Japan has had three decades of deflation. So it does seem that when cash holds its value, people don't need to speculate on real estate. In the '80s, when it had high inflation, it grew a real estate bubble well beyond the 2008 US bubble (despite plenty of construction). China has rampant overconstruction and a plummeting birth rate, and yet it has built a real estate bubble perhaps even beyond '80s Japan, because its population saw real estate as a safe place to store and grow their wealth.
At least prior to the pandemic, that price growth can be almost entirely attributed to the Abenomics policy of a rising sales tax (which went from 5 to 8 percent in 2014, and then to 10% in 2019). This was deliberately implemented to cause consumer price inflation and accelerate consumption (due to the expectation that prices would rise in the future). Consumption tax is included in the CPI. If you look at base prices before sales tax, they're almost perfectly flat between 2010 and 2020. Anyway, the CPI is flat enough over the decades that the Japanese yen has largely held its value, at least on domestic products, and this supports the thesis that Japanese citizens haven't felt it necessary to accumulate real estate to protect their wealth.
As an aside, the fact that the purchasing power of the US dollar has fallen substantially over that time, while the exchange rate of JPY to USD has risen, is something quite fascinating to me. I don't see it discussed nearly enough.
> CPI is flat enough over the decades that the Japanese yen has largely held its value, at least on domestic products
Not contesting—this makes sense—but do you have a source?
> the fact that the purchasing power of the US dollar has fallen substantially over that time, while the exchange rate of JPY to USD has risen, is something quite fascinating to me. I don't see it discussed nearly enough
It’s the widowmaker carry trade. FX traders and macro funds love talking about it.
It comes down to the difference in international versus domestic demand for dollars per se, not dollars in any form (e.g. Treasuries).
The widowmaker carry trade reflects the currency side, but what fascinates me is that for example, a tube of toothpaste (random example) has gone to $3~$4 in the US, while it's still $1 in Japan. Go to a dollar store in Japan (except for Daiso) and it's full of cheap, high-quality goods that are made-in-Japan, from plastic organizers and pencil cases to measuring tapes and bicycle stickers. Those are now cheaper than similar made-in-China products being sold in the USA. The cost of container shipping is still quite low. So you'd think Americans would be hungrily importing Japanese goods until the arbitrage opportunity disappeared, but they're just... not. And perhaps that reflects that the most significant and long-lasting component of inflation in the US is shelter, which can't be imported.
To be fair, bubble Japan had ridiculous property bubble valuations. At the peak, the grounds of the Imperial Palace had a valuation more than the entire state of California.
It creates an incentive to create and hoarde value. Western real estate as a market being broken is orthogonal to the system. (Case in point: Japan.)