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  • Japan about to boom?

    I have been researching Macro economics quite heavily. It appears Japan's property market is in a recovery stage and is about to boom. The Yen seems to be undervalued by about 15 - 20% and the carry trades look like unwinding soon. The economy is very liquidated, almost a complete opposite to US, NZ, AUS etc who's markets are over heated/over valued.

    I would like to here from anyone on here who may have an interest in Investing in Japanse property.
    No price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche

  • #2
    Why will Japan Boom?

    A good article about why Japan looks likely to boom:

    Over to you, big spender

    Apr 19th 2007 | TOKYO
    From The Economist

    Reasons to expect a consumption boom


    IF economy has been pulled steadily out of the slough into which it had fallen for more than a decade, Japan's corporate sector has been doing almost all the pulling. Ever since the recovery that began tentatively in 2003 started to look solid, economists have predicted that households would soon take over the running, by starting to spend again after years of deflation and tightened belts. Yet every prediction of a consumption boom has proved premature, causing some to question the sustainability of the recovery as a whole. In February deflation, which last year had been declared vanquished, even made an unwelcome return.JAPAN'S
    The corporate recovery, at least, has been remarkable. Companies have repaid huge amounts of debt incurred during the 1980s and 1990s. Demand for Japanese goods from overseas, notably China, gave the initial boost to company profits, which have grown for four consecutive years to record levels. Companies have ploughed back much of the cash they have earned into investment to replace neglected capital stock, from factory machines to computers to buildings. The latest quarterly Tankan survey of business prospects carried out by the central bank, the Bank of Japan, suggests that the recovery in capital expenditure is now spreading from big manufacturing companies to smaller ones, and from manufacturing into services. But sooner or later Japanese companies will have finished most of their upgrading, and worries about the American economy are growing among Japanese exporters, led by carmakers. The government also wants to cut its huge fiscal deficits: wise, perhaps, but this will dampen overall demand. All reasons to hopehouseholds will spend more.

    The oddity is that they have not so far, at a time when companies have been eager hirers: unemployment has fallen to just 4%. The scramble among companies for the new graduates who began work this month made a stark contrast with the fate of unemployed graduates a few years ago. But flat consumption is explained by stagnant wages—indeed, in January and February total cash wages per worker actually fell by 1.1% compared with a year earlier.
    Globalisation, combined with technological change, exerts downward pressure on wages. But other explanations are plausible. Jobs are shifting from manufacturing to lower-paid services. And younger workers, replacing a huge cohort of baby-boomers due to retire over the next three or four years, cannot command the salaries of their well-paid, portlier elders.
    But wages—and hence consumption—must now be likely to grow. A further fall in the unemployment rate would bring it closer to the point where wage pressures accelerate. Goldman Sachs, an investment bank, puts that critical point at unemployment of 2.5-3.5%, a range it expects to be reached towards the end of the year. Many newly hired workers were people who earlier this decade gave up hope of finding a job and who cannot afford to be too fussy now. But this return of “discouraged” workers may nearly have run its course.
    What is more, companies have since 2005 once again been hiring more permanent workers than those on part-time contracts. Permanent workers get paid more. For instance, they are eligible for annual bonuses, which typically account for one-fifth of income. Bonuses are on the rise.

    Moreover, thanks to those baby-boomers, retirement payments by companies, including traditional lump sums to the newly retired, are set to jump—from around ¥10 trillion ($84 billion) last year to ¥13.5 trillion in the fiscal year that began this month. Goldman Sachs guesses that will boost consumption by 0.3 percentage points a year. Camera shops, sellers of weekend fishing-boats and even restaurants report brisk business. Baby-boomers want to enjoy their coming leisure.
    As for the return of deflation, there may be little cause for alarm. Prices fell in February by 0.1% compared with a year earlier, when measured by “core” consumer prices that include energy but exclude fresh food. But the fall was chiefly thanks to a drop in the price of oil-related goods and mobile-phone costs—hardly unwelcome trends to consumers. Besides, the official inflation measure is skewed downward by an unrepresentative calculation of housing costs. Elsewhere, price increases are spreading through service industries as demand slowly grows. Japan's newly confident consumers may at last be about to make their presence felt.
    http://www.economist.com/research/ar...ory_id=9045378
    No price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche

    Comment


    • #3
      Japanise Interest Rates

      Deflation and cheap money has been the case in Japan for a long time. An interesting situation is unfolding. Watch to see what happens as interest rate go up to normal levels.


      Q&A: Japanese interest rates
      The Bank of Japan has abandoned the country's zero interest rate policy after more than five years.
      Rates have been set at 0.25% but not everyone is happy with the decision.

      Why has Japan had zero interest rates?
      Japan's monetary policy of zero interest rates was introduced in March 2001 in an attempt to revive the economy, which had been in long-term recession since the early 1990s.
      One of the main problems was deflation - falling prices - which meant that consumers and businesses were reluctant to spend or invest because any purchase was likely to be cheaper in the future.
      The zero interest rate was designed to make it cheaper for consumers and companies to borrow money for spending, and less attractive for them to save.

      What is prompting the decision to increase the rate?
      Japan has been wrestling with more than a decade of slow growth and recession that has hit companies and consumers alike but now its economy has been gaining momentum.
      It grew in each of the past five quarters while unemployment has fallen to an eight-year low of 4%.
      The government recently upgraded its annual growth forecast for the current year to more than 2%.
      There is a feeling that the economy is now strong enough to cope with interest rates going up.

      Why is this considered a significant step?
      It signals Japan's confidence in the strength of its economy, which has seen accelerating growth and falling unemployment.
      It also marks a shift in monetary policy, away from tackling deflation.

      Is the decision unanimously supported by the Japanese government?
      In a word, no.
      The decision was made by the Bank of Japan - an independent body.
      There is great nervousness among Japanese ministers who are concerned because the last time zero rates were abandoned, in 2000, this led to a prolonged economic downturn.
      Finance minister Sadakazu Tanigaki has said repeatedly that he does not believe the time is right for a rise in rates.
      He, like others, is concerned that it could stop the country's resurgent economy in its tracks.

      So what now?
      Economists say that another rise is unlikely until October at the earliest - and only if it does not appear to be having negative effects on the economy
      However, in the past year there have been increasing signs the economy has pulled itself out of its trough.

      http://news.bbc.co.uk/2/hi/business/5178610.stm
      No price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche

      Comment


      • #4
        Japanese shares finish at seven-year high

        Strong share market gains in Japan.

        Summary | AFP | Newstalk | NZPA
        Monday July 9, 09:24 PM
        Japanese shares finish at seven-year high


        Japanese share prices closed at a fresh seven-year high, lifted by better-than-expected machinery orders data, a weaker yen and a positive lead from Wall Street, dealers said Monday.[/b]

        The Tokyo Stock Exchange's benchmark Nikkei-225 index of leading shares climbed 121.04 points or 0.67 percent to 18,261.98. The broader Topix index of all first-section shares added 12.56 points or 0.71 percent to 1,792.23.

        Gainers beat decliners 1,125 to 462, with 140 stocks flat.

        Turnover rose to 1.7 billion shares from 1.68 billion on Friday.

        "Wall Street's gains (on Friday), a softer yen and upbeat machinery orders supported the market," said Hiroichi Nishi, equity chief at Nikko Cordial Securities.

        A 5.9 percent jump in domestic core private-sector machinery orders in May was much better than the 2.6 percent gain expected by the market, easing concerns about slowing corporate capital spending, dealers said.

        "The market responded favourably to the May machinery data and to higher overseas share prices," said Hiroaki Hiwada, a strategist at Toyo Securities.

        He said the machinery orders data showed corporate capital spending remains strong and that bodes well for the economy and further stockmarket gains.

        Continued softness in the Japanese currency kept investors optimistic about prospects for the upcoming company results season.

        "With fiscal first-quarter results coming soon, the softer yen has boosted market expectations that exporters will revise up their earnings estimates (for the full year)," Hiwada said.

        Dealers said, however, that shares may struggle to make further headway ahead of a two-day interest rate meeting at the Bank of Japan through Thursday.

        While the central bank is not expected to make any move yet on interest rates, players hope for some clues from governor Toshihiko Fukui on the chances of a hike in August.

        Sony Corp fell 10 yen or 0.15 percent to 6,530 after announcing it would cut the price of the PlayStation 3 in North America by almost 17 percent to try to boost sales in the face of fierce competition with Nintendo and Microsoft.

        Other electronics stocks were in demand. Nikon rose 130 yen or 3.7 percent to 3,680.

        Fanuc gained 160 yen or 1.3 percent to 12,860 and Minebea was up 15 yen or 2.2 percent at 704.

        Oil companies rose as crude prices remained firm. Showa Shell rose 34 yen or 2.3 percent to 1,536, Nippon Oil was up 16 yen or 1.4 percent at 1,151 and Cosmo Oil gained 9 yen or 1.4 percent to 670.
        http://nz.news.yahoo.com/070709/8/u7d.html
        No price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche

        Comment


        • #5
          Agree the yen is undervalued right now, would buy some with the Kiwi dollar this high if I had enough spare!

          Libertas, do you have any information on housing affordability in Japan? I believe that it is still very expensive to buy anything. Also population decline and draconian immigration policy may not bode well for future growth.
          payji-san dayo, SAN! sonkei shiro!

          Comment


          • #6
            I think Japan is a great long term bet and here's my thoughts on why.

            The BOJ has held short-term interest rates near zero and printed yen like there is no tommorrow. This has caused the Japanese to spend their savings on non yen based assets.

            Its tragic really but as the productive Japanese worked to lower consumer prices, the inflationary policies of the BOJ reversed those declines, to the effect that those same Japanese consumers did not get the full benefit of falling prices. This has been a subsidy to the American consumer, however this inflation is about to get way out of control.

            The BOJ is using this monetary policy of creating inflation and will succeed more than they can ever imagine at present.

            The BOJ realises that if they stop the flow of liquidity this will cause a collapse in the USD and the US economy as US interest rates soar. To survive this the US must be able to exchange dollars it prints for goods that the rest of the world makes...and pay low rates of interest on these same printed dollars.

            Should the BOJ stop printing yen and simultaneously raise interest rates to normal levels the US will be able to do neither of the above.

            A real rate of interest on the yen would reverse the carry trade by creating demand for Japanese assets and correspondingly diminish demand for USD based assets. This will send US int rates through the roof and stock, bond and real estate prices through the floor.

            This would be bad not only for US consumers but for the world at large and not least the Japanese. The Japanese are afraid of this very scenario and continue on the path of effectively funding the US consumer (who is largely tapped out now anyway) while threatening their own economy with the prospect of hyperinflation and the collapse of the yen.

            The longer they continue along the same path the worse the eventual outcome to both the US and by extension the rest of the world.

            A point to note on the above is that even though the yen would collapse it would collapse less so than the USD. Domestic inflation in Japan will be fairly spectacular and real estate will be a great investment for any savvy Japanese.

            My two cents worth anyway.

            Comment


            • #7
              quick way to get into the Japenese property market

              if u want a quick way in without too much outlay, why not consider a couple of the japanese property trust listed on the australian stock market eg Rubicon Property Trust [RJT]

              this way u can keep outlay low, have a look in and have exposure to both the NZ$/A$ and the A$/Yen so ultimastely the NZ$/Yen

              Comment


              • #8
                The carry trade - why apart from yield differentials?

                http://en.wikipedia.org/wiki/List_of...by_public_debt

                Japan's public debt is a huge problem.

                Regards,
                *poormastery*

                Comment


                • #9
                  Originally posted by John Galt View Post
                  I think Japan is a great long term bet and here's my thoughts on why.

                  The BOJ has held short-term interest rates near zero and printed yen like there is no tommorrow. This has caused the Japanese to spend their savings on non yen based assets.

                  Its tragic really but as the productive Japanese worked to lower consumer prices, the inflationary policies of the BOJ reversed those declines, to the effect that those same Japanese consumers did not get the full benefit of falling prices. This has been a subsidy to the American consumer, however this inflation is about to get way out of control.

                  The BOJ is using this monetary policy of creating inflation and will succeed more than they can ever imagine at present.

                  The BOJ realises that if they stop the flow of liquidity this will cause a collapse in the USD and the US economy as US interest rates soar. To survive this the US must be able to exchange dollars it prints for goods that the rest of the world makes...and pay low rates of interest on these same printed dollars.

                  Should the BOJ stop printing yen and simultaneously raise interest rates to normal levels the US will be able to do neither of the above.

                  A real rate of interest on the yen would reverse the carry trade by creating demand for Japanese assets and correspondingly diminish demand for USD based assets. This will send US int rates through the roof and stock, bond and real estate prices through the floor.

                  This would be bad not only for US consumers but for the world at large and not least the Japanese. The Japanese are afraid of this very scenario and continue on the path of effectively funding the US consumer (who is largely tapped out now anyway) while threatening their own economy with the prospect of hyperinflation and the collapse of the yen.

                  The longer they continue along the same path the worse the eventual outcome to both the US and by extension the rest of the world.

                  A point to note on the above is that even though the yen would collapse it would collapse less so than the USD. Domestic inflation in Japan will be fairly spectacular and real estate will be a great investment for any savvy Japanese.

                  My two cents worth anyway.
                  The only money being made in Japanese real estate is Aussie developments in the ski resorts selling to..... other Aussies. The Japanese look on in total disbelief as this new breed of nouveau riche jet-setters drop anywhere up to 60 million yen (AUS$600k approx) for a condo in the middle of a town with one ATM that shuts at 9 p.m. (it's got better). In Hakuba, the site of the Winter Olympics downhill, hotels were selling at the same price as a South Auckland dump on the wrong side of the tracks. Savvy expats picked them up for a song, and now the Aussies are advancing.

                  Apart from that, the only property that holds its value is in the very exclusive parts of Tokyo. For the majority, a house is a place to live, not a ticket to retirement.

                  Comment


                  • #10
                    Originally posted by BertrandG
                    Thanks for sharing all these interesting articles. Seems like Japan will be one of THE destinations to invest in in the future. We will see...
                    I don't agree. The demographics are vile. Secondly, given that the construction industry is a substitute for the country's under-employed, there is a vast over-supply of property. If you do buy in Japan, you can name your price starting as little as 40K for inner-city apartments. You'll never make a capital gain and you'll have plenty of competition for tenants.

                    Comment


                    • #11
                      From today's Japan Investor e-mail alert:

                      When property markets turn downward (or upward) investors tend to lump REITs, physical real estate and stocks in real estate companies all in the same basket, i.e., real estate plays, and avoid the lot. The Tokyo Stock Exchange J-REIT Index is now down a whopping 52% from a mid-2007 peak, and up to 90% of the 42 listed REITs are trading at a discount to NAV.

                      There is no denying that credit has dried up for real estate developers and the number of property transactions has dropped off sharply. This is a double whammy for newly emerged real estate developers whose business model was dependent on a) readily available credit and equity, and b) active trading in real estate properties. As a result, many are failing and will continue to fail.

                      The J-REITs with the highest discounts to NAV are those whose sponsors are also the designated management company, and investors are leery that a failure in the management company/sponsor will negatively affect the J-REIT. However, some discounts to NAV more than account for what is actually limited risk to J-REIT holders from such an occurrence.

                      On the other hand, the deep discounts to NAV are attracting foreign value investors looking for ways to acquire or consolidate deep discount REITs to obtain their properties for less than current market values. Despite the recent plunge in J-REIT unit prices, foreign investors and domestic J-REIT fans believe there is still a lot of REIT secular growth potential in Japan. Japan’s J-REIT market is still miniscule relative to Japan’s property market, and to Topix market cap at under 1%. In Australia, REITs are equal to 9% of the ASX, and they are 2.8% of the S&P 500 in the U.S.

                      Where else in the developing world, much less a major city, can you find yield spreads at 5% and above? It was this level of yield spreads which first attracted foreign investors to Tokyo before the mini property bubble, when the foreign investment banks and `vulture` funds last started looking at Japan and spurred development of real estate securitization. Thus to value investors, J-REITs are looking pretty good.

                      Comment


                      • #12
                        Japanese shares fell 2.8 per cent to a five month closing low on Friday, as the market was sprung with a broad sell-off. The decline was spurred by negative data out of the US, and growing concerns over the economy.
                        The benchmark Nikkei 225 fell 345.43 points, or 2.8 per cent to 12212.23.
                        Silicon wafer maker Sumco sank 11.3 per cent, becoming the biggest percentage loser on the Nikkei after a brokerage downgrade.
                        Sony lost 4.2 per cent, as the consumer electronics maker said it would recall 438,000 **** portable computers due to possible overheating that could burn users.
                        Financials were among the biggest losers, Mizuho and Mitsubishi UFJ shed 6.4 per cent and 5.4 per cent respectively.

                        Comment


                        • #13
                          I see a couple of Japanese companies had large $$ in Lehman Brothers too - so that can not be good for the country.

                          Cheers,

                          Donna
                          SEARCH PropertyTalk, About PropertyTalk

                          BusinessBlogs - the best business articles are found here

                          Comment


                          • #14
                            The debt creation system is falling over.... who will be last standing? The Fed and other Central Bankers may control the lot once the dust settles. This is a major historic event unfolding.
                            No price is too high to pay for the privilege of owning yourself. - Friedrich Nietzsche

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