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Prepared by Sanjay Kalra (ext. 36142).
The land and property systems in Japan are somewhat different from those in other countries. While in most other countries the land price is a residual of the property price, in Japan the land and the building are priced separately. Land prices are normally determined by market comparisons using official land price indices (OLPI) prepared by the National Land Agency. The Japan Real Estate Institute (JREI) also complies a number of land price indices. For a description of the OLPI and JREI indices, see Stone and Ziemba (1993) and Okamura (2000).
While inheritance taxes on financial assets are levied at market prices, taxes on land are assessed at 40–60 percent of market value. Farm property is subject to more favorable treatment. The assessed value of farmland in the Tokyo metropolitan area, for example, is estimated at less than 1 percent of the market value. Moreover, if inherited land is used as farmland for more than 20 years, inheritance tax payment is waived.