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Japan investors turn to Reits as inflation play

Published on Jun 12, 2014 10:37 AM

TOKYO (Reuters) - Yield-hungry investors have been betting that Japanese real estate investment trusts will pay off as asset prices rise and interest rates remain stable, with the instruments growing in popularity among both retail and institutional investors.

The Tokyo Stock Exchange Reit Index pushed to 13-month highs this month, and has risen around 3 per cent so far this year, helped by the introduction in January of the Nippon Individual Savings Account (NISA).

The tax-break facility was set up to give Japanese retail investors incentive to move their funds to other assets from historically low-earning saving accounts, whose cash value erodes as the Bank of Japan slowly moves closer to meeting its 2 per cent inflation target.

"People have started realising inflation is really coming,"said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo, to explain Reits' appeal. "I think it's an inflation hedge," he said. "This kind of fear is pushing some money into higher-yielding assets instead of just bank deposits."

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