It is a city of hope, a city of contradictions, a city of dreams. In countless irrepressible, pulsating motions, Tokyo exudes the new found wealth, stunning pride and aspirations of all of Japan's 121 million inhabitants.

The Japanese capital is choked with a teeming mass of humanity, seemingly endless traffic jams and an overwhelming sense of vitality and rhythm. Perhaps no other aspect of the city of nearly 12 million tells the story as clearly, however, as its real estate problems.Incredibly - for all except New Yorkers and Bostonians - land prices in Tokyo's residential areas have soared by 18.8 percent since 1985 and in some quarters the rise is an astounding 90 percent or more.

According to officials of Japan's National Land Agency, the exorbitant Tokyo land prices reflect a growing number of owners selling property to meet heavy demand for new office buildings and condominiums.

Probably even more significantly, credit is easy and there exists an unprecedented glut of funds. And predictably enough, increased purchases of outlying luxury homes by people selling their more central properties have led to speculation by real estate agents, causing land prices to surge unbelievably.

Yet another key factor, of course, is the continuing influx of foreign firms that need centrally located office space and expensive residential facilities for their executives and their families.

Foreign companies (mainly U.S.) entering Japan numbered about 250 a year in the late 1970s. However, in recent years the figure has jumped to 600 annually. And more than 80 percent of these firms place their offices and ex- patriot residencies in the capital. Financial internationalizatio n of Japan has been proceeding at a hefty pace in recent months, with the opening of the Tokyo off-shore market scheduled for Dec. 1.

Foreign executives seeking independent houses in top residential neighborhoods must pay around $6,250 monthly for three bedrooms and close to $9,000 for four bedrooms. Apartments in select areas cost slightly less: $3,750 monthly for three bedrooms and $7,650 a month for four bedrooms.

The result is an endless upward spiral of Tokyo land prices, since Japanese law says that no taxes will be imposed on sales if the price of newly-purchased residences equals or exceeds the price of the sold real estate.

"Locals buy new homes with hardly a thought to prices, making for a mad situation," says a Tokyo real estate agent. This stunning development is nothing less than a bonanza for the city's real estate dealers, but a disaster for ordinary workers and their families who want their own homes or apartments.

In the most attractive central city areas, for example, a small two- bedroom apartment markets for almost $1,250,000 nowadays.

Even in the outskirts of the Japanese capital it is not uncommon for single lots to be priced at astronomical rates. A mere 177 square meter plot can carry a $854,000 price tag. And in some of the more desirable sections of the city a landowner selling 100 square meters of space can count on receiving as much as $9.3 million or so.

As the land is passed from one real estate broker to another, the price rises in each transaction. Meanwhile, the demand for office space in the center of Tokyo is causing many small- and medium-size companies to move their offices into apartment buildings, causing the prices of these facilities to soar - often to an astounding $18,570 a square meter.

In a number of these residential areas, reports the Japan Real Estate Research Institute, land prices have soared by 40 percent and up in the past 12 months. It is not uncommon to open the morning newspaper to find real estate ads offering 200 square meters of very ordinary undeveloped residential land in a very ordinary suburb an hour's traveling time from central Tokyo for (hold on to your hat) $1.8 million or thereabouts.

So, although Tokyo is a city of hope for its citizens, it is rapidly moving away from this description. The metropolis soon will be divided into two classes - those who own land and those who never will. Oddly, there continues to exist a wide agreement in the capital that the most efficient solution is to let the free market reign, to permit prices to rise to whatever level is necessary to equate the amount of land people want to buy with the amount available.

When questioned about this, the vast majority of Tokyo residents protest that land is high priced because it is scarce. This is mere poppycock. The Japanese capital boasts more unused or under utilized land than any other major world city. On every side there are acres of mean, two-story sprawl that should have been replaced by high-rises many years ago.

So far, although the city and national governments have taken notice of the problem, little has been done to provide a solution. Only recently, however, a blue-ribbon advisory panel appointed by Deputy Prime Minister Shin Kanemaru called for relaxation of building restrictions in order to promote construction of more high-rise structures in Tokyo and other urban areas. But doubts remain about whether this suggestion will be followed.

The effect of building upwards would fly in the face of the long-standing policy of emphasizing the right to sunshine for surrounding buildings and their residents. The current policy limits the height of all new buildings in Tokyo's residential districts to ensure that adjoining houses or structures receive adequate sunlight.

Many Japanese, for instance, can be counted upon to oppose any change in this real estate policy, particularly among the consumers' groups and the environmentalists, contending that eliminating the restrictions would lead to the deterioration of their living environment.

Indeed, continuation of the present skyrocketing land prices in Tokyo can have but one effect: a worsening (if that is possible) of the "rabbit hutches" - miserably cramped and substandard housing of those Japanese who live and work in the capital.

One property industry executive recently summed up the situation by commenting with a grimace: "It's really disturbing. Prices are shooting up every day." During only two days in which he was away from Tokyo on a business trip, the price of some land he was negotiating to purchase climbed by 10 percent, he complained. That's incomprehensible.

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