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Financials

REFILE-UPDATE 2-Japan property shares jump on BOJ plan

(Corrects Mitsubishi Estate’s stock code in first paragraph)

* BOJ move likely to accelerate property market recovery

* BOJ’s asset-buying could fuel REIT sector M&A

* Tokyo Stock Exchange’s REIT index jumps to 5-month high (Adds details, background)

By Mariko Katsumura

TOKYO, Oct 6 (Reuters) - Mitsubishi Estate 8802.T and other Japanese property stocks jumped on Wednesday as investors bet the central bank's surprise plan to buy assets including real estate investment trusts would help spur on the industry's recovery.

Further consolidation in the country’s 3 trillion yen ($36 billion) REIT market is also expected if the Bank of Japan pours money into selective REITs with financial stability.

REITs, corporations that pool investor funds to buy real estate, have lost about two-thirds of their value since peaking in May 2007 as the global credit crunch made it harder for them to raise funds to purchase properties for growth.

But the Bank of Japan’s plan to set up a 5 trillion yen ($60 billion) fund to buy a wide range of assets including REITs, along with cutting benchmark interest rates to virtually zero, has brought “extremely positive” support to Japanese REITs, said Daisuke Seki, CEO of IB Research and Consulting, a REIT consultancy.

“REITs are seeing an increasingly positive business environment because fund-raising is becoming easier and now, investors are assured that the government will be pumping money into the (REIT) market,” he said.

Seki said the BOJ’s move could also accelerate mergers and acquisitions in the country’s REIT market if the central bank is seen targeting mainly REITs with bigger assets or better financial health.

Shares of Mitsubishi Estate surged 4.2 percent, and the real estate sector's subindex .IRLTY.T also rose 4.2 percent.

Among REITs, Nippon Building Fund Inc 8951.T gained 5.2 percent, Japan Real Estate Investment 8952.T jumped 6.4 percent and Japan Prime Realty Investment Corp 8955.T rose 1.2 percent.

That helped the Tokyo Stock Exchange's 36-member REIT index .TREIT rise 1.2 percent to its highest close since May 6.

Through the Bank of Japan’s 5 trillion yen fund announced on Tuesday, the central bank plans to allocate about 3.5 trillion yen to buy government debt and treasury bills, and the remainder to purchase other assets. [ID:nTOE69305D] [ID:nTOE69405K]

BROADER IMPACT

To counter a tighter lending environment and falling property prices, Japanese REITs last year began actively pursuing mergers and acquisitions as weaker players seek partners for survival.

The industry consolidation, along with greater willingness among banks to offer loans, has helped REITs improve their financial health and buy properties in the past year.

Japanese REITs had acquired properties worth a total 366 billion yen in the six months to June, more than double the figure a year ago, with more transactions expected towards the end of this year, according to a Barclays Capital report.

The BOJ’s latest move is also likely to support Japan’s property market as a whole, said SMBC Friend Securities Research Centre analyst Masao Bamba.

“It’s not that the government will directly buy properties, but the fact that they will pump money into the REITs and help maintain their cash status means that property transactions in general will be activated. REITs are key vehicles in property transactions,” said Bamba.

“The news came also when the (property) market was heading for a recovery with easier access to banks’ lending. It’s positive for the overall property market,” he said.

Betting on a recovery in Japan’s property market, investors from the United States to Singapore are already on the hunt for real estate in Japan with over $2 billion in deals cemented since late last year and more in the offering. [ID:nTOE68207P] (Reporting by Mariko Katsumura; Editing by Chris Gallagher)

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