Japanese Economy Recovering - GDP and Inflation Up

Japan’s Q2 GDP was revised sharply upwards to 0.9% (3.8% at an annualised rate) from an initial estimate of 0.6%. Increased estimates of companies' capital spending and public investment drove the upward revision. GDP for Q1 was also raised to an annualised rate of 4.1%, from 3.8%. The pick-up in business investment was particularly welcome as evidence that the economy was gaining fundamental strength.

The Bank of Japan said that Japan's economy was "recovering moderately", boosted by a pick-up in exports and in companies' investment in fixed assets. Public investment is also rising while the housing sector is looking stronger.

A gentle housing recovery in Japan may be underway as potential buyers respond to low borrowing costs and a sense that prices have bottomed after years of declines. Ten year fixed rate bank mortgage rates have fallen to 1.5%. Housing starts have been on an upward trend for some time and new construction in the 2013 fiscal year could top the one million mark for the first time in five years.
Prime Minister Shinzo Abe is to decide by early October whether to allow the sales tax to rise from 5% to 8% next April. He has tied his decision to the economy’s growth rate and the Tankan survey of business investment, among other data. If the sales tax increase is to go ahead as planned then there may be a supplementary fiscal stimulus package and/or further monetary easing by the BOJ to offset any perceived slowdown in consumer spending. The governor of the BOJ does not think the fiscal squeeze will "break" the Japanese economy.

Inflation in Japan rose to 0.7% in July, its highest level in almost five years, as the effects of a weaker yen pushed up the cost of fuel and electricity. Excluding the cost of energy, consumer prices fell 0.1% over the year. Nonetheless, some observers detect a demand driven pick- up in prices and a possible pick-up in wages; both of which are necessary if deflationary pressures are easing and the BOJ is to attain its target of a sustainable 2% inflation rate. Workers’ bonus payments have risen but base salaries are generally flat.

Japan's Real Cost of Borrowing turns Negative on "Abenomics" for 1st time since Summer 2008

Japan's real cost of long term borrowing has dropped below zero, bringing an end to years of high real rates and marking a milestone for "Abenomics".
Negative real interest rates are a key feature of Shinzo Abe's war on deflation, which aims to encourage bond heavy investors to seek higher returns through stocks, loans or property, or buying assets overseas.
Such portfolio rebalancing is expected to feed into higher prices, as banks begin to chase growth at home and as institutions such as life assurance companies swap JGBs for foreign bonds, undermining the Yen. Inflation also erodes gross government debt, which now stands at 240% of GDP.
Data on Friday showed that Japan's core consumer price inflation index rose from 0.7% in July to 0/8% in August pushed up mostly by higher costs for imported fuel. Meanwhile the benchmark 10 year government bond yield sank from just over 0.8% to 0.72%.
That means that investors long bonds during August were losing money in inflation adjusted terms. That is the first time that this has happened in Japan since summer 2008, when fuel prices pushed core CPI as high as 2% while 10 year bonds were yielding about 1.5%.

As portfolio rebalancing plays out, the Bank of Japan has promised to take up the slack, ramping up bond purchases to keep nominal interest rates as low as possible.
Since April, when new governor Haruhito Kuroda announced a shift to a new phase of "quantitive and qualitative monetary easing", the BOJ has been mopping up about JPY7.5tn of bonds a month, equivalent to about 3/4 of coupon bearing debt issued.

Source - FT 1 October 2013

Japanese Anti Yakuza Laws Not working all that well

The discovery of 230 transactions with organized crime syndicates totaling about Y200 million ($2 million) at Mizuho Bank Co. – one of Japan’s largest banks — shows how easily finance-savvy yakuza can secure funds in the world’s third-biggest economy, despite repeated crackdowns.
Over the past two decades, lawmakers and regulators have passed a series of laws and ordinances aimed at curtailing organized crime. Starting with laws in 1991 making typical yakuza activity and money laundering illegal, Japan has been stepping up penalties and stiffening up “know your client” rules. Banks were obliged to check customers’ IDs and report information on money laundering, while regulators were given more authority to monitor suspected money-laundering behavior.
But those rules look tame by international standards. Under 2011 yakuza-exclusion ordinances, companies are merely required to “try” to confirm they are not engaged in transactions with a gang member. Failure to make adequate efforts to ID a client could lead to a prison term of up to one year or a fine of up to Y1 million.
The weak penalties, coupled with wiggle room in implementation, have invited international criticism. In fact, the number of queries to police about run-ins with mobsters has risen by 33% over the four years through 2012, according to the National Police Agency. The criticism has forced Japan to launch its first comprehensive assessment of the state of money laundering here.
Financial Services Agency officials argue that awareness among banks of the gravity of laundering money for the yakuza has risen exponentially. They point to Japan’s housing loan corporations, which received Y685 billion in public funds in 1996 after they were unable to recover loans, including many that were knowingly made to yakuza organizations. Mizuho’s problem was more a failure by bankers to report to their superiors when they found out they were lending to the mob, FSA officials said.
Until the Mizuho case, no major bank had been found guilty of dealing with “anti-social forces” – Japanese official-speak to describe gangsters — since 2007, and the situation is improving, they said.
You be the judge. Here are some of the most recent and/or high-profile cases Japanese financial regulators have found over the past six years, according to the FSA or the Kanto Local Finance Bureau:
2010: Korea Exchange Bank’s Japan branches suspend new business operations for three months after an Osaka branch manager accepts a deposit into a customer’s account from someone with ties to yakuza. The money — Y400 million — was to help the customer buy a golf course. The bank apologized for the trouble caused and submitted a business improvement plan.
2010: Regional lender Miura Fujisawa Shinkin Bank, based in Tokyo bed town Yokosuka, says it knowingly made loans totaling more than Y450 million to a criminal syndicate and related individuals and organizations for over 17 years, and created savings accounts for the organization. The bank apologized and then-Chairman Yoshihisa Ogawa resigned.
2009: Citibank’s Japan branches suspend promotional sales activities in its retail banking division for one month after regulators say it had not set up an adequate system to detect and monitor suspicious transactions and failed to set up procedures to control any dealings with possible “anti-social forces.” This was Citibank Japan’s second of three suspensions for what regulators said were lax controls. Citibank issued an apology and a business improvement plan.

2007: Mitsubishi UFJ Financial Group Inc.’s core banking unit, Bank of Tokyo-Mitsubishi UFJ, suspends lending to new corporate customers for seven days for knowingly making loans in the 1970s to organized crime member Kunihiko Konishi. Top management of the bank’s precursor Sanwa Bank went so far as to permanently station staff in the mob member’s office, regulators said. The bank apologized and said it was taking the matter seriously.

http://blogs.wsj.com/japanrealtime/2013/09/27/in-japan-real-gangstas-go-to-the-bank/?mod=WSJBlog

Japan Business Commentary: 加藤友康社長が出演予定カンブリア宮殿放送中止！（カトープレジャーグループ）

Japan Business Commentary: 加藤友康社長が出演予定カンブリア宮殿放送中止！（カトープレジャーグループ）


カトープレジャーグループ（ＫＰＧ」加藤友康  http://tokumei10.blogspot.com.au/2008/04/blog-post_15.html


ビデオ-  http://www.youtube.com/user/katotomoyasuorix/videos?view=0
ビデオ- http://i.youku.com/u/id_UNTMwNTc3NDgw




http://n-seikei.jp/2012/11/post-12151.html

Weak Yen Helps Push Real Estate Sales

While a lot of excitement over a weakening yen has been focused on the boost it may give to Japan’s exports, in Tokyo, the depreciating currency may be acting as a tailwind for a quiet boom in high-end private real estate.


According to Tokyu Land Corp. 8815.TO +4.34%, Japan’s fourth-largest real estate group, investors from other countries in Asia have been increasing their purchases of high-end real estate in Japan’s capital since the start of the year.

“We’ve especially seen a rise in investors from Singapore,” Takumi Mochizuki, a Tokyu Land spokesman, told JRT last week.

High-end properties in districts such as Roppongi – where many foreign financial corporations are headquartered – are especially popular, Mr. Mochizuki said.

“For outside investors, these properties have essentially become 30% cheaper,” said Mr. Mochizuki, referring to the 27% drop of the yen versus the dollar since November last year. That drop has been precipitated by the aggressive anti-deflation policies of Prime Minister Shinzo Abe — and in particular his push for a dramatic increase in the amount of cash the central bank pumps into the economy, a measure that generally has the added effect of decreasing the value of the currency.

The dollar has been appreciating strongly against the yen since the middle of November last year, and last week rose to 100 yen for the first time in 4 years and one month.

The Japan branch of Jones Lang LaSalle JLL -0.13%, a global realty corporation, also said that high-end domestic property aimed at affluent individuals from abroad is selling well.

“We’ve been holding four or five corporate events aimed at affluent individuals in Singapore since November last year,” spokesman Tomoyuki Suzuki told JRT. Sales at those talks have been largely successful, with “roughly 40% of customers” deciding to buy, said Mr. Suzuki. Properties average ¥50-¥70 million in worth, he said. Jones Lang LaSalle plans to hold similar events with potential customers in Hong Kong as well this summer, he said.

There are a variety of reasons for the investor interest in high-end property, Mr. Suzuki said, starting with a two-decade slump in land prices that have pushed them close to 80% below their peak in 1991. “Property prices have stagnated for the past 20 years. I think there are many investors who think prices will begin to rise from now on,” said Mr. Suzuki. “Many have also been considering widening their portfolio (to include Japan), in addition to places like London and Australia.”

“The weak yen has been a good reason to follow through on these needs,” he said.


http://blogs.wsj.com/japanrealtime/2013/05/13/weak-yen-helps-push-high-end-real-estate-sales/

Central Bank Cash Printing leads to Asian Property Investment Boom

As central banks print cash to boost moribund economies, investors in Asia wanting to hedge against rising prices are dumping gold and doubling down on property.

They are driven by the search for yield as surprisingly benign inflation dims the appeal of bullion, but it's a risky play given lofty valuations for real estate.

The trend is most visible in the frenzy around real estate investment trusts (REITs) in Asia, where issuance ex-Japan more than quadrupled to $4.33 billion through early May from the same period last year and valuations are at their highest since before the 2008 financial crisis.

"I have been saying for the last two years that REITs are a good inflation hedge," said Charlie Chan, one of the best-known hedge fund managers in Asia, who made a killing by betting on them in 2012.

"They are easier to value, you get what you see and you own the building and if there is inflation, the building price will just go up," added Chan.

His $200 million hedge fund returned 63 percent last year and is up a further 35 percent in 2013. Asia hedge funds, by comparison, returned 10 percent last year and are up about 9 percent this year, according to Eurekahedge figures.

REITs such as Cambridge Industrial Trust made up more than half his portfolio at one point last year, Chan said.

Since REITs hold various kinds of properties, from factories to shopping malls and hotels, they benefit from higher rents when economies boom and prices rise.

Unlike gold, which doesn't pay any dividend, REITs also provide a steady flow of income. Yields for REITs in Asia stand at 4.4 percent on average, according to data from StarMine.

Spot gold fell 13 percent this year to May 7. By comparison, the MSCI Asia Pacific REITs index rose 14 percent, according to data from Thomson Reuters Datastream.

"Yield-hungry investors are increasingly being squeezed out of the sovereign bond markets by central bankers everywhere," said David Baran, co-founder of hedge fund Symphony Financial Partners in Tokyo. "REITs are an increasingly compelling asset class."

NEW OFFER FLOOD

REIT indices in Singapore and Hong Kong rose 13 percent and 17 percent respectively year-to-date, with both reaching all-time highs in the past two weeks.

In response to the red-hot demand, companies are flooding the market with new offerings.

Mapletree Greater China Commercial Trust is a prime example, raising $2.06 billion in Singapore's largest ever REIT IPO in February. The 5.6 percent yield offered saw institutional investors bid nearly 30 times the units on offer.

Issuance of REITs in Asia ex-Japan has more than quadrupled so far in 2013 from the same period last year to $4.33 billion, according to Thomson Reuters data, and there is no sign of a slowdown given a $4 billion pipeline in the coming two to three months from IPOs alone.

Assets under management at real estate funds investing in Asia and Japan rose to a record $55 billion and $20 billion respectively at the end of March, data from Lipper showed.

With billions more expected from follow-on deals, 2013 looks to be the biggest year for REIT issuance since at least 2007.

"Suddenly, you see a lot of REITs coming on to the market and we are seeing a lot of companies that are in the radar because they are paying better yields," said Jalil Rasheed, a Singapore-based investment director at Invesco Asset Management.


COSTLY PROPERTY

Investors are stretching valuations, with the Bank of Japan adding fuel to the fire, with the purchase of 133.8 billion yen ($1.35 billion) of REITs since its asset buying scheme began in December 2010.

As much as 92 percent of the REITs listed in Asia have gained over the last year, with Japan Hotel Reit Investment Corp and Industrial & Infrastructure Fund more than doubling, buoyed by Prime Minister Shinzo Abe's aggressive fiscal and monetary expansion policies.

The IBES MSCI AC Asia Pacific REITs index now trades at 1.3 times book value, its highest since February 2008 and meaning investors are paying 30 percent more than the value of the underlying property.

The biggest REIT in the region by market value and trading volume, Westfield Group, trades at a record 1.6 times forward 12-month book value, 71 percent above the five-year median, according to data from StarMine. The second-most liquid, Nippon Building Fund, trades at 1.8 times or nearly 80 percent above its five-year median value.

Investors hope to tap into hotel room rates and rental rates on buildings and shopping malls that continue to soar.

Hong Kong's Swire Properties said it increased rents by up to 82 percent in the three months to March on properties such as One Island East and Cityplaza as supply remains tight.

"Regulatory measures have largely targeted the residential market. The commercial space - office buildings, shopping malls and hotels - remains buoyant," said Michael Smith, head of real estate investment banking in Asia ex-Japan at Goldman Sachs in Singapore.

"The beauty of these REIT structures is that it's a very pure exposure to commercial real estate."

http://www.chicagotribune.com/business/sns-rt-us-asia-realestate-inflationbre9490bc-20130510,0,813885.story

BOJ's Easing Floods Tokyo Real Estate With Cash

Tokyo is an important investment area. We are actively acquiring luxury condominium complexes," said Managing Director Koshiro Hiroi at Grosvenor Group Ltd. of the U.K., which in March acquired the Park Habio Azabu Tower, a high-rise condominium complex near Tokyo Tower.


Grosvenor is a prestigious realty firm, privately held by a British ducal house, that owns many properties in London's Mayfair district. It has been investing in and developing real estate mainly in Europe and North America, but is shifting toward Asia, where it can anticipate future growth. Working to increase Asian assets from 8% now to 15% of total assets, the firm has established a joint investment program with an Asian partner. Its direct investment is Y25 billion ($252 million), but total investment is projected to be Y100 billion eventually, including additional funds procured through loans and other financing.

Real-estate investment funds

Grosvenor is not alone in the growing trend to invest in Asian properties. A number of companies have set up investment funds targeting Japanese properties. Fortress Investment Group LLC of the U.S. announced in December 2012 that it had gathered enough investors to close its yen-denominated fund at its cap of Y130 billion. Over the next two years, the fund will invest in real estate and real estate-related debt.


Also worth watching is what individual Asian investors have been doing lately. In January, a Hong Kong investor purchased a commercial building in Tokyo's Omotesando district, a commercial area popular among young people, for Y1.4 billion. Richwood Capital Partners Asia Ltd. plans to put Y20-30 billion gathered from well-to-do individuals in Asia into properties in Japan. It has reportedly already invested Y3 billion in an office building and condominium complex in central Tokyo.

The most prominent and data-driven indication of the bullishness of the real-estate market in Japan is the flood of funds coming back into Japanese real-estate investment trusts (J-REITs). On March 27 the Tokyo Stock Exchange REIT index, which tracks trends in J-REIT investment, reached 1,700 for the first time since January 2008. This six-year high is all the more remarkable considering that the index was at 1,100-1,200 at the end of 2012.


Taking advantage of the phenomenal improvement in financing over the past three months, J-REITs are taking over one large property after another. For example, Nippon Building Fund Inc. and a partner recently bought the Sony Corp. office building for Y111.1 billion and the Panasonic Corp. office building for Y57 billion.

Unleashing change

Behind the recent bullishness of the Japanese real-estate market is change at the top. Beginning last December, the Shinzo Abe administration has introduced a series of economic measures, collectively known as "Abenomics," based on bold monetary policy, agile financial policy and growth strategies to stimulate private-sector investment.

Bank of Japan Gov. Haruhiko Kuroda, inaugurated on March 20, announced further monetary easing both quantitatively and qualitatively toward a price-stability target of 2%, and historically low interest rates will likely remain in place. This offers an ideal environment for real-estate investment, which generally seeks to increase profits by expanding funding through loans.

Abenomics has brought a steep depreciation of the yen and now sustains the earnings recoveries of Japanese exporters. Another notable effect of a weaker yen is that it makes dollar-denominated investments more attractive. "Investors with a specific country allocation will have more room to invest in Japan as the yen becomes weaker," said one global investor. Funds that become available with easing in Europe and the U.S. are seeking investment targets furnishing higher yields than bonds and the like. This also favors the real-estate market.

The growing understanding that the rental market has bottomed out is also a positive factor for the future profitability of real estate. Since last fall, when the supply rush ended in Tokyo's rental market, more property owners have been raising rents, mostly in high-performance, well-equipped grade-A buildings.

In a recent survey of leading securities analysts and real-estate brokers by the Nikkei Real Estate Market Report, the majority of those polled see "rents starting to rise in the latter half of 2013 and continuing to increase in 2014."

New stores, new vigor

Tokyo land prices had fallen 0.3% on the year as of Jan. 1, down for the fifth straight year. But more importantly, the pace of decline slowed by 1.0 percentage point from the previous year.

Prices rose at 84 of 2,606 locations in Tokyo covered by the Land Ministry survey, up by more than 10 times from just eight locations last year. Meanwhile, land prices in 1,014 locations remained unchanged or stopped falling, a significant increase from 100 spots the year before.


Some areas are already enjoying a welcome revival. The opening of the Tokyo Skytree tower last May has contributed to a jump in the number of people visiting the Asakusa area, which is just one station away from the city's newest landmark.

Proximity to the new Tokyo Skytree tower has made the Asakusa district more attractive for business -- about 100 new restaurants opened in Asakusa last year. Reflecting the area's popularity, land prices in the Asakusa 1-chome neighborhood, to the east of Sensoji Temple's Kaminarimon gate, rose 9% on the year for the biggest jump among all commercial districts in Tokyo.

Residential land prices in the Tama area, in western Tokyo, are also rising. For example, the area near JR Tachikawa Station is attracting many new residents because a number of major commercial complexes -- including a LaLaport shopping mall and a big-box store of Ikea, the Swedish furniture brand -- are set to open there.

Demand for housing is also improving in central Tokyo. The price of land in the Toyosu 4-chome area in Koto Ward, where many high-rise condominiums overlook Tokyo Bay, rose by 2.8% on the year. This represented the biggest increase in Tokyo's residential areas.


Goldman reawakens

Noting the market recovery for office space in Japan, Goldman Sachs also appears to have resumed its search for investment targets with attractive returns. In December its private-placement fund acquired an office building on a back street in Tokyo's Ginza commercial district.

While the building is far behind the main street that hosts designer-brand stores such as Tiffany, Louis Vuitton, Chanel and Gucci, Goldman is thought to be gunning for high returns with renovations or rebuilding. Goldman has also acquired two office buildings in central Tokyo that are over 40 years old, presumably with the same intentions.

In the investment market, the names of investment firms that once swept the Japanese market, such as Morgan Stanley and Lone Star Fund, are again coming up in conversations.

Leading real estate service firm Jones Lang LaSalle's "property clock" aggregates trends in office rents in the world's major cities. It plots rental property markets, which tend to be cyclical, as is the stock market. The fourth quarter of 2012 saw the Shanghai and Beijing markets on the cusp of a decline, following on the heels of Hong Kong and Singapore, where rents have fallen further. Tokyo, on the other hand, was identified as a market poised for growth. Moving past a long period of falling rents, the Tokyo market is entering a recovery.






http://e.nikkei.com/e/fr/tnks/Nni20130410D09HH848.htm