Investors long accustomed to cheap financing in Japan are now confronting a policy shift. The Bank of Japan lifted its policy rate to 75 basis points, ending a decade of zero‑interest support. That change forces lenders to price debt higher, prompting a reassessment of underwriting standards across office, retail and logistics portfolios.

Despite tighter funding, two forces keep asset prices from collapsing. A surge in domestic capital inflows, spurred by pension funds and insurers seeking yield, continues to back transactions. At the same time, rental growth outpaces inflation in major cities, reinforcing cash‑flow expectations and allowing landlords to sustain higher valuations. These dynamics force investors to recalibrate risk‑return matrices, as higher financing costs erode projected yields.

Analysts warn that the new cost structure could narrow spreads on leveraged deals, especially for foreign investors used to low‑cost yen financing. Yet the resilience of pricing suggests the market may absorb the shift without a sharp correction. For now, underwriting teams are tweaking debt‑service ratios while monitoring the BoJ’s next policy cue.

Equity managers note that Japanese REITs have maintained dividend yields above 4%, attracting income‑focused funds despite the rate hike. The combination of robust rent growth and domestic funding depth may keep price compression limited, but any further tightening could pressure cap rates and trigger a re‑pricing cycle across the sector.