Looking forward to inflation

June 22, 2011

By Tim Kelly

Yoshiharu Hoshino, the president of Hoshino Resort, one of Japan’s leading resort operators, is looking forward to a dose of inflation after years of sliding prices.

By engineering a rise in rates by printing money, he reckons Japan can make a big chunk of its burgeoning national debt disappear, which along with tax hikes is, he predicts, likely the way Japan is going to exit a potential crisis as debt soars to more than twice its gross domestic product.

While having the nasty side affect of making assets worth less tomorrow than today, if, like Hoshino, you borrow money to buy the bricks and mortar of hotels, the plus side is your debt, relative to your cash flow will also get smaller as long as you have low rates locked in.

“It would be a very big plus,” said Hoshino told the Reuters Rebuilding Japan Summit in Tokyo.  Japan defaulting on its debt is unlikely, he said.

Resort owners who agree with Hoshino, who already own 27 facilities in Japan, may therefore be tempted to borrow more to buy more and wait for robust inflation to pay the loans back.

Those that do, are likely to be looking for properties in well-known, accessible tourist spots that appeal to foreign travellers, said Hoshino.

With Japan’s population in slow decline, travel by Japanese at home is stagnant, forcing owners of hotels, hot spas and ski resorts to try an lure vacationers from overseas, including newly affluent travellers from China and other parts of Asia.

“The potential for brand name locations is high, and a gap between less well-known spots will clearly open up,” Hoshino explained.

The ongoing nuclear crisis for the moment is persuading many international travellers to stay away, but once it is under control, Hoshino said he expects them to return.

Photo Credit: REUTERS/Toru Hanai

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