The stronger currency exchange rate unwound following the U.S. presidential election in November 2016, with the stock market rallying accordingly. Real GDP is now expected to have grown around 1% in 2016 while external concerns over capital market volatility and China’s slowdown remain a key risk. The new “yield-curve control” policy an experimental strategy implemented by the Bank of Japan (BoJ) since September 2016, appeared effective, at least in the first three months, with government bond yields hovering at around 0% since then. Core CPI remained in negative territory at -0.4% in November 2016 while overall CPI (including fresh foods) was 0.5% in the same period due to subdued consumer demand and cyclical exogenous factors.
Against the backdrop of the negative interest rate policy cap rates remained extremely tight, recording an all-time low for assets in core space. This caused a decline in the volume of real estate transactions, more than a 40% drop from the recent peak on a preliminary basis. Similarly total returns started to indicate the change of tide recording a slowdown for the first time in the current cycle. Capital raising activities by listed REITs remained at a healthy level on the other hand, as acquisitions by J-REITs accounting for more than 60% of all reported transactions in Japan in the recent six months.
Source : Deutsche Asset & Wealth Management