70 – 80 percent drop in rosenka land values in Tohoku

In order to account for changes in land values due to the March 11 Tohoku disaster, Japan’s National Tax Agency (NTA) announced adjustment ratios, or scaling factors, for the 2011 rosenka (prices of land fronting major roads). Along with the 1995 Hanshin Earthquake, this is only the second time in history that adjustment ratios have been introduced.

The 2011 rosenka values were calculated on January 1, 2011, prior to the March disaster. They usually represent 80% of the assessed land values (kouji-chika) and are used to calculate inheritance and gift tax.

The coastal areas in Iwate, Miyagi and Fukushima Prefectures suffered severe damage from the tsunami and the NTA reported a drop in land values of between 70 ~ 80%. In addition, the land in the vicinity of the Fukushima Daiichi Nuclear Power Plant was determined to have zero value for taxation purposes.

The targeted areas are Aomori, Iwate, Miyagi, Fukushima, Ibaraki, Tochigi, Chiba, Kazo and Kuki in Saitama, Tokamachi and Tsunan in Niigata, and Sakae in Nagano. A total of 65,000 square kilometers, or 17.1% of Japan’s total area, is affected by these changes.

In June, 2011, sites were re-surveyed to assess the impact of the March 11 disaster. Surveyors checked over 16,900 locations to see whether buildings had collapsed, if train lines were disrupted and if the local population had decreased.

The most affected area was Onagawa Town in Miyagi Prefecture which was hit by a 14.8m tsunami which left 488 residents dead and 454 missing. Part of Onagawa Town was given an adjustment ratio of 0.2, which means a drop in values of 80%. Matsushima, Minamisanriku and Yamamoto were all given adjustment ratios of 0.25, while the coastal areas in Iwate and Fukushima Prefectures were given ratios of 0.3. The residential city of Urayasu in Chiba Prefecture which was seriously affected by land liquefaction, received a ratio of 0.6.

NTA has assigned a value of zero Yen to land within the exclusion and (former) voluntary evacuation zones around the Fukushima Nuclear Plant. The NTA said that this does not mean the land is necessarily worthless (although some may disagree), but it will not be subject to taxation.

Following the 1995 Hanshin earthquake, the maximum adjustment ratio was 0.75, which represents a fall in values of 25%.

The ratios will be applied to inheritance tax on real estate from those who passed away between May 11, 2010 and the end of 2011, and if the heirs receive the inheritance in 2010 or 2011.

Sources:
The Yomiuri Shimbun, November 1, 2011.
The Mainichi Shimbun, November 1, 2011.

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