TOKYO, Sept 19: Japan’s commercial land prices have risen for the first time in 16 years, the land ministry said on Wednesday, as the world’s second largest economy continues its gradual escape from deflation.

The average price of commercial land in Japan rose 1 per cent in the year to July 1, according to a survey by the ministry.

Residential land prices slipped 0.7 per cent, down for a 16th year; although by less than the 2.3 per cent decline seen a year earlier, it added.

Commercial land prices in the Tokyo metropolitan area increased 12.1 per cent, the biggest increase since 1988, while residential land prices rose 4.8 per cent, the ministry said.

Tokyo is in the midst of a boom in real estate and construction, reflecting a scramble to build new condominiums and shopping centres.

An earlier survey by the tax agency showed that the average price of land alongside major roads in Japan rose for a second straight year in 2006.

But economists said the construction boom in major metropolises appears to be cooling.

“The mini-bubble in the major cities appears to be nearing its end due as massive redevelopment projects appear to have peaked,” Societe Generale Asset Management senior economist Akio Yoshino said.

The recovery in land prices appears to support the Bank of Japan’s case for increasing interest rates from their present low levels, but economists are cautious about reading too much into the latest figures.

“When signs begin to emerge that the rise in land prices may be moderating even in the major cities, the Bank of Japan could misjudge its policy call if it pegs monetary policy solely on land prices,” Yoshino said.

Japan’s interest rates remain the lowest among major economies at just 0.5 per cent, a legacy of the bursting of the asset bubble of the early 1990s.—AFP