JPMorgan Recommends Investing in Japanese Real Estate

Japan Cash Flow Properties

14 December, 2017 –

In order to take advantage of Japan’s prevailing easing monetary policy, JPMorgan Chase & Co.’s alternative asset management unit wants to invest in the country’s real estate and infrastructure. The news was reported by Bloomberg.

Although the European Central Bank and the Federal Reserve have started tightening monetary policies, Bank of Japan’s Governor, Haruhiko Kuroda, plans to continue with “powerful monetary easing” in order to encourage positive inflation in the country. According to the BoJ’s guidance for short-term interest rates and 10-year government bond yields, borrowing costs are expected to remain low in Japan.

The managing partner of JPMorgan Global Alternatives, Anton Pil, said, “Leverage is still very inexpensive in Japan, so you can use a degree of leverage to enhance returns. Many foreigners want to get exposure to Japanese real estate because the Bank of Japan is on a different schedule.” In fact, Pil believes that as the Federal Reserve sells bonds with an aim to reduce its balance sheet, alternative asset classes are likely to attract more attention and become lucrative for investors.

According to Pil, since investors nowadays look for non-traditional forms of fixed income, which can generate cash as well as serve as an inflation hedge, the Japanese real estate and infrastructure is becoming more attractive. However, Pil does not aim to use “significant” leverage. According to him, nearly 35% to 50% of leverage is sufficient. He stated, “If you go north of that, real estate doesn’t become the driver, but the leverage becomes the driver of your return.”

JPMorgan’s shares have gained 24.6% in a year’s time, outperforming 17.4% growth for the industry it belongs to.

(Source – Zacks, Pic – Real Estate / “Shinichi Sugiyama“)

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