October 13, 2017 7:00 am JST

Pockets of Japan are partying like it's 1989

$22,000 bottles of wine, $100,000 hotel memberships and scams

Disco balls and other trappings of Japan's late 1980s bubble are making a comeback -- at least in certain parts of the economy.

TOKYO -- Despite an economy that is growing at a modest clip, Japanese purse strings remain tight and prices impeded. Imagine the frustration of the Bank of Japan, which since 2013 has been aggressively showering the financial system with yen to get inflation moving at a 2% annual clip.

So far, it has succeeded in creating a cash glut.

This money is rushing into certain areas of the economy, causing "small bubbles" that resemble the big bubble of the late 1980s.

This is true in the market for high-end wines.

Oenophiles with plenty of cash are eagerly awaiting a bidding contest being organized by Shinwa Art Auction that will take place on Oct. 14. During a previous event, on May 27, a bottle of Romanee Conti, a highbrow favorite out of France's Burgundy region, fetched 2.5 million yen ($22,167), a Shinwa Art record.

Kazuki Ishii, the company's managing director, said the bidding got so high that even Shinwa executives became "perplexed." He added that Japan is clearly experiencing a wine bubble.

The same might be said for resort memberships, which were particularly popular in the late 1980s when Japanese assets could do nothing but swell in value.

A representative of Yokohama-based e-kaiinken, which intermediates between sellers and buyers of these memberships, said customers who seek status are willing to buy expensive memberships. The memberships that the company handles range from as little as 50,000 yen to more than 10 million yen.

Memberships that give holders the right to stay in a "super suite" at the XIV Karuizawa Sanctuary Villa Museo resort hotel in Nagano Prefecture for 13 nights a year go for 12 million yen. Members also must pay annual dues, fixed assets taxes and for each night they stay.

The total cost is well in excess of the average salaryman's annual pay package.

Antique coins are also benefiting from the BOJ's ultraeasy monetary policy.

Naoki Nishimura, president of Universal Coins, a Tokyo-based antique coin sales and appraisal agency, said the company is "studying the feasibility of setting up antique coin-backed exchange-traded funds."

Putting aside the ETF feasibility debate, the coin boom even eclipses Japan's bitcoin frenzy.

Japan's pocket bubbles are also popping up outside the world of exclusive and exotic products.

Maharaja, a nightclub that once symbolized Japan's go-go bubble years, reopened on Sept. 13 in Kyoto's Gion district. The venue serves Japanese sake, and maiko apprentice geisha, ninja as well as oiran courtesans make appearances. Nearby, at the Ritz-Carlton, Kyoto, rooms were going for more than 200,000 yen a night in October.

Where these mini bubbles differ from the heady one that began imploding in 1990 is that this time foreigners are doing a lot of the buying.

The desire to share experiences through Instagram and other social media apps could also be persuading people to spend big. There's that "status" motive again.

This past summer, the Hotel New Otani in Tokyo set up poolside cabanas. Inside were sofas and free-flowing Champagne -- and guests willing to pay 100,000 yen a day. A representative of the hotel said many customers found the tents to be highly Instagram-worthy.

Bubbles attract all types, even rule-benders. And the current economy has been ripe for problematic fund-raising schemes. In one of these, "memberships" are sold through godo kaisha, Japanese limited liability companies, which take advantage of a loophole in the financial instruments and exchange law.

A godo kaisha attracts members rather than investors. But there is little if any difference. A membership in a godo kaisha bestows the holder with a stake in the company. Members are thus equivalent to the shareholders of a joint stock company. Yet these limited liability companies are not required to register with the Financial Services Agency as financial instrument traders.

Recently, construction company Santo was challenged at a shareholders meeting by M&S, a Tokyo-based godo kaisha, to pay out more in dividends.

Santo, whose market capitalization is about 1.4 billion yen ($12.4 million), has more than 1.5 billion yen in cash and deposits. "The company has a huge amount of cash reserves, but it still borrows from its main banks and pays interest to them. This is in complete disregard to shareholders." Masahiro Naito, a managing partner of M&S. said.

The talk among stock market players, however, was just how a godo kaisha was able to buy a large enough stake in a listed company to wage a proxy fight with the company's management. They did it without registering with the FSA and by selling memberships.

At any rate, the Romanee Conti-sipping, nightclub-going, cabana-lounging Instagrammers might want to watch what the U.S. Federal Reserve Board does this month. It has said it will start reducing the asset holdings it built up during its own quantitative-easing days. There are some who believe this could spell the end of Japan's pocket parties.

Shinwa Art Auction Co., Ltd.

Japan

Market(Ticker): JAS(2437)
Sector:
Industry:
Retail Trade
Specialty Stores
Market cap(USD): 26.66M
Shares: 7.15M

Santo Co., Ltd.

Japan

Market(Ticker): JAS(1788)
Sector:
Industry:
Industrial Services
Engineering & Construction
Market cap(USD): 13.00M
Shares: 6.86M

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