Photo/IllutrationThe area around the Gion district of Kyoto’s Higashiyama Ward bustles with foreign tourists. Seen in the right background is Yasakajinja shrine. The land price in the area marked the second highest growth rate among all commercial districts in Japan this year. (Yoshikatsu Nakajima)

Land prices in Japan rose from a year earlier for the first time in 27 years, fueled by sightseeing spots popular with foreign tourists and by urban areas where redevelopment projects are ongoing.

The national average of benchmark land prices as of July 1 rose 0.1 percent from a year earlier, the land ministry announced on Sept. 18.

As of the same day in 2017, the national average had fallen 0.3 percent from the previous year.

The benchmark land prices, collected in a survey by prefectural governments and compiled by the land ministry, are used as criteria for land transactions.

In this year’s survey, the national average of commercial land prices rose 1.1 percent, following a rise of 0.5 percent the preceding year.

Of the top 10 survey spots that marked the highest growth rates, five were located in Kyoto. That was attributable to the rapid opening of hotels and shops due to the increase in foreign tourists.

In areas other than the three largest urban areas in and around Tokyo, Osaka and Nagoya, commercial land prices also rose in the four major local cities of Sapporo, Sendai, Hiroshima and Fukuoka by 9.2 percent on average.

The sharp rise means that investments in real estate were also pouring into large local cities due to the extremely low interest rates brought by the Bank of Japan’s large-scale monetary-easing policies.

The highest commercial land price in Japan was a spot in the Ginza 2-chome district of Tokyo where the Meijiya Ginza Building now stands. The price was 41.9 million yen ($373,000) per square meter, far exceeding the 38 million yen of 1990 and 1991, the closing years of the asset-inflated "bubble" economy, and breaking the record high for the second year in a row.

On the other hand, commercial land prices in local areas except for the three biggest urban areas and four major cities fell 0.6 percent on average.

The declining rate was lower than the 1.1 percent recorded last year. The decline meant that land prices remained sluggish in rural areas where the transportation systems are poor and populations are decreasing.

Meanwhile, the national average of residential land prices fell 0.3 percent this year, marking a decline for the 27th year in a row. The decline was lower than last year's 0.6 percent.

Of the top 10 spots that showed the highest growth rates, three were located in Kutchan, Hokkaido, whose Niseko district is popular among foreign tourists who enjoy skiing.

Around the Gion district of Kyoto’s Higashiyama Ward, which is bustling with tourists, the land price of a spot in a commercial area near Yasakajinja shrine stood at 2.17 million yen per square meter, up 29.2 percent from last year. The growth rate was the second highest among all commercial areas in Japan.

In January, a Lawson convenience store, which had operated in front of the shrine for about 20 years, closed. Tsuruha Drug, a drugstore, opened on the site in March.

The closure of the Lawson store was apparently attributable to the sharp rise in land prices.

“When we were negotiating for renewal of the contract, we were unable to accept the conditions offered by the landlord,” said the public relations office of Lawson.

Tsuruha Holdings Inc., the parent company of Tsuruha Co., which operates the drugstore, said, “Opening our store on the site will increase the public's recognition of our company. As a result, it will be easier for us to open outlets in other locations.”

Since many foreign tourists enjoy shopping at drugstores, Tsuruha officials think that the company can turn a profit even if land prices remain high.

The number of foreigners who stayed overnight in Kyoto in 2017 totaled 3.53 million, a record high.

In the city, foreign hotel operators are opening high-class hotels in rapid succession. In addition, traditional houses in Kyoto, called "Kyomachiya," are being converted to simple accommodation facilities.

“Kyoto is full of tourism resources but its real estate market is small. Therefore, when (good) real estate properties are put on the market, they sell at surprisingly high prices,” said Yuko Akiyama of real estate services company JLL.