BETWEEN FOUR WORLDS: CHINA, RUSSIA, JAPAN AND AUSTRALIA;

BETWEEN FOUR CAREERS: DIPLOMAT, ECONOMIST, JOURNALIST AND JAPANOLOGIST;

BETWEEN FOUR LANGUAGES: ENGLISH, CHINESE, RUSSIAN AND JAPANESE
Chapter 17

TRYING TO BE AN AMATEUR LAND DEVELOPER
With the lecture circuit seemingly determined to grind on forever I realized I had a tax problem. Almost half of everything I was being paid was going to the government.

Fortunately a friendly tax official told me I could save a lot of tax if I incorporated myself. Being incorporated made it easier to claim expenses against income, he said.

(The Japanese tax regime is very generous to small corporations. Too generous. It is a major reason for Japan’s current fiscal problems. )

But first I had to create expenses. That turned out to be very easy, but not quite in the way I intended.

MORE SHANGRILA

I described earlier the original Shangrila we carved out for ourselves in the early 1980’s near Yoro Keikoku, in the middle of the Boso Peninsula wilderness.

From there in the mid eighties we had moved to yet another piece of abandoned, jungle-covered farm land, near the village of Hosoo in Ohara town. This time we were closer to civilization, near the Boso east coast and the train-line running direct to Tokyo.

And with access to water and electricity, it was a much more livable than our original Shangrila.

Amphitheatre-shaped and facing due south, the land had been neatly terraced back into the side of a large densely-forested hill, no doubt by the original owners going back centuries.

We were enjoying the benefits of their labor.

With beautiful views over the valley below and without sight or sound of other human beings, often I would just sit there wondering why the 100 million people of Japan were not clamoring to join us in seeking out and enjoying these mini-paradises.

There too for several years we had been happy, trekking out from Tokyo every weekend to clear the jungle and grow things, dragging our two small children behind us.

We found that kiwi fruit vines grew well in the rich soil and warm climate.
Before long we had a full-scale kiwi fruit plantation producing several thousand fruit a year - much more than we needed for ourselves.

At harvest time we instituted the Kiwi Fruit Picking Festival, with friends invited to collect and eat as much as they could. That pagan rite continues through to till today.

THE LAND BOOM IS COMING

Sometime in the late eighties someone asked me to buy a scrubby, cedar (sugi)- covered, two-acre (2,000 tsubo) hillside in the nearby village of Nakadaki, Misaki town.

I agreed, even though I did not need the extra land. I simply saw it as a cheap insurance against the land boom insanity about to move out of the cities and engulf the countryside.

(The speculators seemed poised to buy up every nook and cranny across the nation. So like everyone else, I felt I should get in quickly.)

(Which is why there was a land boom in the first place, of course. )

Soon after I ran into a hail-fellow-well-met Englishman looking for land to run an outdoor training camp for company employees. He would call it ‘I Will Not Complain’.

He had been cheated in an earlier training camp site deal and wanted to make a fresh start. Could he rent my Nakadaki land? Please!

I felt sorry for him and said yes.

It was, I would realize later, a decision that would change the entire pattern of my life for the next two or more decades.

I WILL COMPLAIN

At first the Englishman had said he just needed the raw land. Clients would sleep in tents, cook over campfires and toilet in the jungle.

But soon the clients began to complain.

So could I install toilets, showers, sleeping quarters, a kitchen, a dining facility…. Please!

It was a tall order. But I could see the chance for tax savings since much of the construction could be expensed.

In effect, the Japanese government would be paying for half of everything I built.

But I should have realized that I would be paying the other half, and having to suffer headaches, sleepless nights, and a host of other problems well into the next millennium as a result.

THE LOCKWOOD HOUSE

Problem Number One came quickly.

A New Zealand company called Lockwood had pioneered an unusual technique for building attractive earthquake-proof, pre-fab houses out of carefully dried and laminated radiata pine boards.

I discovered this when a friend with a Lockwood house on the Tokyo outskirts threw a farewell party. He had just sold his land to developers and was leaving Japan quickly, before the tax man could demand a share of his land boom capital gains.

I asked what would happen to the house. He said casually the developers would be crushing it into matchsticks, soon.

‘What a waste,’ I said, looking at the solid pine boards and quality fittings.

‘You can have it if you like,’ he replied.
“The boards all slot together like kiddy’s blocks. Just pull them apart and slot them together again and, hey presto, you have a house . “

“And while you are about it you can take the curtains, too, and the furniture, and the knives and forks, and anything else you like. It is all going to be left behind when we head for the airport. We can’t take it with us.”

It was an un-refusable offer. Apart from anything else, I needed some kind of building to house those IWNC clients being made to sleep in the Boso mud.

And as an inveterate scavenger, I am quite unable to pass up anything offered for free.

But inveterate or not, could I pull down an entire house in Yokohama, transport it to Boso, and rebuild it, single-handed?

THE ‘FREDDY’ FACTOR

At this point, enter ‘Freddy’ (not his real name).

I had run an advertisement seeking someone to rent a small annex house on the Kiwi Farm. A dark-skinned Texan, possibly half native or Mexican, was the only respondee.

‘Call me ‘Freddy’, was his catch-cry.

A former US marine MP, he had stayed on in Japan, trained himself to be a two-by-four carpenter, married a Japanese woman, and then set up his own building company somewhere to the north of Tokyo.

To hear him talk, it seemed a remarkable achievement.

But then disaster had struck. First, the gangsters had got into him on a major project. Then his wife had died, leaving him to raise two children by himself and also leaving him without the crucial Japanese backup for his company (he could not read Japanese).

Forced into bankruptcy, he had to try to make a fresh start. Some cheap accommodation in the countryside would help.

I had an idea.

The Lockwood house at Yokohama was still sitting on its site, waiting for the wreckers to arrive.

Could he pull it apart? Of course, he said, with the assumed confidence I was later to get to know only too well.

Could he put it together again? Again no problem, though he had still to see the house.

Would he be happy to do all this while camped out in my small Kiwi Farm annex? Certainly!

At the time it seemed like a marriage made in Heaven.

Or was it Hell?

DISMANTLING THE LOCKWOOD HOUSE

First impression of ‘Freddy’ had been positive. Physically he was very strong.

His spoken Japanese was good. He had learned it entirely through the ear (language teachers around the globe please note).

He had a strong instinctive intelligence. Or at least it seemed that way.

Later it turned out that with the intelligence came what the Japanese call warujie (bad intelligence).

Worse, he was also an alcoholic.

I will pass silently over the enormous problems we had getting the Lockwood pulled apart and transported to Chiba. Suffice to say that even though I had given him a contract to do the job I ended up having to do most of it myself, together with the help of Sophia students.

I will say even less about the problems we had later. Suffice it to say that at the end of a year ‘Freddy’ was still finding excuses to delay rebuilding the Lockwood.

Meanwhile the Lockwood boards and other materials we had painfully transported all the way from Yokohama were being left outside in the Boso summer heat and humidity, to warp and rot.

Eventually, we had no choice but to part company.

He had cost me dearly, and not just in financial terms.

It should have been my first lesson in learning not to take people on trust – not to assume naively that just because you do the right thing for them, they will do the right thing for you.

BECOMING A BUILDER

Fortunately I was able to bring up a young carpenter from New Zealand to try to rebuild the Lockwood. Slowly he managed to fit some of the warped planks together.

The final product looked more like a rickety barn than a house. Someone rightly dubbed it “Clark’s Folly.”

But by this time the Lockwood people in New Zealand were interested in what I was doing.

Never before had anyone been able to pull one of their houses apart and rebuild it, they said.

We had made history, of sorts. They set out to encourage me to do more building.

They promised to provide materials cheaply, and help find reliable carpenters. I set out to build one or two of their houses, experimentally.

But carpenters can only do so much. When you build a house there is a host of other problems – painting, electricity, plumbing, sewage etc.

But I was hooked on Lockwood’s unusual technology. The finished product was also very attractive – solid boards from floor to rooftop providing a warm and protective feeling.

Besides, I still had the income from the lecture circuit flowing in every week and had to use it somehow.

Why not use it for something constructive.

Some queried why an alleged university professor was trying to enter the building business.

I would talk about the need for hands-on experience in running a company – something I was supposed to be teaching as part of a venture business and enterprise management course.

Another reason was a need to find an outlet for mental and physical energy unused in the ivory tower and on the lecture circuit.

Meanwhile another problem, almost on a par with the ‘Freddy’ problem, was slowly developing.


IWNC IN TROUBLE


IWNC had always had difficulty finding customers – mainly because its ideas of how to run outdoor training courses were weird.

Participants would have to spend hours sitting at the bottom of trees or cliffs, often in the rain, encouraging each other in turn to struggle to reach the top.

It was supposed to foster group solidarity.

But it was not doing much to foster client solidarity with IWNC. Ominously, they were not getting much repeat business.

I told them about a highly successful, low cost, treasure-hunt style operation in the Hakone forests, booked out years in advance (Japanese like challenges where they can all work together in small groups to find a solution).

But the IWNC people were too stuck in their orthodox and very expensive textbook ideas on how to run outdoor training.

Financial controls were lousy too. Money poured out of the operation even faster than rain out of the Boso skies in July.

So once again I faced dilemma.

It was quite likely IWNC would eventually go belly-up. Bubble-collapse was beginning to hit their already-weak order book.

But in that case, what would happen to all the infrastructure I had built for them at what was now called the Nakadaki Centre?

I had two alternatives.

One was to develop a residential complex alongside the Centre. That would be neither cheap or easy, but it would at least tie in with some of the infrastructure – the expensive water system especially.

It would also allow me to jump ships if and when IWNC went under.

The other was to put even more money into the infrastructure in the hope this would help keep IWNC afloat.

I ended up trying to do both.

The residential complex ended up as five Lockwood houses built into the side of an attractively terraced, two acre hillside next to the Centre.

The added infrastructure included a rather nice conference room and barbecue centre.

But IWNC’s order book continued to decline anyway. Eventually the operation was handed over to one of those MBA geniuses whose only concern was the bottom line.

He had little interest in Nakadaki.

His idea of ‘outdoor training’ was to concentrate on high-paying executives – flying their groups to exotic hotels around Asia where the only hint of the outdoors was a climbing wall at the back of the hotel near the kitchens.

We parted company, and not amicably.

I had to take him to court for unpaid bills.

CHANGING DIRECTIONS

But with IWNC gone what was I to do with all the infrastructure I had built for them?

One answer was to continue the residential side of the project.

That way I could hope to get the economies of scale needed to make at least some of the infrastructure worthwhile (by now it included a rather nice tennis court, a canoe centre, and later a squash court made experimentally out of Lockwood timber).

I would try to create a community of hardy souls keen to live in the countryside. Hopefully I would end up with enough rental income to be able to hire a manager.

First move was to build and populate bungalows on adjacent hillsides. Building some more houses on nearby riverside land provided even more scale and population.

I was helped greatly in all this by three young NZ carpenters, arriving one after the other, over a span of almost ten years.

Without them most of the development would have been impossible. Through them I developed a great respect for the Kiwi work ethic.

Later I would try bidding for some of the houses thrown onto the local bankruptcy auction market by the Koizumi-induced recession.

I ended up with a ‘community’ of around 50-60 people, mainly foreign but some Japanese, scattered across the hills and plains of the mid-eastern Boso coastline.

Some lived there with their families, commuting in and out of Tokyo daily (the area was only an hour from Tokyo on a fast train). Others came out for weekends and holidays.

To some extent it was a success; income just managed to cover expenses. But managing all the buildings, facilities, repairs, additions, accounts, paperwork etc was a nightmare.

And while I was able eventually to get myself a good managerial secretary, finding a good site manager was much harder.

One small consolation was that the progressive governor of Chiba Prefecture, Domoto Akiko, came to rent one of my Nakadaki houses.

She would bring out her top officials to see at first hand what she saw as an environment-friendly ‘model’ for developing Chiba’s many unused hillside areas.

(I had to tell her, and them, that ‘nanny state’ restrictions had made this kind of development almost impossible.)

MORE PROBLEMS

There were other problems.

One was that in the Nakadaki hill site alone I now had twenty or so houses and bungalows scattered over an area of more than four acres.

They all needed water.

But thanks to Tokyo’s mistaken fiscal policies, the regional authorities had become so starved of funds they could not afford to supply town water to new developments, including Nakadaki.

So we had to rely on wells drilled into Boso’s thick sedimentary rocks.

We ended up with four of them linked together in a complex network.

Almost invariably it managed to break down when I was not around.

Efforts to educate the Nakadaki population in how to operate the system were only partly successful. Once I found myself stuck at the end of an Internet connection in Peru trying to work out which pump was working and which was not.

My idealistic dreams about creating a community of rugged, independent-minded, outdoor-life loving souls were starting to get ragged.

THE ECONOMICS OF DEVELOPMENT

In retrospect, the Nakadaki dream was one of the more foolish things I was to do with my life.

Almost every weekend I had to trek out there from Tokyo and back, worrying about problems, tending vegetation, supervising earthworks, building more houses.

Why did I keep on with it?

Deep down it was not just a matter of using the surplus funds from the lecture circuit. Probably, it was motivated more by a love of soil and countryside I had gained in my Australian youth.

The idea of having my own land and developing it was a powerful aphrodisiac.

But at the time I could also see good economic rationales, and not just in the form of tax savings.

I would be creating a rental income source for myself in the future when other income sources were declining (but those other income sources were to be much more persistent than I expected).

There would also be more tax savings via the generous five percent depreciation deduction allowed on wooden houses (yes, but when development costs eat up most of your income this is not much of a plus).

But the main economic incentive was a curious disparity in Japanese land prices, itself a reflection of a curious disparity in Japanese thinking.

I could not resist wanting to take advantage of it.

RURAL VERSUS URBAN JAPAN

Invited on the lecture circuit to tell foreign audiences how to do business in Japan, I had liked to emphasize the cultural factor.

Japan was not the nationalistically exclusivist nation of much Western imagination at the time.

True, its single-minded, group-think mentality had created some areas of the economy where competition was intense and entry difficult. But the same mentality meant there were other areas untouched and wide open to entry.

The foreigner with a fresh eye could easily discover those overlooked areas, move in, and succeed (as we were to discover during the post-bubble recessions when the foreigners managed to take over much of Japan’s financial industry).

One such area was sensible use of the large areas of unused countryside close to the cities.

In the US and UK, even in Australia, countryside suitable for weekend houses, bungalows or hobby farms within two, even three, hours from the large city centers was greatly sought after.

Sometimes it would sell for almost the same price as outer suburban land.

In short, a ratio of one to one.

But in Japan the ratio was almost one hundred to one.

Land in the outer suburbs of Tokyo was selling for around one million yen a tsubo even when it was up to 90 minutes commuting distance from the center.

Undeveloped hillside land just a few kilometers further out and ideal for weekenders would sometimes be selling for as low as 10,000 yen a tsubo.

With Japan about to discover the weekend, inevitably some would want to start using some of this cheap rural land closeby.

It was an investment chance not to be missed. Or so I thought.

As it turned out I was only partly right.

Even with the weekend in place the strong Japanese work and socializing ethic kept people in the towns.

Despite much Japanese romantic talk about being their being uniquely sensitive to nature, most are not very interested in countryside to begin with.

Many are terrified by it, at least in the raw.

Even Japan’s fat cats have never embraced the idea of having a nice place in the country with a tennis court or swimming pool to which one could invite friends.

Expensive bars and geisha clubs were the places where you invited friends.

And Tokyo’s mistaken economic policies kept land prices depressed anyway.

CHIBA IS CHEAPER

Even so, I persevered. For with Boso land there was yet another and even stronger ‘cultural’ factor at work.

For historical and other reasons many Tokyo residents had a prejudice against Chiba prefecture.

True, Chiba’s urban and industrial areas close to Tokyo were unattractive, for a variety of reasons.

But none of those reasons applied to the Boso Peninsula with its warm climate, long ocean frontage, lushly-forested hills, and lack of severe earthquake danger.

There were large areas in the centre of the peninsula, some of it near my original Yoro Keikoku ‘Shangrila,’ where you could walk for hours through deeply forested hill country without seeing anhy sign of human habitation.

And this was just little over an hour from Tokyo.

Exactly one hour from central Tokyo was the long Kujukuri (literally 99 mile) beach. Even in summer it was largely deserted.

A few miles further down the peninsula and close to where we were was our ‘secret,secret’ beach – a mile-long stretch of clean pinkish sand at the bottom of fifty-meter cliffs and accessible only though a hidden tunnel built hundreds of years ago by locals diving for abalone.

Needless to say, it was even more deserted.

Yet many Tokyoites would willingly spend hours, often in heavy traffic, to get to weekend resorts in the earthquake-prone Izu Peninsula to the southwest of Tokyo rather than make the much faster trip to nearby Boso.

Easily developable Boso land was selling for only a fraction the price of similar land in distant Izu.

Even allowing for Japan’s conservative group-think, people must soon come to realize Boso attractions, particularly since a good network of highways and bridges was making it much more accessible than before. Or so I thought.

(The previous road system had been chaotic. One theory said it had deliberately been left that way since wartime Japan had feared a US landing on Boso’s long beachfront coast and hoped to confuse the invaders.)

But prejudices change very gradually in Japan. My predicted Boso boom was also to be very slow in coming.

HILLSIDES

For me as an inveterate developer there was yet another incentive for getting involved with Boso – the ease of hillside development.

Boso has hills – lots of them, rolling one after another far into the horizon. Most have hard rock foundations.

For some strange reason the Japanese do not like using hills, especially when they are covered with jungle.

Foreign tourists taking the bullet train west from Tokyo towards Osaka often say how surprised (and delighted) they are to see mile after mile of pristine hillside country facing the railway line in what is supposed to be Japan’s most crowded industrial area.

True, large-scale resort developments usually have no choice but to use ‘mountain’ land (in Japanese even a low hill is called a yama – mountain).

But they will then cut down most of the trees and bulldoze the area into as many flat building blocks as possible, together with a golf course.

The idea of an individual buying and developing a ‘yama’ as his own weekend resort is seen as little short of ridiculous.

Apart from anything else, how does one cope with landslides, jungle and snakes? My claims made little impression on Japanese friends - that the jungle, once cleared, could be replaced by gardens, that Japan’s only dangerous snake – the mamushi – preferred to live in damp rice fields rather than in the hills, and that if there were to be landslides the person at the bottom of the hill was in greater danger than the person at the top of the hill.

The average Japanese would much prefer to buy a small block of developed flat land at the bottom of the hill at say 30,000-50,000 yen a tsubo rather than the hill itself even at say 2,000 – 3,000 a tsubo (or for as little as 1,000 yen per tsubo is the hill looks uninviting– a disparity of a thousand to one with outer urban land).

The foreigner usually thinks opposite. He will prefer the hill , with its better views, more privacy, cleaner air ...

Ideally he would like to have the whole hill for himself.

HILLSIDE DEVELOPMENT

Nor is developing one’s yama quite the problem most assume it to be.

The Boso locals have no bias against foreigners buying their hills. Many are only too happy to sell – to get out of debt, send kids to university etc. .

Without too much haggling one can get an entire yama, all for oneself. In Boso, often it will be covered with the very attractive, lustrous, sub-tropical forest which extends in an arc from southern Japan, through Taiwan and into Nepal - non-deciduous trees with dark green, shiny leaves and inviting even in the middle of winter.

And without too much damage to the environment it can be developed.

Large backhoes (yunbo) will carve out an access road, building site and even a tennis court on a three acre (one hectare or three thousand tsubo) hillside in a week or so.

Putting in facilities is not all that difficult either.

A forty meter well will almost always bring up water. The electric and phone companies are more than willing to bring in wiring free of charge (they cover their costs with rip-off charges later). Efficient jookasoo (electrified septic tanks) take care of any sewage problem.

And provided one does not want to build near too steep a slope, all this can be done by oneself, including the gaining of permissions, in the allegedly difficult and exclusivist Japan where many foreigners like to think that even renting a small apartment is a hassle.

(Incidentally, there are absolutely no legal barriers whatsoever to foreigners owning and developing land in Japan.)

(A foreigner I know once registered ownership in the name of a dummy company on the Isle of Man!

(He only got into trouble when he tried to sell it. There had been a slight change in the address of the dummy company and the authorities required massive documentation to prove it was still the same dummy company!)

THE BANKRUPTCY FACTOR

An even greater incentive for my expansionism was the bankruptcy auction system.

The Koizumi-Takenaka recession saw tens of thousands of house owners thrown out of their homes by the banks.

A neat two-story house with a developed garden would be put on the auction-tender block with a reserve price as low as two-three million yen.

(During the bubble era frenzy the same banks might have loaned up to twenty million yen with the same property as collateral, telling the owner land prices were bound to double and they should use the money to buy more land.)

Cleaned up and rented out, the return on one of these buys could be as much 10-15 percent, at a time when the cost of housing loans was little over three percent.

That the Japanese were too caught up in their collectivist, doomsday, recession mentality to realize these bargains said volumes about their emotional mentality.

The same Japanese during the bubble period frenzy had been willing to pay 8-9 percent for money to invest in real estate returning only around 3 percent, which was, of course, a major reason why so many of them were going bankrupt.

FINANCIAL SHENANIGANS

Yet another incentive for all this activity was a money-making machine which anyone could have enjoyed at the time, provided they could make an informed guess about the future of the Japanese economy.

One needed only to realize that the mistaken supply-side, fiscal-restraint policies of first the Hashimoto and then the Koizumi administrations would keep interest rates low and the yen cheap for a very long time.

So all one had to do to make some money was to park one’s funds in Euro and US dollar bonds returning six to nine percent, and use them as collateral to borrow yen from banks at well below one percent (the banks were getting their money at zero percent).

There were also exchange profits as the Euro and USD appreciated against a yen weakened by those mistaken policies.

This very attractive arbitrage situation continued for the best part of ten years. It was enough to keep me in poker chips for quite a while.

It also encouraged me into even more land buying and development without fear of being financially over-extended.

OVER-EXTENDED

But I was to be badly over-extended in other directions.

The lecture circuit remained busy. I was still running around from one end of the country to the other trying to tell audiences the reasons for the quite unnecessary recession they were being forced to suffer.

Government and other committee work continued. So I was still having to spend hours every week in stuffy offices listening to endless reports and empty debates (I justified it to myself by saying I was getting an inside view of Japan Inc. in action).

My university commitments were to continue for much longer than I had expected.

All this plus the never-ending trips to Boso to watch over various projects meant I was giving far too little attention to other things more important – writing, reading, research, improving my Japanese, enjoying my other languages, overseas travel, family, friends, relationships.

More on that to come.

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