Crashing the Art Market, Japanese Style – artmarketblog.com
With all this talk of art market crashes and art market corrections I am surprised that no-one has actually looked at what caused the art market crash that took place around 1991. If all those so called art market analysts and art critics out there actually took the time to research the history of the art market instead of making unjustified sweeping statements and continually incorrect predictions they would find some rather interesting and important facts. From the research that I conduced I have come to the conclusion that of the various different events that caused the art market crash of the early 90′s, most of the events are unlikely to be repeated. Since there are several factors that led to the collapse of the art market in the early 90’s which will require a bit of explaining, I will write a few posts on this topic with each post covering a different factor.
One of the main catalysts for the decline of the art market were the rich Japanese who, during the art market boom of the late 80’s, were buying virtually every Impressionist painting on the market that had been painted by one of the famous Impressionist artists regardless of the quality of the work. With many of the world’s most famous artists being of the Impressionist movement it would not seem at all unusual for an art investor to presume that an Impressionist painting would be a good investment. It is also interesting to note that the Japanese were not only buying Impressionist paintings because of their investment value but also because of the prestige and honour associated with owning such a valuable and popular work of art. Because the Japanese economy was flourishing and the real estate market was booming there were plenty of super rich Japanese looking to splash their money about and what better way to prove your financial worth than to buy a really expensive Impressionist painting. An article from the New York times in 1990 by James Sterngold on art investment included a quote from a Japanese art critic and art professor who said of the new art collectors who were buying these expensive works of art artists that “Contemporary Art is too cheap to satisfy their ambitions”. The problem was that although the Japanese had high ambitions they were careless and irrational with their money and did not have enough knowledge of the art market to make an informed and rational decision.
It is quite obvious that the Japanese were so convinced of the profit potential of Impressionist paintings, and of the prestige and honour they would receive for being the owner of an Impressionist painting, that they were paying ridiculous prices even for second rate works. The whole art market boom was virtually being driven by the wealthy Japanese so, when much of the buying of art was exposed as a huge front for corporate fraud and tax evasion in early 1991, the number of Japanese buyers in the market for art experienced a dramatic drop almost immediately. The Japanese had caused an increase in demand for Impressionist paintings but then almost as quickly as they had entered the art market, they disappeared. The sudden decrease in the number of Japanese buyers meant that there weren’t the large number of buyers willing to pay huge amounts for certain paintings leaving the market to question the value of the market as a whole. Once people started questioning the motives of the Japanese buyers all hell broke loose. To be continued…
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.