Kiyohiko G Nishimura: Population ageing, macroeconomic crisis and
policy challenges
Speech by Mr Kiyohiko G Nishimura, Deputy Governor of the Bank of Japan, at the
75th Anniversary Conference of Keynes' General Theory, University of Cambridge, Cambridge,
20 June 2011.
* * *
1. Introduction: macroeconomic crisis and long-run fundamentals
I am honored and thrilled to participate in this conference commemorating the
75th anniversary of the publication of Keynes' General Theory. In particular, being an
academic-turned-central banker, the opportunity to participate in this panel on policy
responses to macroeconomic crisis, is a great privilege. The task before me, as a central
banker, is to describe the responses of central banks to the macroeconomic crisis of 2008,
especially their "unconventional policies". In addition, I hope to add some color to our
discussion on the consequences of the financial crisis by drawing on the Japanese
experience, which suggests a long and winding road in the post-crisis period.
Having set the parameters of my presentation, I would like to start my presentation by
expressing my uneasiness over the smugness that I sense among commentators on macro
theory and policy. Very often, I hear that the worldwide asset market bubbles and resulting
macroeconomic crisis of 2008 was due to financial excess, and therefore macroeconomic
fundamentals have not changed, either before the crisis, or since. Financial excesses in the
bubble years accumulate on the balance sheets of those who leverage heavily, and the
prevalence of such problems may become a drag on economic recovery for some time, but
eventually time will heal the wounds and everything will be back to normal. In other words,
the issue at stake is maintaining financial stability, and all that is required of economic theory
and policy is to supplement their theoretical and policy toolkits by adding measures to check
financial excess before it builds up and to control systemic damage when bubbles burst.
Lord Keynes, who laid the foundations of macro theory and policy three-quarters of a century
ago would most certainly have challenged such a view, if he were attending this conference.
In fact, just one year after the publication of the General Theory, in a speech whose theme
still resonates today, he has alluded to the issue at the root of my uneasiness1. So let me
stand on his shoulders and explain.
There is a remarkable correlation between asset market bubbles that cause macroeconomic
crisis and demographical changes. In Figures 1.1 and 1.2, I show Japan, the United States,
Spain and Ireland as examples of countries affected by the financial crisis2. In these
countries, the formation of bubbles in asset markets seems to coincide with a growing
inverse dependency ratio, which is the ratio of the working population to the non-working
(dependent) population. Meanwhile, busts in asset markets seem to happen when the
inverse dependency ratio declines noticeably.
Moreover, there also seems to exist a relation between asset market bubbles and
demographical changes at the international level, which, borrowing from Lord Keynes, could
be described as the demographic consequences of globalization. In the past decades, once
non-market economies such as Russia and China were folded into the global market
economy. As a consequence, the working population of the "market-economy world," which
once consisted largely of the so-called industrialized economies, has expanded dramatically,
since the aggregate working population of China and others is much larger than that of the
industrialized economies. Against this background, we witnessed a truly global asset market
boom, synchronously involving many regions, and which culminated in the crisis of 2008.
Real property prices across a wide area of the globe surged nearly threefold within a decade.
The significant point for us here is that the bubble we have experienced coincided closely
with the turning point in demographic trends. Such demographic perspective casts serious
doubts on the view that little has changed in the fundamental character of the global
economy even after the crisis of 2008. It will form the core of my argument in this
presentation. The perspective directs us to recognize the fact that we are in the midst of a
balance sheet adjustment process after the worldwide financial bubble burst, at a time when
the population is ageing. This is not the balance sheet adjustment of the past, which took
place when the population was young and growing. This is a balance sheet adjustment when
the demography is rapidly tilting toward the old. With the change (though gradual) in
demography, which is one of the long-run macroeconomic fundamentals, between the
pre-crisis and the post-crisis era, macroeconomic policy challenges are also likely to have
changed accordingly.
In Section 2, I consider the acute impact of demography on asset prices. Assets such as
residential property and company shares are stores of value enabling the transfer of
purchasing power from one period to the next, as well as productive resources creating
goods and services. I concentrate on the former characteristic of assets, namely, their role as
stores of value. A simple, rather mechanical overlapping generation model suggests a
correlation between residential property prices and the inverse dependency ratio, which is in
fact found in many of the countries suffering financial crisis. When applied to the
marketeconomy world as a whole, this simple model also suggests that globalization of the scale we
have experienced over the past decades is likely to produce unprecedented increases in
asset prices. Moreover, the example also suggests that the go-go age of asset booms has
passed, and ageing populations imply that the rate of return on assets will be substantially
smaller in the post-globalization era than in the globalization era. In fact, it will be even
smaller than in the pre-globalization era.
In Section 3, I begin by examining the process of balance sheet adjustment after the bursting
of a bubble and when the population is ageing, juxtaposing Japan in the 1990s and the
United States in the 2000s. Then, I summarize the consequences of severe, prolonged
balance sheet adjustment under population ageing. I identify the multi-faceted challenges
central banks may face as a consequence of carrying out balance sheet adjustments under
population ageing. There I explain unconventional policies to tackle these problems, taking
the Bank of Japan's efforts as an example. In the final section, I will give some thoughts on
the population issue in the tradition of Cambridge, especially with respect to technological
innovation.
2. Background of financial crisis: population ageing and globalization
Population growth and longevity after 1955
Let me first examine the changing characteristics of population dynamics. Table 2.1 shows
population growth estimates for selected countries in selected years, based on the most
recent United Nations population figures. As an illustration, I take the United States, United
Kingdom, Germany, France, Italy and Japan to comprise the Developed area of the
marketeconomy world. I take China and Russia to represent the former communist countries that
have become incorporated into the market-economy world. In this table, they represent the
Emerging area of the market-economy world. Table 2.2 depicts population longevity for the
same countries.
These tables illustrate three facts. First, looking at each country's population growth and
longevity, we see simultaneous declining population growth and increasing longevity. This
implies that many countries face a sizable increase in working-age population up to a certain
point in time, when the population then begins to age rapidly, with no exception, at least for
the countries in this table.
Second, if you compare the size of the Emerging population with that of the Developed, the
Emerging
huge impact of globalization is immediately apparent. In 2005, the area was more
than twice as populous as the Developed. This table illustrates a big jump in the
"marketeconomy world population" when the Emerging is incorporated into the market-economy
world. As is apparent, it is the China factor that drives these dynamics.
Third, however, the incorporation of the Emerging area through globalization does not help
halt the population ageing of the market-economy world. Population growth in the Emerging
area is actually expected to be lower than that in the Developed area.
Conceptual framework: simple overlapping-generation model with pure store of value
Although ageing populations may have a sizable effect on the economy, current
sophisticated mainstream models are not particularly suited to examining the impact of the
brute force of demographic factors, globalization and ageing, on asset prices as stores of
value.3 To tackle demographic factors squarely, I take the other extreme of simplicity.
Specifically, I use a skeleton form of an overlapping generation model, in which there is only
one type of asset of no intrinsic value, and this serves as a pure store of value.
As in familiar overlapping generation models in introductory economic theory, I assume
people live in two periods, and that there are the Young and the Old at any point in time. The
Young produce one unit of non-storable consumption goods, which are the sole goods in this
world. There is only one type of asset, called Pure-Store-of-Value (PSV) assets. They yield
nothing and thus have no intrinsic value, but they are the only stores of value in this world.
That is, PSV assets are the only means to save, or to transfer purchasing power from one
period to the next. The quantity of PSV assets is fixed and constant over time. People
accumulate PSV assets in exchange for the consumption goods they produce when they are
young, and trade them for consumption goods when they are old.
To make the analysis even more transparent and mechanical, I make the extreme
assumption that the Young are constrained not to consume but to save. Thus, unlike usual
overlapping generation models, there is no utility maximization of the Young: the Young
produce the consumption goods, trade them with the Old to get PSV assets, and save them
for the next period.
In this economy, there is only one market, in which the consumption goods produced by the
Young are traded for PSV assets possessed by the Old. The supply of consumption goods is
equal to the number of young people, since one young person produces one unit of the
consumption goods and, by assumption, she does not consume it. The supply of PSV assets
possessed by old people is fixed by definition. Thus, the purchasing power of PSV assets, or
the price of PSV assets in terms of the consumption goods is:
Price of the PSV Asset = (Number of the Young) divided by (Quantity of the Assets)
Since the quantity of PSV assets is fixed, the change in the number of the Young determines
the change in the price of PSV assets. Consequently, the PSV asset price inflation rate is:
PSV Asset Price Inflation Rate = (Ratio of the Young to the Old Population) - 1
This model is admittedly simplistic: specifically, it is stripped of consumption and saving
decisions (optimization), capital stocks (including human capital), and technological progress.
More realistic models may bring smoother generational consumption/ rate-of-return paths
through capital stock formation, and so on4. However, the demographic factors explained in
this simple example are brute and forceful, and it seems unlikely that incorporation of
intertemporal optimization and other adjustment processes would completely undermine the
basic results.
Closed economy: inverse dependency ratio and "boom and bust" in property markets
Let me now apply this model to the real world. Assets such as residential and commercial
property, equities and even art objects are essentially all "long-term stores of value," that is,
means of transferring purchasing power from the present to the immediate as well as distant
future. And among these long-term stores of value, residential property is usually the most
popular in many countries for various reasons including preferential tax treatment. So if the
model has a reasonable explanatory power, we expect movement in real residential property
prices5 to coincide with that of the inverse dependency ratio (i.e., ratio of working-age (15-60)
population to the rest), which corresponds to the ratio of the young working population to the
old non-working dependent population in the simple OLG model, abstracting from child-age
population.
Figure 2.1 shows real land prices in Japan (national average, for all purposes) juxtaposed
with the inverse dependency ratio from 1955 to date. This figure shows, firstly, that the
relative abundance of young people coincided with sharply higher property prices. Secondly,
in contrast, the relative abundance of old people seems to be leading to lower property
prices. It should be noted here that declining property prices greatly aggravated the balance
sheet adjustments of Japanese corporations, as will be explained later. The US case is
illustrated in Figure 2.2. In the United States also, an increasing inverse dependency ratio
seems to have coincided with the property bubble. After the bubble burst of 2007, property
prices seem to have followed the long run movement of the inverse dependency ratio,
although it would be premature to draw any conclusions from this at the moment.
How about the European experience? Figure 2.3 shows the situation in Ireland. A sharp
ascent in property prices coincided with an increase in the inverse dependency ratio, and
then we see a free fall. This free fall suggests a painful adjustment is coming. Spain is shown
in Figure 2.4. Again, a sharp increase in property prices coincided with an increase in the
inverse dependency ratio, and then prices declined. Germany, having no bubble in 2008, is
shown in Figure 2.5, where property price movement is depicted after 1995, when data are
available. In contrast with Ireland and Spain, property prices in Germany had already begun
to decline in 2010, coinciding with the population ageing that the country has experienced for
some time. Recovery of property markets to the previous peak seems far away in an ageing
society.
Globalization: from exuberance to stagnation in global asset markets
Let me now consider the effects on asset prices of globalization, in particular marketization6
of former communist countries into the market-economy world. To do this, we apply the
simple overlapping generation model just described, as if the market-economy world were
one big economy. Thus, I ignore productivity differences between regions, immigration and
emigration, uncertainty, and in particular, exchange rate adjustments.
I illustrate the possible impact of globalization by using the numerical example of Table 2.3,
which is based on the United Nations population estimates of Table 2.1. To make the
analysis as simple as possible, I take 25 years as a one-generation period postulated in the
overlapping generation model described before. We will consider three periods: the Cold War
(Period 1, represented by 1955), pre-globalization (Period 2, by 1980), and globalization
(Period 3, by 2005). Also, to simplify the analysis but to add a realistic flavor, we take
population numbers of respective years in Table 2.1 as those of the young population.7
These two assumptions lead to the figures in Table 2.3. I also assume that the quantity of
PSV assets is fixed at, say, 100 million in the market-economy world.
Suppose that in the Cold War and pre-globalization periods (Periods 1 and 2), the
marketeconomy world consists solely of the Developed area of six industrialized economies, as
shown in Table 2.1. Then, in Period 1, the market-economy-world Young population is the
same as that of the Developed area, about 473 million. The Old population in the Cold War
period is that of the Developed area, and as a whole they possess 100 million PSV assets.
The Young population trades 473 million units of consumption goods for 100 million PSV
assets that the Old population possesses. Consequently, the price of PSV assets is about
4.73 units of consumption goods in Period 1. A similar situation holds true in the
pre-globalization period, where the price of PSV assets is about 5.90 units of consumption
goods. Consequently, the asset price inflation rate in the pre-globalization period is 0.89%
per annum.
Then, consider globalization. The Emerging area (that is, Russia and China) is incorporated
into the market-economy world in the globalization period (Period 3). I assume throughout a
fixed exchange rate between the Developed area and the Emerging one. Thus, there is one
free worldwide market of consumption goods traded for PSV assets. Like the Young in the
Developed area, the Young in the Emerging area produce one unit of consumption goods,
and sell it to the Old to obtain PSV assets for their retirement. The Old only exist in the
Developed area in the worldwide consumption goods market, since the Old in the Emerging
area have no PSV assets and cannot buy consumption goods in the worldwide market. The
Emerging
Old in the area are therefore ignored in the following analysis. (They are assumed
to be outside of the market-economy world.)
The Young population of the market-economy world is then the sum of that of the Developed
Emerging
and of the area, about 2.14 billion. The Young populations of both regions want to
trade their consumption goods of about 2.14 billion units for 100 million of PSV assets.
Consequently, the price of PSV assets is about 21.4 units of consumption goods in the
globalization period (Period 3), a huge increase from 5.90 in the previous period. The price of
PSV assets is nearly four times higher in the globalization period (Period 3) than in the
pre-globalization period (Period 2), leading to asset price inflation of 5.28% per annum.
The number of young people in the market-economy world, who are saving for future
retirement, increases substantially in the period of globalization. Thus, we have a global
"savings glut," which leads to substantial asset price inflation globally. In the example of
Table 2.3, the asset price inflation rate accelerated substantially, from 0.89% to 5.28%
annually for twenty-five years.
What will happen once the boom is over? Let me extend Table 2.3 to include the
postglobalization period, in Table 2.4. Here the post-globalization period is represented by 2030,
and all population figures are the United Nations population estimates given in Table 2.1.
If we look at Period 4, the post-globalization period, we see that the market-economy world
population will grow by only 0.28% annually from 2005 to 2030. Under my simplified
assumption, the young population in the market-economy world will produce about
2.29 billion units of consumption goods, while there will be 100 million PSV assets. This
means the price of the assets will be about 22.9 units of consumption goods in the
postglobalization period, meaning that asset price inflation decelerates quite sharply. The asset
price inflation of the post-globalization period is a mere 0.28%. In fact, the rate is lower even
than the 0.89% of the pre-globalization period.
Summing up
So far, I have suggested that the brute force of compositional change in population might be
in the background of asset market bubbles and their subsequent bust, especially those which
caused the global macroeconomic crisis of 2008 and after. To close this section, I would like
to draw two observations from this exercise.
the
First, I am not suggesting this demographic factor is cause of the crisis, but pointing out
that this favorable demographic background (increasing inverse dependency ratio) might
have been fertile ground for the excessive optimism that led many economic agents to take a
highly leveraged position to multiply their returns. By the same token, the eventual sharp
reversal of the ratio made resolution of accumulated financial excesses particularly difficult,
resulting in the prolonged, severe balance-sheet adjustment that followed the crisis, and
which is still under way.
Second, the aftermath of globalization is likely to imply a substantial slowdown in asset price
inflation, and ultimately in the rate of return on these assets. Moreover, the
postglobalization-period rate of return is noticeably lower even than that in the pre-globalization
period, because of increased population ageing.
3. Post-crisis world: multifaceted challenges and unconventional policy
Severe and prolonged balance sheet adjustment under population ageing
Let me now consider the post-crisis world. In order to determine the effect of balance sheet
adjustments after the bursting of a bubble, I first clarify who leveraged during the bubble
periods. In Japan, it was the corporate sector, especially small to medium-sized firms, which
for the first time gained access to large banks after the so-called financial liberalization. The
corporate sector's loan-to-GDP ratio increased by 29 percentage points in the ten years
before the bubble burst in 1991. In the United States, it was the household sector that
leveraged, especially in housing. The household sector's housing loans-to-disposable
income ratio jumped by 39 percentage points in the ten years before the bubble burst in
2007.8
These sectors were interest-sensitive and thus constituted the "transmission gears" of the
ordinary monetary transmission mechanism in the periods before the bubbles burst. That is,
these leveraged sectors had been sensitive to policy rate reduction in business cycles.
However, after the bubbles burst, these leveraged sectors became insensitive to policy rate
reduction, because of the acute balance sheet adjustments. Large legacy shortfalls must be
compensated for by current profit or income, period by period, and this process is slow and
painful. This leads at least to a breakdown in the ordinary monetary transmission mechanism
of policy rate change.
What then are the long-term consequences of severe and prolonged balance sheet
adjustment under population ageing? Three adverse consequences can be identified.
Long-term consequence 1: declining mobility/flexibility
First, mobility declines, or in other words, the economy becomes "inflexible". Since
de-leveraging firms or households have to pay back all their debts before "moving" from their
current position, they are often stuck with an "underwater" property. Population ageing
strengthens this tendency. In the case of Japan, de-leveraging took place in the corporate
sector, and thus firms became less mobile between industries and regions. In the United
States, the household sector is de-leveraging, and thus household mobility has been
reduced.
Figure 3.1 depicts declining entrepreneurial mobility in Japan. This figure shows the creation
and destruction of enterprises between pre-bubble (1981-1986), bubble (1987-1991), and
post-bubble (1992-1996). It can be seen in this figure that the creation of new enterprises
was sharply reduced after the bubble burst of 1991. In contrast, the increase in the rate of
destruction was relatively mild. These two imply a "sticky industry structure," a tendency to
hang on to the past.
Declining mobility is found in the household sector in the United States. Figure 3.2 shows
changes in the householder mobility rate between 2005 and 2009. A sharp decline is found
across all age groups. Since there is no such change in renters, this sharp decline suggests
that the housing crash reduced householder mobility rates.9
Long-term consequence 2: loss of non-tangible/human capital
The second consequence of severe and prolonged balance sheet adjustment is the loss of
non-tangible or human capital. De-leveraging firms and households suffering long
underutilization or under-employment tend to lose their non-tangible or human capital. In Japan,
this has been observed especially in small to medium-sized enterprises: loss of
entrepreneurship, loss of human networks in skilled manufacturing, and loss of access to
technological advances. In the United States, the long-term unemployed or underemployed
risk losing their human capital.
Long-term consequence 3: problems in financial intermediation
The third consequence of severe and prolonged balance sheet adjustment is the
deterioration in financial institutions' efficient functioning as financial intermediaries. This was
most acutely observed in Japan during the several years after the bubble burst: a pile-up of
non-performing loans seemed to lead to a breakdown in the "market selection mechanism"
around 1997.
Figure 3.3 shows the result of a large-scale panel analysis of Japanese firms, in which the
total factor productivity of exiting and surviving firms is compared. Survival of the fittest is a
basic premise of the natural selection mechanism. Thus, if the market mechanism works
well, the productivity of successful and surviving firms should be higher than that of failing
and hence exiting firms, at least on the average.
In this figure, the shaded areas show cases where the productivity of failing and thus exiting
firms is higher than that of surviving firms, which is an anomaly. In fact, the shaded areas are
rather exceptional most of the time. However, if we look at the period 1996-97, the period of
the financial crisis, we see many shaded areas indicating that more productive firms were
exiting in many industries. This strongly suggests a breakdown in the natural selection
mechanism.
Post-crisis reality
So, what will the post-crisis reality look like once the consequences of acute balance sheet
adjustment under population ageing have taken effect? Some of the post-crisis reality can be
seen in the Japanese situation in the 2000s.
(1) Decline in prospects for growth and investment returns
First, growth prospects decline. Average real GDP growth in Japan fell from 5% to 4 % in the
70s and 80s, to around 1% in the 90s and 2000s. This implies the expected rate of return on
investment in the 2000s is low, especially for those small to medium-sized firms that depend
on domestic demand. In contrast, money (bank deposits) becomes relatively attractive as a
store of value, given the price-stability pledge of the central bank. Ironically, this leads to an
apparent breakdown of the historically-proven quantity-theoretic relationship between real
activity and money stock.10
Moreover, not only is the policy rate very low, but so too are
longer risk-free rates, judged by historical standards. Conventional monetary policy through
the overnight policy rate is not as effective as before, and this means the economy is more
vulnerable to a downside shock.
The change is not only macroeconomic but also microeconomic and structural. The demand
structure shifts from homogenous, mass markets for the young, to more segmented and
heterogeneous markets for the old. Thus, continued focus on the young may entail
everdeclining demand and overcapacity, and could miss the opportunity of exploiting the potential
demand of the old. Here the microeconomic and structural failure of firms and banks to
accommodate new demand may have macroeconomic consequence as well.
In many discussions over the past two decades, this dramatic decline in growth and
investment prospects has often be attributed to the supposedly unique nature of the
Japanese economy, whatever that may be. However, if the demographic factors outlined in
the previous section do indeed shape the future, then declining prospects for growth and
investment returns may have more global relevance.
(2) Coordination failure in the financial system
Second, there are signs of coordination failure. Banks' lending is sluggish, partly because of
their inadequate functioning as expert relationship bankers. Here a vicious circle seems to be
working. To begin with, banks lack the expertise to assess investment in new fields, suffering
as they are from problems with non-performing loans and under-investment in their loan
officers' human capital. Consequently banks do not lend. This means that new investments
and new enterprises cannot get funding, and thus new markets falter. Then, banks miss the
opportunities to accumulate new expertise, bringing them right back to the starting point of
this vicious circle.
Another coordination failure is found in capital markets, in the form of excessive risk
aversion. Fearing unknown unknowns, investors shun investing in riskier securities. Their
market then becomes thin and vulnerable to non-fundamental shocks. This means they
themselves become prone to turning into unknown unknowns, thus the original fear is
selffulfilling. These two types of coordination failure in financial markets result in an apparent
lack of "animal spirits".
(3) Piling-up of public debt
Third, we see a piling-up of government debt. This is partly the result of the substitution of
public debt for private debt in the process of balance sheet adjustment, and partly due to the
substitution of public demand for private demand during this period of declining growth.
According to the OECD's Economic Outlook, Japan's General Government Gross Financial
Liability-to-GDP Ratio in 2010 was 198%, compared with 93% in the United States. However,
it should also be noted that, because of low long-term rates, the Government Net Debt
Interest Payments-to-GDP is 1.2% in Japan, compared with 1.7% in the United States.
Three challenges and unconventional policy
Let me now examine the challenges that central banks face in the post-crisis world.
The first challenge is that of "cycle stabilization": ensuring a return to sustainable growth with
price stability, when the policy rate is near zero and longer-term risk-free rates are also very
low compared with their historical average.
The second challenge is to enhance the growth trend, or strengthen the foundations for
growth. In other words, the challenge is to raise long-term growth prospects, especially in
domestically-oriented growth. This should be done by solving the coordination failure in
banking and capital markets described above.
The third challenge is to avoid causing problems in national debt management. We should
design and execute carefully measures to cope with the first and the second challenge,
taking appropriate account of the current national debt situation as explained before, as well
as general economic conditions.
To tackle the first and second challenges, many central banks have introduced
unconventional policies, which differ from region to region depending on the particular
problems they face. Here as an example, I will explain the Bank of Japan's recent attempts
at unconventional policies, namely, the Comprehensive Monetary Easing (CME) in October
2010, and the Growth Foundation Strengthening Facility (GFSF) in June of the same year.
To meet the challenge of cycle stabilization, the first part of the CME changed the guidance
for the policy rate from 0.1% to the range between 0 and 0.1%, making clear the Bank's
Virtually Zero-Interest Rate Policy (VZIRP). For the second part of the CME, the Bank
clarified its policy duration commitment: the Bank will continue its VZIRP until it judges price
stability to be in sight on the basis of the Policy Board members' understanding of price
stability. With Policy Board members' announced forecasts for two years ahead, this is
similar to "forecast targeting" though not specific in numbers.
The third part of the CME is the Asset Purchase Program, which is also designed to meet the
cycle stabilization challenge. The first half of the Asset Purchase Program aims to influence
downward longer-term risk-free rates. That is, the outright purchase of JGBs with remaining
maturity of 1-2 years and T-bills is to reduce the term-premiums of risk-free rates. The
scheme to provide 3- and 6-month funds at the overnight rate already instituted was aimed at
lowering rates longer than the overnight rate, and has been continued and included in this
program. These are unconventional, but can be considered as a natural extension of
conventional monetary policy through policy rate changes.
However, the second half of the Asset Purchase Program is truly unconventional, in that the
Bank purchases riskier assets than it bought before: BBB-rated corporate bonds, and
a-2 CPs. It also purchases ETFs and J-REITs directly from the market. The purchase is
designed to act as a catalyst to induce investment in riskier assets, and thus help solve the
coordination failure I described earlier. In other words, it is aimed at breaking another vicious
circle in capital markets,