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BOJ Faces Tough Choice With REIT Buying (Reuters)

BOJ Faces Tough Choice With REIT Buying (Reuters)

March 8, 2021 – The Bank of Japan (BOJ) is under pressure to relax rules for its purchases of real-estate investment trusts (REITs) to enable it to keep buying the asset at the current pace, highlighting the challenges of sustaining its massive stimulus programme.

The fate of the rules, which limit the central bank’s ownership of individual REITs to a maximum of 10%, could be discussed at the BOJ’s review of policy tools at its March 18-19 meeting, with an industry estimate putting nearly a third of its REIT holdings at close to the permissible threshold.

Given Japan’s fairly small REIT market, the BOJ may struggle to keep buying the asset unless it relaxes the ownership rule or accepts REITs with lower credit ratings, analysts say. The BOJ currently buys REITs with ratings of AA or higher.

“There’s a good chance the BOJ could tweak the rules for its REIT buying at the March review,” said Koji Ishizaki, senior credit analyst at Mizuho Securities.

There is no consensus yet within the BOJ. Some officials see a tweak in rules as a possibility to ensure the BOJ can keep buying the asset smoothly. But others are cautious of taking on more risky assets, said three sources familiar with the central bank’s thinking.

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