Thursday, March 13, 2014

Misery Index Near a 33-Year High in Japan (Goldman Sachs Takes Advantage)

In Japan, the misery index, which adds the jobless rate to the level of inflation, will climb to 7 percentage points in the three months starting April 1, based on the median estimates of economists in Bloomberg News surveys of unemployment and consumer prices. That would be the highest level for the measure since June 1981 when Japan was emerging out of depression after the oil shocks in the 1970s.

Bank of Japan monetary stimulus designed to spur economic growth and achieve 2 percent inflation has weakened the yen by 6.8 percent in the past 12 months, eroding the value of wages to a record low.

The fundamental cause of the spike in the misery index is Japan's central bank recent mad money printing.

 The money printing is flooding the capital goods sector, including real estate, with funds, and Goldman Sachs is taking advantage. Bloomberg reports:
Goldman Sachs Group Inc. plans to expand its private real estate investment trust in Japan to 60 billion yen ($583 million) by the end of March amid rising demand to invest in the nation’s real estate market.
The REIT will acquire two office buildings in Tokyo and Fukuoka, on the southern island of Kyushu, said Hiroyasu Kaizuka, head of the real estate investment department at Goldman Sachs Asset Management Co. in Tokyo. The REIT, which started in August 2012 with 30 billion yen, plans to add about 4 billion yen of properties by the end of June, he said.
Goldman Sachs, the first non-Japanese company to start a private REIT, is targeting 100 billion yen of properties in three years from inception. Property transactions in Japan may rise as much as 30 percent to about 5 trillion yen this year from 4 trillion yen in 2013, according to an estimate by brokerage Jones Lang LaSalle Inc. (JLL)
“The market condition has turned around so quickly that the yield has become tight,” said Kaizuka in an interview in Tokyo. “We won’t consider buying properties that will hurt the return.”

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