On March 19, 2024, the Bank of Japan decided to raise its policy rate from -0.1% to 0-0.1%. This is the first rate hike in 17 years since the Bank last raised rates in 2007, and the first rate hike in 8 years since negative rates were introduced in 2016.
In general, rising interest rates put downward pressure on the prices of risk assets, including equities. However, after the Bank of Japan officially announced that it would raise interest rates, stock prices actually rallied. As the market had already priced in the rate hike, and the BOJ has made a comment that "the accommodative financial environment will continue for the time being," the market took the major event in stride without any major disruptions. It can be said that the communication between the Japanese monetary authorities and market participants was well done, and this is seen as positive in terms of increased confidence in the Japanese market.
The BOJ has made the prospect of stable 2% inflation a condition for raising rates. On the other hand, the Bank does not expect to raise rates quickly, so it is sending a message that inflation will remain at around 2% and interest rates near zero for some time to come.
At Cadira Capital Management, we consider price and interest rate trends when forecasting fundamental trends for individual companies, but we do not make investment decisions based solely on macroeconomic trends. So, given a combination of moderate inflation and near-zero interest rates, which companies are most likely to do well?
One candidate is the real estate industry. While rising interest rates are detrimental to real estate companies through two channels: increased borrowing and higher discount rates, if the benefits of higher rents outweigh these detriments, corporate value can be expected to increase. On the other hand, rising interest rates and higher material and labor costs make it more difficult to develop new properties, which leads to a tighter supply-demand balance for leases, creating a situation that makes it easier to increase rents. The real estate industry tends to compete to develop new properties, but if prices and interest rates were to rise, we would expect to see a shift in emphasis to the use of existing properties. This will be positive for the global environment in terms of reduced resource consumption and positive for shareholder value in terms of increased free cash flow. If the company can demonstrate sustainable growth by increasing the value of its assets and replacing them appropriately, the capital market will view this positively.
As telecommuting systems become more common, the importance of gathering in an office to communicate is also attracting more attention. Under such circumstances, the demand for offices with good accessibility and an atmosphere that makes people want to come to work will increase. Therefore, large real estate companies with prime properties in central Tokyo deserve special attention.
Learn More
2026/7/9
The Impact of AI's Evolution on Asset Management
AI Adoption: Rapid Spread, Gap in ResultsThe evolution of AI is bringing about a structural shift in...
2026/6/9
The Need to Reassess Risks considering Extreme Weather
Growing Cost of Extreme Weather Risk MitigationIn May 2026, CDP (Carbon Disclosure Project, an NGO p...
2026/4/17
The Impact of Large-Scale Military Operations Against Iran
Japan’s Crude Oil and LNG ProcurementFollowing the large-scale military operation conducted by the U...
2026/3/13
A Review of the Lower House Election Results and Key Themes Ahead
Lower House Election ResultsIn the February 2026 general election for the House of Representatives, ...
2026/2/13
Japan’s Evolving Discount Rate — Re-examining Corporate Valuation in a Rising Interest Rate Environment
Interest Rate Trends and BackgroundLong-term interest rates in Japan have been rising. Comparing Jan...
2026/1/19
Further Revision of Governance and Shift in Management Resource Allocation: Expanding the Scope of Growth Investment in the Japanese Stock Market
Review of 2025The Japanese equity market in 2025 experienced a broadly strong upward trend. The TOPI...
2025/12/19
AI-Powered Threats: How Cybersecurity Became a C-Suite Priority
Cybersecurity DamageIn recent years, cybersecurity incidents have continued to rise sharply. Accordi...
2025/11/21
Japan's First Female Prime Minister: The Takaichi Administration and New Investment Opportunities
Japan’s First Female Prime MinisterIn October 2025, Sanae Takaichi was elected Prime Minister of Jap...
2025/10/31
Defining the Boundaries of Sustainable Investing in an Era of Expanding Defense Spending — Cadira’s Investment Policy
In recent years, rising geopolitical tensions have heightened the importance of the defense industry...
2025/8/15
Staying Grounded Amid Political and Trade Uncertainty in Japan
At Cadira Capital Management, we believe that while macro-level developments such as politics and tr...
2025/7/25
Gender Reform as a Catalyst: What Sustainable Investors Should Watch in Japan
On June 11, the World Economic Forum released its Global Gender Gap Report 2025 (*1), in which Japan...
2025/5/8
Agility Matters More Than Ever—The Impact of U.S. Tariff Policy and Implications for Japanese Equities
When the environment is highly uncertain, investors cannot rely solely on a company’s current busine...
2025/4/18
Governance Reforms and the Future of Japan’s Listed Subsidiaries: Unlocking Value through Transparency
Efforts to enhance corporate governance in Japan continue to advance steadily. The Tokyo Stock Excha...
2024/11/29
Trends in the US Housing Market
Housing was one of the key issues of the 2024 U.S. presidential election. Skyrocketing home prices a...
2024/11/22
On Japan’s House of Representatives Election on October 27
Elections to the House of Representatives were held on October 27. The Liberal Democratic Party (LDP...
2024/10/18
On the 2024 LDP Presidential Election
On October 1, Shigeru Ishiba was sworn in as Prime Minister of Japan. Prior to this, on September 27...
2024/9/17
August Stock Market Volatility and Subsequent Outlook
The Japanese stock market plunged in the first half of August, with the TOPIX posting historic decli...
2024/5/17
On the Recent Weakening of the Japanese Yen
The yen-dollar exchange rate reached 160 yen on April 29, 2024. This is the yen's weakest level in 3...
2024/4/26
On the Bank of Japan's Rate Hike
On March 19, 2024, the Bank of Japan decided to raise its policy rate from -0.1% to 0-0.1%. This is ...
2024/2/9
Impact Integrated Value (IIV)
How can we effectively integrate both positive and negative impact when making investment decisions?...
2024/2/2
Positive Impact Assessment
Integration of positive impact in corporate valuation poses significant challenges. For standardized...
2024/1/26
Our Investor Contribution
Engagement is a core activity essential to achieving our mission. It is conducted with the aim of ma...
2024/1/19
Sustainable Companies
The Japanese stock market is in a situation where structural changes are creating new investment opp...
2024/1/12
Structural Investment Opportunity
At Cadira Capital Management, we believe that investor engagement will bring about a structural chan...
2023/12/1
Our Investment Philosophy
At Cadira Capital Management, we believe that "investing for sustainability" will deliver superior r...
2023/11/8
Our Views on Geopolitical Risks
The conflict between Israel and Palestine erupted on October 7th, raising concerns about geopolitica...
2023/10/24
Perspectives on Equity Investing in a Declining Population
"Is there any reason to invest in countries with declining populations?"This is an unavoidable quest...
2023/10/9
Our Views on Exchange Rate Risks
The Bank for International Settlements (BIS) announced that the real effective exchange rate (*1) fo...
2023/9/25
Our Bottom-up Approach to Listed Equity Impact Investing
At Cadira Capital Management, we take a unique bottom-up approach to impact investing in public equi...
Important Notice
The content of this website has been prepared by Cadira Capital Management Co., Ltd. (“CCM”) for informational purposes only to professional investors who are expected to make their own investment decisions without undue reliance on such content. The views and strategies described may not be suitable for all investors. Under no circumstances is it to be used or considered as legal or investment advice, a recommendation to buy, an offer to sell, or a solicitation of an offer to buy or sell securities and investors should be advised to consult their own stockbroker, accountant, solicitor, independent financial adviser, or other professional adviser for advice. We accept no liability whatsoever for any direct or consequential loss arising from any use of this content. The information is intended solely to report on investment strategies and opportunities identified by CCM. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. CCM and its affiliates do not warrant the accuracy or completeness of any of the information or data contained herein. References to specific securities and their issuers are for illustrative purpose only and are not intended to be, and should not be interpreted as investment advice or, a recommendation, offer or solicitation for the purpose or sale of any financial investment. This content does not constitute tax advice and as such investors should be advised to consult their own tax advisers regarding the tax consequences of their investment activities. Investment return and principal will fluctuate, so that a client's initial investment may increase or decrease. Investing in securities markets involve risks like those arising from stock and bond markets, currency exchanges rate and interest rate volatility. No part of this content may, without CCM prior written consent, be copied, reproduced, or published by any recipient for any purpose. Past performance is not indicative of future performance.
