When one summarizes Japanese real estate, one cannot do so without touching upon the long decline of real estate values from the peak of the Japanese bubble that occurred in the early 1990s. A summary of the long-term history of Japanese real estate returns indicates that, with the exception of 2004 to 2007, Japanese real estate lost value during the past two decades. The obvious question then becomes whether such a period was the only period when investors in Japanese real estate made money. The answer is clearly: “No.” Investors were making money even with losses in real estate value.

AFTER THE BUBBLE BURST

From 1997 to the early 2000s, significantly high returns, well north of 20 percent IRR, were made for investors both from Japanese loan assets, many of which were collateralized by real estate. The “Japanese Real Estate Returns” graph on page 14 shows the breakdown of income and capital returns from Japanese real estate, and we can see that it provides cou