Hello Wabmaster
This maybe too much information but...
I'm curious about the Japanese mindset towards investing. How do the Japanese deal with a stock market and real estate that has declined for over a decade? Where do they invest?
This is overly simplistic but the stock mrkt and real estate prices are not something most Japanese think about. I read only 8% own stock. The majority of Japanese savings goes into time deposits in banks which pay less than 1% (I forget the exact rates). Annuities were popular but there were problems with the insurance carriers being able to cover the promised returns. I haven’t heard much about them recently.
In terms of real estate, individuals never really became speculators and residential property doesn’t change hands much. Commercial property is mainly held by the big boys. We looked at buying a rental property. The numbers did not work out even with a 1.5% mortgage. They barely worked out to buy a primary home.
Personally, I don’t own any Japan investments except as part of a global fund. The simple reason is the market is too speculative due to hot money. Most of the shares are non-active because of cross holdings between companies (around 55% of stock). Most domestic individual investors (about 20% of stock) tend to be extremely long term. Most of the active stock is owned by foreigners (about 25% ofl stock) who are mainly speculators. There are also problems with transparency etc. People say these things are changing but who really knows.
do you know of any J-REITs available to US investors?
There is something of a boom in Japanese Reits. I don’t know of any foreign funds investing specifically into Japanese real estate. Reits are set up as open and closed ended funds here so if you can purchase foreign stocks directly you can purchase the closed ended funds, I guess. Here are a couple of articles that may be interesting.
http://www.bloomberg.com/apps/news?pid=10000101&sid=azWf0Vi4nj4Y&refer=japan
This article was in the International Herald Tribune January last year. Sorry about placing the entire article. It is from google’s cache.
Japan real estate trusts seize the moment
The collapse of the Japanese real estate bubble in the 1990's epitomized the wrenching economic transition that Japan went through in the past decade. But out of the troubled landscape of the property market has emerged a booming real estate investment market known as J-REIT, Japan's rendition of the real estate investment trusts that are widely popular in the United States and elsewhere.
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The market that began in September 2001 with just two listed vehicles has grown to a total market capitalization of nearly ¥1 trillion, or $9.4 billion, shared among 10 listed funds.
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J-REIT's grew as banks, individuals and foreign investors jumped in to take advantage of yields between 4 percent to 6 percent, a handsome return on relatively solid capital in a country where interest has virtually disappeared from bank deposits.
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J-REIT's received a big lift when the general stock market began to recover last spring. The Tokyo Stock Exchange REIT index closed on Wednesday at 1,221.55, an all-time high.
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J-REIT's are now on something of a roll. There are several J-REIT funds of funds run by major fund management companies. Two funds, Nippon Building Fund and Japan Real Estate Investment, were adopted as components of the Morgan Stanley Capital International index, and local money magazines are rife with features on J-REIT's.
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"Investors' interest has been aroused," said Masahiro Horie, president of Tokyu Real Estate Investment Management, which runs a REIT focusing on properties in the trendy Tokyo district of Shibuya and along the Tokyu Railway line.
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Yet some say that J-REIT's contain structural flaws that are masked by the current boom. First, analysts say, they are overexposed to office properties, a category that is more vulnerable to the swings of the overall economy than other property types like retail and industrial properties.
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"In Japan, statistics are most richly available for office properties," said Takashi Ishizawa, a real estate industry analyst at Mizuho Securities in Tokyo. "Those for residential and retail properties, meanwhile, are insufficient. So office buildings are easiest to handle."
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Some analysts have doubts about REIT's as an investment because of their close ties to the parent companies, many of them traditional property players like Mitsui Fudosan and Mitsubishi Estate.
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The parent company typically sends employees on loan to REIT's, which then engage property management firms from within the group. As an executive with an international executive recruiter in Tokyo put it, "One might as well buy shares of the parent companies."
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Ishizawa, the Mizuho analyst, offers a more charitable view, saying that the REIT's were trying to grow out of a very early stage of development.
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"REIT's have no track records or recognition in Japan, so people tend to look at the credibility of the sponsors," he said. "This is going to change."
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Ishizawa suggested that investors look at Japan Real Estate Investment for financial health, at the Nippon Building Fund for quality properties and at the Japan Retail Fund for diversification.
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While most Japanese REIT's invest in midsize office properties, there are some varieties. Yuuichi Hiromoto, president of the Japan Retail Fund, the only REIT that specializes in shopping malls and other retail facilities, said his fund had a unique advantage because he was buying from a wide range of choices of properties offered by banks and financially struggling owners.
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"We have turned down 95 percent of the offer, which comes to about ¥2.9 trillion in total," Hiromoto said.
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The ¥150 billion Japan Retail Fund, he said, is set to grow to ¥400 billion in about three years.
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Orix Asset Management, founded by the leasing giant Orix, operates a REIT that buys small- to medium-size office buildings for ¥2 billion to ¥5 billion.
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"Buildings this size are most efficient in terms of cost performance and have the greatest tenant demand," said Hiroshi Ichikawa, president of Orix Asset Management.
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Another criticism of REIT's centers on their price: Some trade at 30 percent higher than net asset value, a premium that will look even higher if interest rates go up. If that happens, REIT managers said, an upturn in rents will almost certainly follow - and that could usher in a new growth period for real estate funds.
The difference in spendable income has to be because the interest rate is lower. When the interest rate goes up, Average Joe and Jane won't have so much to spend on after-mortgage items, and may decide to buy a smaller house, or no house at all. End of bubble. Of course if interest rates stay low, everything's just ducky . . . . 
