20000327

Japan to securitise state-owned land parcels

TOKYO: Japan's Ministry of Finance (MOF) is planning to securitise small parcels of state-owned land in a financial option that could pay higher interest rates than government bonds, a Japanese financial daily said on Sunday.

The move comes just days after figures showed Japanese real estate prices dropped for the ninth year in a row last year, with residential land prices falling 4.1 percent and commercial property prices down 8.0 percent.

A specially established company will buy the land from the government and issue asset-backed securities, with the minimum purchase set at 1 million yen ($9,322), the Nihon Keizai Shimbun newspaper said.

The MOF plans to offer the first issue in an auction for public subscription in June, and is targeting around 100 billion yen from the sale of such securities through brokerages and other channels, it said.

Asset-backed securities are high-risk, high-return investment vehicles that can fall in value if land development projects fail.

The MOF hopes the securitisation will attract some of the vast pool of time deposits due to mature from the postal savings system over the next couple of years and help to reinvigorate the property market.

The MOF is now planning to sell land at around 15 sites in Tokyo, most with an area of more than 1,000 square metres. The development projects will each cost around 10 billion yen.

A securitisation project carried out by Tokyu Land Corp 8815.T last year offered a yield of four percent a year on a five-year redemption period, a much higher return than on comparable time deposits and government bonds in a country where interest rates are near zero.

Japan's land prices have been in a relentless slide since the bursting of a late-1980s asset price bubble and the onset of an economic slump that brought Japan's worst recession in half a century.-Reuters