Traditionally conservative Japanese investors are eyeing higher-yielding investments such as global infrastructure and real estate after a prolonged period of low economic growth and yields, according to analysis from Australia-based AMP Capital.

With AUM of about 500 trillion yen (US$4.4 trillion), the Japanese institutional investment market “represents a substantial source of capital for investment into real assets across the globe”, the company says in a statement on Tuesday (April 11).

According to Toshiaki Yamashita, Japan-based managing director of AMP Capital, Japanese institutional investors particularly prefer assets that are lower risk and generate low- to mid-single digit yields.

He says Japanese retail and institutional investors are broadly seen as conservative, with more than 50% of financial assets in deposits and only about 5% in investment trusts.

“This allocation may change, however, as government policies encourage investors to shift from deposits to investments, investors begin seeking higher-yielding assets after a prolonged period of low growth, and an easing of institutional investors’ aversion to risk,” Mr. Yamashita says in the statement.

After decades of low growth and limited domestic opportunities, “it’s a natural step for Japanese institutions to begin deploying capital to global infrastructure projects, which is a positive development for liquidity and will continue to support the globalisation and maturation of this market”.

In addition, the fact that Japan’s institutional investment market – comprising corporate pensions, public pensions and financial institutions – are almost universally arranged as defined-benefit schemes, underscores the need for consistent income streams that may be offered by real assets investment, the company says.

It expects infrastructure debt to be one of the beneficiaries of the growing Japanese appetite for different investments.

Full Content: Asia Asset

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