"It was interesting to read your comments about the Japanese REIT index as I have long considered it an area of great value, but I have yet to find an attractive investment vehicle. I do not think I can shed any additional light on the JREIT market other than to say that it is important to remember the short history of this market. When JREITs first appeared (less than 10 years ago, I think) yield starved Japanese investors jumped aboard and before long many REITs were trading at premiums of up to 50%; a REIT inspired mini Tokyo condominium boom (described by some as a new bubble) took place; supply increased and some companies took on too much leverage and got into trouble. The JREIT index also peaked at a time when it looked like Japan might overcome deflation, but deflation is worse than ever now.

"Some of the larger REITs with prime Tokyo real estate and sound finances look good value to me, but an end to deflation might be needed to give the market a real boost and that might depend on politics. There is an interesting battle going on at the moment between those who want to print more money( the Finance Ministry) and those who do not mind printing a little, but not too much (the BOJ):

Kan's Rift With Shirakawa May Hamper Deflation Battle And more recently: Kan Says BOJ Hasn't Told Him of Monetary Easing Plans


"My money is on the BOJ for now.

"Thanks again for the excellent work you and David do. I never miss a day."

Eoin Treacy's view Thank you for your kind remarks and this informative email contributed in the spirit of Empowerment Through Knowledge.

The strength of the Yen remains a headwind for the competitiveness of Japan's export sector and the currency will need to weaken if Japan's economy is to successfully exit the current slump. As we have often said, due to the competitive forces of the global economy, no country wants a strong currency, but some need a weak one more than others. Japan falls into this latter category and it seems inevitable that the central bank will eventually be compelled to do whatever it can to fight additional deflationary pressures.

The Japanese REIT sector certainly looks appealing, having for the most part bottomed and offering globally competitive yields. For foreign investors, the risk remains that the base formation process takes more time or that the Japanese are successful in combating Yen strength so that the yield is diluted in foreign currencies. If the Collective know which of these REITS have the soundest balance sheets and hold prime Tokyo property, I would be happy to add them to the Chart Library, if not already present.

The Yen Trade Weighted Index encountered resistance last week below 130 but would need to sustain a move below 123.50 to break the short-term progression of higher reaction lows and indicate a return to supply dominance.

The US Dollar failed to sustain the break below ¥88 in November and had rallied to ¥93 by January. It pulled back over the last couple of months but has found support in the region of ¥88 on two separate occasions and rallied from that area again last week. A sustained move to new lows would now be required to limit scope for further higher to lateral ranging.

The Euro broke downwards from the 10-month range against the Yen in January and retested ¥120 late last month. It rallied back into the overhead short-term range on Friday and a sustained move below ¥120 would now be required to question scope for further higher to lateral ranging.