Tuesday, October 18, 2005

Boom, not Bubble

The current economic recovery has close parallels to Japan's situation in 1986 (excellently covered by the Nikkei Shimbun's Takumi Anzai in this piece) such as an election landslide by the LDP in a snap election, the Nikkei reaching record levels, and an influx of foreign investment in Japanese equities. 1986 marked the beginning of the infamous Japanese real estate Bubble. Are we seeing another one in the making?

No, says Morgan Stanley’s Robert Feldman. In his article in the the Oct.17 Global Economic Forum, he offers an opinion on the current boom in Japanese real estate:
More investors are seeing real estate as a respectable asset class…While real estate is now back in vogue, there is no bubble. The rise of real estate prices remains concentrated in the centers of major cities, while prices in suburban and ex-urban areas are still falling. These trends are likely to continue, in my view. They suggest that investors have learned the lessons of the bubble, and are valuing property on a discounted cash flow basis.
Feldman also predicts that JGB interest rates will top out at 2.0% in early 2006, but that more than 2.5% is 'highly unlikely'.

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At 10:28 PM, Anonymous Pete Lawley said...

Great blog! It's really good to see a site dedicated to an aspect of the Japanese economy. It seems China gets all the attention these days but I'm confident Japan is now on the road to recovery.

I'm glad I found your blog - I have just bookmarked it on del.icio.us.


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