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Market Scene : Japanese Buyers Rue Their Brush With Wealth : Color them blue. The speculative art bubble has burst, causing bankruptcies, unveiling fraud and tipping the trade balance.


TOKYO — When Ryoei Saito paid $160 million one week in 1990 to acquire the world's two most expensive paintings--a Van Gogh and a Renoir--his Daishowa Paper Manufacturing Co. empire was at its peak, and so was Japan's surging economy. Saito's dramatic purchases put him at the crest of a tsunami of art purchases that became a symbol of Japan's new prosperity.

Now that the tidal wave has crashed, dragging art prices down as sharply as Japanese property and stocks, Japan's huge art collection has become just another reminder of the worst excesses of Japan's speculative bubble.

Investors have salted away their precious paintings in basements all over Tokyo waiting for the next art boom. But many may not be able to hold out that long. There is widespread speculation that Saito, who recently had to sell off assets and draw from his personal fortune to bail out his company, may soon be forced to sell his art treasures at a huge loss.

Already, a rash of bankruptcies by dealers and galleries has forced banks to take paintings in lieu of loan repayments. As a result, banks already suffering from huge inventories of hard-to-sell land are now also saddled with thousands of paintings valued at an estimated $8 billion.

Impressionist art prices are down more than 50% because of the sudden cooling of Japanese interest. But some dealers worry that if troubled Japanese banks and credit companies are forced to dump their art, prices could plunge even more sharply.

Another impact of the burst art bubble: a bigger Japanese trade surplus. In 1990, Japanese imported more than $4 billion in art, snapping up 40% to 50% of all Impressionist art put on the market and offsetting at least some of its exports. Although Japanese are still present at international auctions, they buy far less and pay much lower prices--this year Japan's import of art is estimated to fall to $570 million, one-seventh of its peak level. Meanwhile, it is chalking up a worldwide trade surplus of more than $100 billion.

European and American dealers, hoping to make a killing by buying from dejected Japanese art collectors, are making inquiries but are being turned away because of their low offers. Auction houses, too, are finding art owners unwilling to face the reality of falling prices. "We are getting a lot of interest, but when they hear our estimates for what their paintings will bring, they are shocked. Not much business materializes," says Koji Yamada, of the Tokyo office of Christie's auction house.

Many date the takeoff of Japan's art craze to 1987, when little-known Yasuda Fire and Marine Insurance Co. became world famous overnight by paying $39.9 million for Van Gogh's "Sunflowers." The painting, which now appears on most of the company's advertisements, was seen not only as a good investment but also as a way to boost the company's prestige.

As Japanese buyers bid up prices, auction houses such as Sotheby's and Christie's began bringing the artwork to Japan for special previews and publishing special catalogues in Japanese. At the peak, auction halls were filled with as many as 100 Japanese buyers.

Art, one saying went, was real estate that could be hung on the wall. You could buy the art with low-interest loans from banks, double your money in a year and avoid taxes to boot. Renoir paintings became a form of currency, changing hands as partial payment in real estate deals to avoid taxes. According to one account, a Renoir--virtually any Renoir--could be used as if it were a 1-billion yen note ($8 million).

Even contemporary Japanese artists benefited. Some were able to sell their paintings for close to $1 million--almost unheard of for a living artist here.

Masahiko Sawada, a Toyota dealer from Nagoya, opened his own gallery and began aggressively buying Impressionist paintings. "We are leading the business," the company said at the time, boasting that it "controlled" the prices of Renoirs.

Sawada's Urban Gallery borrowed money against his real estate to buy art that he then provided to big department stores on consignment. By 1989, the company had galleries around the world and annual art revenues of $170 million.

The real estate development firm, Maruko, went the furthest in turning art into a vehicle for speculation. Under its "Partners in Art" program, the company bought such paintings as Chagall's "Arabian Night" and Renoir's "A Young Nude Lying on a Sofa," then sold ownership shares in the paintings for as much as $180,000 apiece. Although investors were paying a high premium, Maruko assured them their shares would grow tenfold in value in 10 years.

Today Maruko is bankrupt, and its investor certificates are worth a tiny fraction of their original value. According to Nikkei Art, a trade publication, creditors are chasing after Toyota dealer Sawada's estimated $570-million inventory of 2,000 paintings in hopes of getting their money back.

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