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“The yen has been close to its lowest level in several decades against the dollar, making the carry trade – of borrowing in yen at near-zero interest rates, and investing abroad at higher rates – very lucrative for Japanese investors,” says David Rea, Global Director of Macro Research and Chief Economist EMEA, JLL.
“A weakening yen has made these overseas assets more valuable in yen terms.”
For outbound real estate investors, there may therefore be an impact on capital flows, but these have historically been much smaller than flows from, for example, South Korea, a markedly smaller market.
A bit of context also makes Japan’s small numerical shift look bigger.
“The change is much more significant than it appears,” Rea adds.
The reason: It’s equivalent to more than three 25 basis point (bps) hikes from each of the world’s other major central banks.
Japan’s policy rate has not been above 0.5% since 1995, meaning the maximum variation in the policy rate, from its lowest to highest points over the past 30 years, is 0.6 percentage points, or 60 bps, says Rea. This compares to, over the past two-and-a-half years, 525 bps for the Federal Reserve; 515 bps for the Bank of England; and 450 bps for the European Central Bank.
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This article was originally published by a www.us.jll.com . Read the Original article here. .