Japan’s economy picked up in 2H 2024, driven by private consumption, capital expenditure, and government spending. Tourism boomed with record foreign visitor spending, while tight labour markets fuelled wage growth. Inflation remained elevated but is projected to moderate. Growth is forecast to slow amid US trade tensions, though the longer-term outlook is supported by accommodative monetary conditions and ongoing efforts to boost tourism and corporate governance.

In 2024, Japan’s housing market was supported by tight supply, strong demand from high-net-worth individuals, foreign investors, and net migration—especially in Tokyo and Osaka. Hospitality assets thrived on record visitor stays, with hotel rates and revenues hitting new highs. Retail rents rose in prime city locations, supported by tourism and low vacancies. Strong fundamentals suggest continued resilience across these sectors.

Japan’s investment volume surged 63% to JPY5.5trn in 2024, driven by strong demand, weak yen, and low funding costs. Cap rates were stable or tightened despite rising bond yields. Hotels and regional cities drew capital due to higher yields and positive growth prospects. Drivers like strong tourism, liquidity, restructuring, demographics, and positive yield spreads remain compelling. Investors are expected to focus on quality assets and income stability. However, prolonged market volatility or weaker leasing conditions could lead to more selective investor behaviour in the short term.

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