BoJ to Maintain Accommodative Policy; Watching Real Estate Prices

In parliamentary testimony, Bank of Japan Governor Toshihiko Fukui reiterated the bank's gradualist approach to raising interest rates. He also said land price gains "(do not yet) warrant concern of excessiveness." The BoJ voted unanimously last week to hold its benchmark rate at 0.5%. A closely watched land price report published last week shows some patches of double-digit gains in metropolitan commercial land in 2006, with an 8.9% increase overall for Tokyo, Osaka and Nagoya. Residential land prices rose 2.8%, for the first nationwide increase in 16 years. Fukui said, "Rising land prices won't automatically prompt a rate increase," but noted the BoJ is monitoring prices. Economists have mixed reactions whether rising land prices will force the BoJ to raise rates. Finance Minister Koji Omi stated last week the gains are not a signal of another bubble emerging. He commented yesterday that rate decisions are the BoJ's responsibility, but The Wall Street Journal says he "hinted that higher interest rates aren't welcome."

Sources: Bloomberg, The Wall Street Journal
Commentary: BoJ Holds at 0.5%, Yen Weakens, Nikkei Gains • Reflation and Global Trade Growth: Japan's Recipe for Winning Stock Picks • James Grant's Long Case for the Yen
Stocks/ETFs to watch: ORIX (IX), Mitsubishi UFJ Fin. Grp. (MTU), Mizuho Fin. Grp. (MFG), Nomura (NMR), NIS Grp. (NIS). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF), CurrencyShares Japanese Yen Trust (FXY)
Related: Bank of Japan Feb. 20-21 Monetary Policy Meeting Minutes [pdf]

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[scott146:]

Any price gains in Japanese residential real estate will be short-term; as population projections through 2050 have Japan's population shrinking 23% due to an aging population and low birthrates.

2007 Apr 02 04:00 PM