2 ASIAN LEGAL BUSINESS – JAPAN E-MAGAZINE DECEMBER 2023 MAIN STORY LAND OF RISING REAL ESTATE 日の出の勢い - 日本の不動産市場 A weaker yen, attractive interest rates and increasing consumer demand spurred by post-COVID market re-opening has made Japan’s real estate market one of the hottest Asian investment options for global investors in 2023. This is keeping real estate lawyers extremely busy. 円安、魅力的な金利水準、コロナ明けの規制撤廃を受けての消費者需要の高まり等が相まって、2023年の日本 の不動産市場は世界の投資家が最も注目するアジアの投資先となり、不動産分野の法務も活況を呈している。 currencies like the U.S. Dollar, a window of opportunity opened to cross-border players holding available investment funds in other currencies to acquire Japan assets priced attractively in Japanese yen. Investors are taking advantage of this window of opportunity. As the value of the yen likely increases in the future, opportunistic investors will see their returns boosted by favourable exchange rate changes,” says Joel Rothstein, chair of U.S. law firm Greenberg Traurig’s Asia real estate practice. While partly driven by the devaluing currency, the surge in investment is also driven by low interest rates, and a stable geopolitical climate, particularly for those looking to reallocate funds from China, where a real estate crisis and geopolitical concerns have chilled investments. “Japan’s geopolitical landscape has fostered relative economic stability, leading the government to initiate strategies aimed at enticing foreign investments. This drive is supported by Japan’s lowinterest rates and a weakened Japanese yen in the foreign exchange market,” says Jun Usami, executive partner at White & Case’s Tokyo office and co-head of the firm’s corporate practice in the country. bring a lot more work for the country’s legal advisors in the near future. Theo Seltzer, a partner in U.S. law firm Morrison Foerster’s Tokyo-based real estate team summarises the main reasons for this rise. “The key factors driving the surge in foreign investments in Japan’s real estate market in the past year include a weak yen as compared to other currencies, particularly the US dollar; Japan interest rates remaining very low as compared to other jurisdictions as the Bank of Japan has not followed other central banks in a steep rise in interest rates, which allows investors to obtain a positive leverage; Japan banks still welcoming new business; Japan being a stable, rule-of-law country, making it attractive in a time of general global concerns; and Japan – in particular the large cities – having a large pool of investible high-quality real estate assets.” WINDOW OF OPPORTUNITY The Bank of Japan’s decision to maintain a loose monetary policy has resulted in the yen dropping almost 14 percent against the U.S. dollar in 2023, which industry watchers say is a thirty-year low. “As the value of the Japanese yen reached historic lows against other major Investments into Japan’s property sector have been garnering increased attention from global investors in the past year, as stable regulatory conditions and a loose monetary policy provide a window of opportunity to capitalize on the country’s declining currency value and low-interest rates. The Bank of Japan’s Financial Systems Report for October said that real estate-related loans have continued to increase amid the rebalancing of private debt and economic activity. The report also found that foreign investors are driving an increase in funding demand in the country’s real estate transactions market. Total foreign investments in Japanese real estate climbed by 45 percent in the first half of 2023, led by substantial investments from institutional investors, private equity firms, sovereign wealth funds and corporations, a CBRE report found. This significant rise in interest among global investors is not simply a “right place at the right time” moment for Japan. A combination of monetary and regulatory decisions has put Japan on the cusp of a real estate boom and a fiercely competitive market that could BY NIMITT DIXIT Image: voyata/Shutterstock.com
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