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Japanese govt looking for new stimulus for troubled property markets

No specific schemes have been drawn up but active discussions are under way, according to Isamu Ueda, a member of the ruling coalition's project team.

'We've determined to take some measures to normalize the REIT market. We're considering setting up a fund as one method to make it possible to use the supplementary budget,' he said.

The government is considering a 1 trillion yen ($10 billion) fund to purchase properties from the trusts and provide loans.

It could lead to the start of a pick up in the property market according to Masahiro Mochizuki, an analyst at Credit Suisse Group.

'We believe support from the authorities will mean lower credit risk and the start of a recovery for the real estate market. Public funds could be the key to smoother refinancing activities for J-REITs,' he said in a report.

In October, New City Residence Investment became the first Japanese REIT to file for bankruptcy, with liabilities of 112.4 billion yen. Smaller funds and developers are struggling to raise money as banks cut back lending and foreign investors cut back on property in Japan.

But not everyone is encouraged by the latest discussions. Tomohiro Araki of Tokyo based Nomura Securities described them as short term proposals with little impact. 'The government is always coming up with these kinds of policies which provide some short-term lift to spirits but when the proposals don't turn into real policy action, the market's hopes quickly fade,' he said.