cars made in Japan. This mounting sense of discomfort about Japan, Inc taking over was exacerbated by Japanese concerns buying prime US properties--most especially the Rockefeller Center during their 80s heyday. As Japan entered the 90s, though, let's just say things weren't so hunky-dory at home, forcing many Japanese concerns to divest of their real estate holdings Stateside. This NYT article dates from September 1995:

The Mitsubishi Estate Company of Japan plans to walk away from its almost $2 billion investment in Rockefeller Center, the Hope diamond of world real estate. Mitsubishi proposed yesterday afternoon that it pass ownership of the Manhattan property to Rockefeller Center Properties Inc., the publicly traded real estate investment trust that holds the $1.3 billion mortgage on the center, according to advisers involved in the negotiations to bring Rockefeller Center out of bankruptcy protection.

Mitsubishi's sudden decision to exit Rockefeller Center is the most striking in a string of recent retreats from the trophy properties stretching from New York to Honolulu that Japanese companies acquired during a real estate binge in the 1980's.

Let us fast-forward to present-day Japan. With the Japanese in utter bewilderment over the excessively strong yen--though there are extenuating factors--their latest idea is to join 'em not beat 'em by leveraging it to buy foreign properties once more on the cheap. Perhaps it's not quite a return to the 80s real estate hysteria, but there are certainly attractive buys to be found out there as stock market valuations remain historically low:

The head of Japan Bank for International Cooperation signaled Wednesday that the country's cash-rich firms are ready to take advantage of the stronger yen to pursue overseas buyouts, saying the state-backed bank hopes to finance its first deal under a special government facility by the end of the year.

Hiroshi Watanabe, JBIC's president and a former top currency official, said the bank's role in supporting the overseas expansion of domestic firms won't necessarily accelerate a hollowing out the country's industrial base. But a longer-term debate is called for, he said, to examine what operations companies should keep at home to maintain Japan's global competitiveness and to protect jobs.

"We have received inquiries from a significant number of clients and we are proceeding with the specifics. If everything goes well, we may see [a deal] materialize by the year end," Mr. Watanabe said. While providing no further details on the firms the bank is holding talks with, Mr. Watanabe said there is strong interest in overseas acquisitions of natural resources, including metals and gas.

The intention this time around is not to purchase trophy real-estate properties but to secure Japanese access to raw materials and energy--both of which are in obviously short supply back home:

In August, the government unveiled a $100 billion program, aimed at encouraging Japanese companies to use the strong yen to buy foreign companies and secure raw materials, including energy-related assets. As part of the 12-month program, the state-owned lender recently signed separate pacts with three major Japanese banks to give them a combined credit line of $43 billion, or ¥3.3 trillion.

Forget about Japan, Inc at your own peril.