You don't have add "or opportunity", risk goes both ways, that's a given. My reason of buying in on this argument is firstly because the actions of Governments the world over and the future effects of these is a very interesting topic and very relevant to everyone, not just people investing in property overseas, and secondly because I don't think that a lot of people investing overseas know anything about what can effect exchange rates or the extra layer of risk they add to overseas property. I know from speaking with a lot of people investing in the US that a lot of them think that because the $US has fallen against the $A that it will go back automatically, my concern is that the $A will continue to appreciate against it and also the Yen because of the policies do the US and Japanese Governments. Investors need to appreciate that this is a very real possibility, whether it ends up being the case or not.
Oil is currently rising in US$ terms while JPY vs USD is literally collapsing. Implied target is $1.04 ($0.9317 today)
It's not just oil but everything else Japan imports. Everything will have to go up eventually. Abe's after 2% inflation but it's likely he'll get more than he bargained for.
I see a disaster in the making for Japan unfortunately. It may be the first of the major economies to implode.
Terry expanding on why things will get bad for the average Jp citizen.
Abe's printing until the cows come home to try and achieve several things;
- inflate (2% target) away debt. The problem with this is the average Joe is the primary supplier of the loans to the JPG. When your lending money at virtually 0% deflation works for you but inflation kills you.
- Pump the stock market so people feel richer. Problem is (see graphics below) the japanese have very little in the stock market so gains are minimal
- Devalue the currency. As mentioned collateral damage will be via imports especially fuel and energy
The first signs of austerity…
Japan To Slash Welfare Benefits In Attempt To Root Out "Comfortably Poor
- ..welfare benefits will be slashed by ¥74 billion over a three-year period starting from fiscal 2013, after a government panel found that some people are making more on the dole than the average low-income person who is not spends on living costs..
A great little Addogram that visualises Japans debt problem.
QE hasn't worked for 30 years but these muppets are now going to go all in. The JPY has devalued (approx)25% against the USD over the last 7 months and almost 30% against the AUD over 11 months. AUDJPY is currently 101 and the USDJPN 96.86. The target is thought to be USD 120.
To me it feels like I'm watching a ship sink.
If Japan's "Shock And Awe" QE Happened In The US….
Why? Because the just announced "Shock and Awe" expansion of BOJ monetization takes the total monthly gross purchases to a whopping ¥7 trillion per month, or 80x less than Japan's total GDP of $5.9 trillion. Back in the US, the Fed is monetizing "just" $85 billion per month, or 187x less than US GDP of $15.9 trillion. In other words, if one were to pro-rate the latest Japanese monetization effort to the US, one would get a mind-blowing $200 billion per month and $2.4 trillion per year in pro forma QE every month.
A slightly more technical explanation of Japan's predicament but understandable for most people. Take notice where Japan sits on this chart and who its close neighbors are. Reveling to say the least
Why Japan Can’t Fund Itself Any Longer [Global Sectoral Balances Chart] Read more…
You've truly digressed there, Freckle.
sorry to have been away for so long, can't really take an awful lot of time to comment, as we've been quite busy. For better or worse (I know which side of the assumption you're banked on, don't answer that one), equity money is moving to real estate for lack of dividends, and Asia real estate money is moving to Japan for fear of more cooling measures (and a few other places – see here – http://www.pwc.com/us/en/asset-management/real-estate/publications/emerging-trends-in-real-estate-2013.jhtml), and we're happily copping it.
rents in Tokyo are on the up, vacancies on the drop, and Fukuoka city, where we and our clients have been purchasing extensively since 2011, is one of the first cities in the country to experience land prices on the rise again finally. Not sure where that rise will end up on the two-decade scale, but on the short term, five year scale it's the best we've seen.
Abe's attempt to kick-start growth through inflation, with fanfare and printing machines at full steam, may be crude, but not really that different to the rest of the world's best efforts and, considering his efforts to negotiate Fukushima fallout (spreading it all over the country to "share the burden"), is probably doing the best he can to just keep exports going with the yen pressed low, while generating enough head winds to possibly live up to his inflation target by 2015. I honestly don't think he (or anyone with half a chance at becoming PM in his stead) can do much more without some handy crystal ball in their back pockets.
interesting times but, for those of us vested in property, Japan's super high yields and the potential for a true revival if the property markets finally bottomed out, coupled with the unbeatable reliable and honest tenant and business environment wins hands down (not over your methods, I know, just for the rest of us RE geeks out there).
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
zmagen wrote:You've truly digressed there, Freckle.Who me? Never! Every serious subject should have a little humor or we'd all have to slash our wrists.
Quote:sorry to have been away for so long, can't really take an awful lot of time to comment, as we've been quite busy.You've been letting the side down mate..
Quote:For better or worse (I know which side of the assumption you're banked on, don't answer that one), equity money is moving to real estate for lack of dividends, and Asia real estate money is moving to Japan for fear of more cooling measures (and a few other places – see here – http://www.pwc.com/us/en/asset-management/real-estate/publications/emerging-trends-in-real-estate-2013.jhtml), and we're happily copping it.I can understand a pullback from the Fukushima region as a whole shunting some pressure on other areas but foreign investment begs the question.. Why would anyone in their right mind invest in depreciating assets (historically) in a currency with quite clear intentions of devaluation? Insanity or just plain stupidity. Somebody's getting sucked in here that's for sure. Even the questionable appreciation in property prices does not outweigh currency risk by a long shot.
Quote:rents in Tokyo are on the up, vacancies on the drop, and Fukuoka city, where we and our clients have been purchasing extensively since 2011, is one of the first cities in the country to experience land prices on the rise again finally. Not sure where that rise will end up on the two-decade scale, but on the short term, five year scale it's the best we've seen.So you've seen a small claw back of an asset (land) at this point in time. Are we back to break even yet or even close to break even? While an increase in rental income is always welcome given the inflation in living costs (food, fuel, energy) is this adequate compensation or will rents be suppressed eventually as inflation of basic living costs bite with devaluation?
Quote:Abe's attempt to kick-start growth through inflation, with fanfare and printing machines at full steam, may be crude, but not really that different to the rest of the world's best efforts and, considering his efforts to negotiate Fukushima fallout (spreading it all over the country to "share the burden"), is probably doing the best he can to just keep exports going with the yen pressed low, while generating enough head winds to possibly live up to his inflation target by 2015. I honestly don't think he (or anyone with half a chance at becoming PM in his stead) can do much more without some handy crystal ball in their back pockets.Abe like the rest is behaving like all politicians. Simply extend and pretend. Extend the misery and pretend it all gets better if we pull the blanket over our heads. It's a poor excuse for leadership. He's just another muppet who'll decimate the wealth (or what' s left of it) of the populace to play one more hand.
Quote:interesting times but, for those of us vested in property, Japan's super high yields and the potential for a true revival if the property markets finally bottomed out, coupled with the unbeatable reliable and honest tenant and business environment wins hands down (not over your methods, I know, just for the rest of us RE geeks out there).There will be no true revival of any property market anywhere as long as central banks think they can manipulate and control economies without peripheral damage. The best you can do is understand the dynamics of manipulation and play the game accordingly.
The bottom 90% are trapped. They have insufficient wealth to grow faster than the deflationary (assets wages) inflationary (living costs) squeeze.
One very small glimmer of hope for Japan is the methane gas fields off its coast. The problem may be time. This is a known source of energy but the tech to unlock it is not well developed therefore risky. Japan thinks it maybe able to bring these fields to production in 6 years. Optimistic by all accounts, however, timing aside it still offers huge potential for Japan in two ways. Possible future energy independence (note production cost may be a spoiler here yet) and the IP value involved in this technology could be substantial.
http://news.nationalgeographic.com/news/energy/2013/03/pictures/130328-methane-hydrates-for-energy/
They certainly need a winner from somewhere after virtually destroying their fisheries with radioactive contamination.
Simulated spreading of the contaminated Fukushima waters in summer 2012, 16 months after the nuclear disaster.
Well things just went bust in the Japanese bond market resulting in a temporary halt while they pulled things back from the brink.
From DB
Deutsche Bank On Central Bank Intervention: "We Are Flying Blind"
- the halting of the Japanese Government Bond complex due to excessive volatility. Now, this is not some zero-liquidity penny stock or an algo fat binary finger: at last check there is one quadrillion yen in Japanese debt, which makes it the second biggest sovereign bond market in the world.
- You'll be able to read chapter and verse from strategists trying to explain what's likely to result from such moves but the honest truth is that we are flying blind in terms of historical evidence even if we go back centuries.
From a web commenter – "…The BOJ and the Finance Ministry would love a panic. That way they could buy the bonds back cheap. It is a shakedown of foreign investors and I think it is hilarious…" Interesting times.
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
zmagen wrote:From a web commenter – "…The BOJ and the Finance Ministry would love a panic. That way they could buy the bonds back cheap. It is a shakedown of foreign investors and I think it is hilarious…" Interesting times.Are you suggesting he/she actually knows what they're talking about or are they just another dumber than my dog blog commentator who probably wouldn't know a wooden dollar from a real one and you've posted it to add humor to the day.
Here's what your slightly smarter than my pet rock commentator fails to grasp. A slide in JGB's impoverishes the 91% of Japanese institutions including the biggest pension fund in the world and may well make a few dollars for the foreigners who have derivative insurance backing any losses. If the BOJ looses control of the bond market it's game over. I've seen estimates that suggest super funds could loose 30 – 50% nominal and much higher in real terms as the Y sinks faster. The implied target is USDJPY 120. Loosing control could see a run to 150+. At that point it would be game over. Some are speculating the Y could go to 200 and beyond.
The general consensus is to get out of Y and Japanese assets and buy foreign currency or foreign productive assets. There are already indications of capital flight that are further pressuring the Y.
Throwing fuel on the fire is China's and S Korea's somewhat negative reaction to put it mildly. SK has to go in all guns blazing because it can't afford to be snookered by Japan when 60% of its GDP is exports. China's kinda hamstrung with food inflation issues so can't realistically devalue. That suggests other forms of punishment in retaliation.
This is absolutely not going to end well for Japan.
There's no "end", Freckle, it's cyclic. No one in their right mind invests in real-estate for a 3-year "hit" (barring flippers and short-salers and serious gamblers). When times are rough, we buy, and cash in when things recover, to start all over again, locally or abroad. You're apocalyptic view of events in this case, as it was and still is with the US market, is to spread panic and doomsday visions among those leveraged into those markets with every up, down, top and turn. Maybe it's a cash investor thing, but we don't see these cyclic fluctuations as something that makes a huge difference in the long run.
Here’s a more rational view of what’s happening atm – http://www.reuters.com/video/2013/04/08/reuters-tv-22-year-jgb-bubble-may-be-about-to-burst?videoId=242103887&videoChannel=117766 (I know, I know, they’re all idiots if they don’t share the “oh woe be upon us, the dark pits of financial hell are spitting hellfire, the end is nigh” philosophy you exhibit every time a currency fluctuates anywhere in the world or economic turmoil kicks in.
Ziv Nakajima-Magen | Nippon Tradings International (NTI)
http://www.nippontradings.com
Email Me | Phone MeZiv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property
US$22 at Alibaba or Y2185. You could make a bundle on these at the rate the yen is plunging. It's called an appreciating asset in Yen terms anyway. I'm led to believe they come in handy when transporting large amounts of cash.
This is the high capacity version the Germans invented. You have to bundle and band your paper though.
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