In recent years, investors from around the world have taken a keen interest in the Japanese real estate market. In the first half of 2025, the amount of real estate purchased by foreign investors in Japan reached a record high of over 1 trillion yen.
Why is Japanese real estate attracting so much foreign investment? In addition to economic factors such as the undervalued yen and monetary easing, there is a more fundamental reason. That is the high international reputation of Japan's legal system and its transparency.
In this article, INA & Associates, as a real estate professional, will explain in plain language and with data why the Japanese legal system and its transparency are highly regarded by foreign investors. We hope that this article will help you gain a deeper understanding of the true value of the Japanese real estate market and its international advantages.
Japan's Legal System Attracts Foreign Investors: The Reliable "Registration System
One of the most important reasons why foreign investors value Japanese real estate is the reliability of its legal system. In particular, the "registration system," which publicly announces the rights of real estate, is among the most accurate and reliable in the world.
In real estate transactions, the legal determination of who is the true owner of the property is an extremely important factor that determines the safety of the transaction itself. Japan's registration system is managed and administered by the Legal Affairs Bureau, a national agency, and once registered, rights can be legally asserted against third parties (countervailing rights). This allows foreign investors to invest large sums of money without worrying about the risk of unclear rights or unforeseen circumstances such as ownership being overturned at a later date.
Robust ownership: Foreigners enjoy the same rights as Japanese nationals
Another notable advantage is that there are no restrictions on real estate ownership in Japan due to foreign nationality. Foreigners can fully acquire ownership rights to both land and buildings under exactly the same conditions as Japanese nationals. This is a very permissive system even by global standards, and many countries have strict restrictions on land ownership by foreigners for security reasons and other reasons.
The table below compares restrictions on real estate purchases by foreigners in Japan and other major countries.
| Country/Region | Permission for Land Ownership by Foreigners and Major Restrictions |
|---|---|
| Japan | No restrictions in principle. With the exception of some important land (e.g., around defense facilities), ownership is almost equal to that of Japanese nationals. |
| U.S.A. | Strict restrictions on transactions in certain areas related to security, such as around military facilities. Subject to review by the Committee on Foreign Investment in the United States (CFIUS). |
| China | Land is owned by the state, so foreigners cannot acquire ownership of land. Building ownership is possible, but there are restrictions on the length of residence and the number of properties. |
| Korea | Regulations have been tightened in recent years, including prior approval and residency requirements, to curb speculative transactions. |
| Philippines | In principle, foreigners are not allowed to own land. Only condominiums and some other buildings can be owned separately. |
In this way, the extremely low barriers to entry compared to other countries make Japan's real estate investment environment even more attractive. Legal rights are strongly protected and there is no discrimination based on nationality. This fair and stable legal framework is the root of the trust that investors around the world have placed in Japan.
Market Transparency Recognized Around the World: Japan's Strengths Proven by Data
In addition to the legal system, another major strength of the Japanese real estate market is its transparency. In the 2024 edition of the "Global Real Estate Transparency Index," released every two years by JLL, a leading real estate services company, Japan was ranked 11th out of 89 countries and regions surveyed, and the highest in Asia.
The index evaluates six criteria, including "regulatory legal system," "market data," and "transaction process," and Japan was rated particularly highly in terms of its regulatory legal system and availability of market data. This means that the environment for investors to make rational investment decisions based on objective data is at a high level even by international standards.
| Assessment Category | Top 5 Global Real Estate Transparency Index 2024 | Japan Ranking |
|---|---|---|
| Overall | 1. United Kingdom 2. France 3. United States 4. Australia 5. Canada | 11th place |
| Sub-index: Transaction Process | -20th place | Outside the top 20 |
On the other hand, the report points to transparency in the "transaction process" as an issue for Japan. Specifically, the report cites insufficient disclosure of information such as details of lease contracts, breakdown of common area charges, or actual transaction prices, compared to developed markets in the US and Europe. Improving these business practices will be key to the Japanese market gaining a higher reputation in the future.
Even with these challenges, however, the overall transparency of the Japanese market is attractive enough for foreign investors. Having access to reliable data makes it easier for foreign investors to accurately assess risk and predict future cash flows. This "high degree of predictability" makes Japan an attractive investment destination for institutional investors and foreign funds seeking stable returns over the long term.
Data Reveals Vigorous Willingness to Invest in Japan
Against the backdrop of this legal system and market transparency, foreign real estate investment has been booming in recent years. The driving force behind this trend is, indeed, foreign investors.
| Period | Trends in domestic real estate investment by foreign investors |
|---|---|
| Full year 2024 | Total transaction value is approximately 5 trillion yen. A series of large-scale acquisitions by foreign investors. |
| First half of 2025 | Purchases will double year-on-year to a record high of over 1 trillion yen. |
| Investment Sector | Investment in "hotels" is rapidly increasing due to inbound demand. Valuations for offices and commercial facilities are also recovering. |
In particular, as economic activity moves toward normalization following the Corona disaster, there is growing interest in investment in the "hotel" sector in anticipation of a recovery in inbound demand, as well as in "logistics facilities" and "residential properties" that are expected to generate stable cash flows. In addition, ultra-large transactions worth several hundred billion yen have been seen for "offices" and "retail facilities" in central Tokyo, which had temporarily lost their valuation, suggesting that their valuation by foreign investors has fully recovered.
These data are the best proof that the Japanese real estate market is not merely a short-term speculation target, but has gained the firm trust of global investors as a place for long-term and stable asset management.
Conclusion: The Unwavering Value of the Japanese Real Estate Market
In this article, we have explained why investors around the world are now paying attention to the Japanese real estate market from the perspective of the legal system andtransparency that lie at its core.
The key points are as follows
1. Robust Legal System
Japan's highly reliable "registration system" legally clarifies the ownership of real estate and guarantees foreign investors the same strong protection of their rights as Japanese investors. This provides an open investment environment with very low barriers to entry, even by global standards.
2. High Market Transparency
As rated the highest in Asia by JLL, Japan's real estate market offers easy access to objective data, providing investors with the foundation to make rational decisions. This increases the accuracy of investment risk assessment and the predictability of future returns.
3. Investment performance as indicated by data
Supported by these solid foundations, foreign investment is at a record high level, with a particularly strong appetite for investment confirmed in a wide range of sectors, from hotels and logistics facilities to offices in urban centers.
In this age of economic globalization, the question of where to invest assets is an important topic for all individuals and corporations alike. We believe that the stability andreliability offered by the Japanese real estate market is a value that shines brightly in the highly uncertain global economy.
We would be more than happy if this article provides you with a new perspective on your asset strategy.
Frequently Asked Questions (FAQ)
Q1. What tax considerations should a foreigner be aware of when purchasing real estate in Japan?
A1. Yes, there are several important points. First, for non-residents not residing in Japan, it is necessary to appoint a "tax agent" to handle the tax payment procedures for real estate taxes (e.g., property tax, real estate acquisition tax, and income tax) and notify the tax office. In addition, rental income and gains from the sale of real estate in Japan are considered "domestic source income" and are subject to the obligation to declare and pay income tax (in principle a separate tax of 20.42%) in accordance with Japanese tax law. We strongly recommend that you consult with a professional regarding post-purchase taxation.
Q2. You mention "transaction process" as an issue for transparency in the Japanese real estate market.
A2. As you mentioned, JLL's report evaluates the transparency of the "transaction process" in Japan as relatively low. This mainly refers to the fact that full disclosure of transaction prices and detailed terms and conditions of lease agreements (e.g., breakdown of common expenses), which are common in Western markets, are not always thoroughly practiced in Japan as a matter of business practice. However, this information can be adequately supplemented by having a reliable real estate company as a partner, and should not be a major obstacle to the safety of the transaction.
Q3: I heard that there have been recent legal changes regarding the purchase of Japanese land by foreign investors.
A3: I believe you are referring to the "Important Land Survey Law" that went into effect in September 2022. This law designates areas around facilities of national security importance (such as Self Defense Force bases and nuclear power plants) and remote border islands as "watch areas" and "special watch areas," and requires that the names and nationalities of the parties involved be reported in advance when buying or selling land or buildings in these areas. Not all real estate transactions are subject to this regulation. It is a limited regulation aimed at preventing land use that threatens national security.
Daisuke Inazawa
Representative Director of INA&Associates Inc. Based in Osaka, Tokyo, and Kanagawa, he is engaged in real estate sales, leasing, and management. He provides services based on his extensive experience in the real estate industry. Based on the philosophy that “human resources are a company's most important asset,” he places great importance on human resource development. He continues to take on the challenge of creating sustainable corporate value.
.png)
