Japan has experienced turbulent behavior of land prices after World War II, especially after 1985. This paper first examines the explanatory power of a simple present-value model and shows its limitation.We then investigate two additional (not mutually exclusive) factors affecting the Japanese land price behavior: distortionary inheritance and capital-gains taxation, and excessive price sensitivity due to the nonWalrasian structure of the land market. Empirical results show that distortionary taxation is a major culprit of high residential land price, and that the non-Walrasian price behavior magnifies the effect of underlying change in the market fundamentals.

To consider the policy event of a gift tax reduction earmarked for housing acquisition, the interdependence of parental gifts and children's housing investments is modeled, considering an informal care issue behind such decision making. The empirical results, which use a sample of households who purchased a house in Japan, demonstrate that such a tax cut would appear to have the following limited e¤ects on boosting housing investment in equilibrium. First, even though transfers are encouraged, they consequently reduce housing investment because the housing investment function is negatively related to gifts. Second, increments in housing investment are further discouraged because the slopes of the gift and housing investment functions have opposite signs.JEL classi…cation: D11, D12, H14, J14, R21

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Judicial auction, Foreclosure law, Occupant, Auction price,