Bank of Japan’s negative interest rate measure may accelerate Japanese investors’ portfolio rebalancing to allocate more alternative and real estate from bonds
Friday, 5th February 2016
On Jan. 28, 2016, Haruhiko Kuroda, the governor of the Bank of Japan (BOJ), announced a cut in interest rates below zero– hoping to lead the country’s economy to inflation and encourage Japanese investors to shift in targets toward riskier assets from government bond.
Japanese institutional investors sees this negative interest rate policy as a pressure for global alternative and real estate investment, that will encourage Japanese investors to invest in overseas real estate.
Mr. Kuroda added that this aggressive step of BOJ could encourage Japanese financial institutional and pensions to invest in riskier assets to gain for necessary incomes and profits.
This change can be a trigger for Japanese banks, insurance companies, and pension funds – especially for large public pensions to shift to wider asset allocation including real estate.
For instance, Japan Post Bank (Yucho Bank), 1.7 trillion USD in assets and the world’s largest deposit holder, has recently announced its new division for real estate investment on Jan. 25th, 2016. Japan Post Bank has been accelerating the shift in the portfolios to reduce Japanese Government Bond and increase overseas assets.
Once, reform of GPIF’s portfolio was concerned for its issues with political leadership dispute, lack of human resource, and conservative public opinion. Yet, this negative interest rate policy eliminate the issues of both political dispute and public opinion with this strong external change that will be accelerating GPIF’s portfolio allocation to one directions.
In that way, this political decision of BOJ can be seen as an indirect support by the government to push GPIF and its reform.
Though action of Japan adopting negative interest rates policy may bring a number of challenges politically and economically, Japanese and global property investment market can invigorate and take this policy of a negative interest rate as an opportunity.
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Asterisk is a private fund placement agency for global alternative in Japan. Through our unique and extensive network of Japanese investors, we support global fund managers in accessing Japanese and Asian institutional investors (pensions, financial institutions, real estate developers, other business companies, etc.).
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