Do long‐term swap rate and stock price give an impact on Japanese Real Estate Investment Trust market under quantitative and qualitative easing and negative interest rate policy?

Published date01 July 2020
Date01 July 2020
AuthorTakayasu Ito
Do long-term swap rate and stock price give an impact
on Japanese Real Estate Investment Trust market
under quantitative and qualitative easing and negative
interest rate policy?
Takayasu Ito
School of Commerce, Meiji University,
Tokyo, Japan
Takayasu Ito, School of Commerce, Meiji
University, 1-1 Kanda-Surugadai,
Chiyoda-ku, Tokyo 101-8301, Japan.
Funding information
Institute of Social Sciences; Meiji
An increase in stock price has a positive impact on the Real Estate Investment
Trust (REIT) market, but an increase in interest rate has a negative impact
on the REIT market in the regime of quantitative and qualitative easing
(QQE). The wealth effect holds. As for the impact of interest rate, swap rate
of 30 years is larger than that of 20 years in the period of QQE. On the other
hand, all the negative coefficients of stock price are statistically significant at
the 1% level in the period of negative interest rate policy (NIRP). But none of
the negative coefficients of interest rate are significant even at the 10% level.
This result is very rare in the analysis of REIT market not only in Japan, but
also in other countries such as USA. Investors tend to buy REITs to compen-
sate for the sluggish stock market and reduced gains in the fixed income mar-
ket. When the Bank of Japan adopts QQE, normal function of REIT market
is maintained. But after they introduce NIRP, normal function of REIT mar-
ket is lost. This phenomenon is a negative effect of NIRP.
NIRP, QQE, REIT, stock price, swap rate
This paper focuse s on Real Estate Inve stment Trust
(REIT) market in Japan under the non-traditional differ-
ent monetary policy regimes. The Bank of Japan (BOJ)
introduces quantitative and qualitative easing (QQE)
on April 4, 2013. They introduce negative interest rate
policy (NIRP)on January 29, 2016. They introduce
yield curve control (YCC)on September 21, 2016
while maintaining NIRP. They indicate that the target
of the 10-year Japanese Government Bond (JGB) yield is
around 0%.They strengthen the framework for contin-
uous powerful monetary easing while maintaining NIRP
and YCC.
The purpose of this paper is to analyze the impacts of
stock price and long-term interest rate on REIT market
under the non-traditional monetary policy regimes,
namely QQE and NIRP. As for stock price, Kapopoulos
and Siokis (2005) mention that one of the mecha-
nisms for interpreting the relationship between invest-
ment in real estate and stock is the wealth effect.Ito
(2013, 2016, 2018) gets a conclusion that returns on
REITs are highly correlated with stock market returns
in Japan.
As for interest rate, Chen and Tzang (1988) support
the propositio n that interest rates are a significant fac-
tor in REIT prici ng.Ito (2013, 2016, 2018) shares the
same results as Chen and Tzang (1988). These results
Received: 27 August 2019 Revised: 31 October 2019 Accepted: 14 November 2019
DOI: 10.1002/jcaf.22431
J Corp Acct Fin. 2020;31:1519. © 2019 Wiley Periodicals, Inc. 15

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