Recent trends in cross-border real estate investment into and out of Japan highlight the market’s uniqueness and its structural impediments. Outbound investment from Japan is noticeably absent compared to its Asian neighbours, and Japanese pensions have a tendency to squeeze allocations to alternative assets, especially real estate. What do these trends look like under a microscope, and what are the possible solutions for normalising identified market patterns?

The Japanese real estate market has experienced an upswing since the beginning of 2013, with J-REITs raising a record amount of capital in the year. In this new environment, overseas investors have paid more attention to the Japanese market, but this has yet to translate to a substantial increase of inbound cross-border investment to Japan.

On the outbound side, Japan is not a major player as a capital source for cross-border real estate investment. In fact, if anything, the inward-looking tendency of domestic