Japans strongest developers stock prices jumped today upon hearing the news that the Bank of Japan will purchase real estate backed assets and real estate investment trusts them selves. Japans enormous REIT market is expected to consolidate rapidly thus leading to more robust financial vehicles and greater stability in the market as a whole. The news yesterday that the BOJ would effectively reduce the cost of capital to zero combined with the move into the property sector today has boosted the fortunes of Japanese REIT’s. Since the financial crisis, REIT’s and other pools of capital have lost almost 2/3 of their value and are now seen to be trading at a discount to their current worth. The specifics are that the BOJ will set up a $60 billion USD fund which will increase fund raising capacity and pump much needed cash into the market. It is also expected that financially stronger vehicles will use this cash to aquire competitors and a subsequent barrage of M&A deals in the Japanese real estate market. Mitsubishi Estate, Mitsui Fudosan and Japan Real Estate Investment all gained significant share value in the expectation that they will be able to capitalize on the infusion of capital to the Japanese real estate market. Many analysists are also saying that this move will greatly speed up the general real estate price recovery, until now, largely financed by foreigners purchase of Japanese residential real estate, mid-sized hotels and possibly even Tokyo commercial property market although that remains to be seen.
