- With the economy already under pressure following the consumption tax hike of October 2019, the COVID-19 crisis has created a perfect storm for Japan. The one-year postponement of the Tokyo Olympics has further dampened market sentiment for 2020, though it is far more welcome than an outright cancellation.
- Cap rates across sectors other than hospitality and retail should hold in place for the time being as transaction activity comes to a halt.
- Compared to other nations, Japan has less exposure to overseas demand including trade and inbound tourism, lending some insulation from border closures.
- Listed Japanese firms hold JPY500 trillion in cash and cash equivalents, whilst households are less indebted than during the lead up to the global financial crisis, and less so compared to international peers.
- The sectors with the most resilience to the COVID-19 pandemic, in order, are 1) residential, 2) logistics, 3) office, 4) retail, and 5) hospitality.
Japan’s conservative approach to pay dividends
With the Tokyo Olympics in sight, Japan entered 2020 with high hopes and sound fundamentals. Sadly, the COVID-19 pandemic has dashed these hopes and presents a major challenge to the domestic property market. Certain sectors are better positioned to weather the storm, however, and frugality among Japanese corporates and households should offer an additional buffer to the domestic market.
Savills Research & Consultancy