Japanese real estate companies have been in the news lately, thanks to the surging levels of Japanese investment in American real estate. In fact, Japanese investors bought nearly $7.5 billion of American real estate in 2023, almost tripling the amount invested just one year before. It isn't just American real estate either; Japanese companies are making big bets in other markets like London and Toronto.

So, what is fueling these bets? For a number of reasons, including low consumer spending and a shrinking population, Japan has not been experiencing high inflation in the last few years like most other advanced economies in the world. This has allowed them to keep their interest rates near zero even as the Federal Reserve has pushed America's rates to over 5 percent. Low rates have given Japanese real estate firms access to cheap capital and have pushed investors to look for more attractive yields than can be found at home. After the Japanese real estate company Mori Trust purchased half of Manhattan's skyscraper 245 Park Avenue last June, the CEO explained, "Our strength is that we have a good financial base. Even for investments of ¥100 billion, we can raise our own funds without gathering investors and quickly execute."

But now, that period of low Japanese interest rates is coming to an end. Last October, the Bank of Japan ended its 1 percent cap on its treasury bond rates, effectively untethering its interest rates. Thanks to the financial position the country is in, it doesn't look like rates will jump any time soon, but Japanese investors might not want to wait around to find out.

This isn't the first time that the Japanese have invested heavily in American real estate. In the 80s, Japanese companies were buying up trophy American real estate assets. At the time, they also had lower interest rates than most other countries. When the Savings and Loan crash hit, many of those investments lost money, partially causing a weak economic period in Japan known as "the lost decade."

Culturally, Japanese investors and American commercial real estate are a good fit: stable, robust, and long-term. But there is more to it than that. The diverging economies of the U.S. and Japan help create an arbitrage that might allow Japanese investors to be the first in the door on a period of good buys. But it also could be another case of cheap money needing to go somewhere. And if the real estate market crashes like it did last time Japanese investment in the U.S. was high, it could have a similar effect on the Japanese economy.

✍️ Fed notes: Minutes from the last Federal Reserve meeting have been released, pointing to signs of diminished risk of renewed inflation. As good as that news is, it's hampered by other points of discussion, such as "an unusually elevated degree of uncertainty" about the economic outlook.

🏠Home boss: A survey done by HR technology provider Checkr showed that, amongst their sample, the managers and bosses were more interested in working from home than lower level employees.