In 2022, buying a prime Tokyo office came with a generous safety margin: The property yielded more than 300 basis points above a 10-year Japanese government bond (JGB). That cushion has now all but gone. After years of near-zero rates, the 10-year JGB yield has climbed to around 3 percent, its highest in three decades, as inflation expectations have firmed. Oxford Economics expects the Bank of Japan (BOJ) to raise its policy rate to 1.75 percent by April 2027.
Property pricing has not adjusted. Cap rates have barely moved, so the gap between prime Tokyo office yields and the 10-year JGB has shrunk to just 10 basis points to 15 basis points, from roughly 140 basis points as recently as January 2026. Investors today earn almost no additional yield for holding real estate rather than government b
