Friday, March 27, 2009

The Debts of the Lenders: Japanese Politicians Mull Real Estate Bailout

Japanese politicians continue to destroy the yen's safe haven status through highly inflationary actions. Their latest proposed gamble involves the purchase of up to 1 trillion yen, or roughly $10 billion, of commercial real estate held by domestic REITs through cheap loans and the establishment of a fund to acquire properties.

The ruling coalition hopes to have Japan Post Bank invest in the proposed fund by purchasing bonds issued by the DBJ, Nikkei [the Japanese business newspaper] said.

The postal bank, a unit of the government-owned Japan Post Holdings Co., is not allowed to directly take stakes in investment funds.

Other investors in the fund would include such private-sector companies as real-estate developers, as well as the Organization for Promoting Urban Development and other public institutions. The ruling coalition aims to encourage commercial banks to make loans to the fund, the news report said.

The fund would acquire real estate held by REITs, which then would use the proceeds they pocket to reinvest in other properties, said Nikkei.

Sounds promising right? Not really when you compare it to the black hole of US bailouts (TARP, TALF, etc.). And those have been sterling successes!

Could this lead to another "bear market rally"? Maybe.

To answer that question let us look at history. Attached you will see how the Nikkei reacted after similar bailout(s) attempts in the early 2000s. The results were not pretty.


Erik said...

The Great Flaw of the Giethner plan

In Debt We Trust said...

Thank you Erik.

Blog Archive