Goldman Sachs launches a $500 million real estate fund in Japan

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The American investment bank Goldman Sachs is preparing to launch a new fund focused on Japan’s real estate market. The target size is around $500 million, with the strategy built on growing global investor interest in Japanese assets amid a weak yen and low interest rates, writes Bloomberg.

Value-add strategy

The bank has been in talks with investors for several months and expects to complete the first phase of fundraising by the end of March. The fund will follow a value-add strategy, which typically targets returns of around 15%, and will focus on data centers, logistics real estate, residential properties, and the hospitality sector.

The first stage of capital raising is scheduled for late March. In the past, Goldman invested in Japanese real estate deals mainly using its own balance sheet rather than through a dedicated fund. The launch of a standalone product reflects the bank’s confidence in the resilience of the real estate sector, which in recent years has stood out among developed markets thanks to softer financing conditions and a steady inflow of foreign capital.

Real estate investment in Japan

Japanese real estate funds have been actively attracting international capital in recent years against the backdrop of higher borrowing costs in other developed countries. In September, Morgan Stanley reported raising ¥131 billion ($880 million) for its Japan-focused fund. At the end of 2025, KKR and PAG agreed to acquire part of Sapporo Holdings’ real estate portfolio in a ¥477 billion ($3 billion) deal, one of the largest property transactions of the year. In December, Blackstone also announced the purchase of a logistics facility in Tokyo for more than ¥100 billion ($670 million).

According to Jones Lang LaSalle, investment volume in Japanese real estate in the first three quarters of 2025 grew by 22% year-on-year to ¥4.71 trillion ($31.6 billion). By comparison, global real estate investment increased by 21% over the same period, showing that Japan is moving in line with the global recovery and remains one of the most active destinations for institutional investors.

Economic backdrop

Real estate in Japan remains attractive for foreign funds, as borrowing costs are still lower than in other developed markets. This remains the case even after the Bank of Japan raised interest rates by 25 basis points to 0.75%, the highest level in 30 years. The regulator pointed to steady wage growth and a moderate acceleration in core inflation. The tightening cycle is not yet over. Central bank governor Kazuo Ueda estimated the neutral interest rate at between 1% and 2.5%, stressing that even after the latest hike the policy rate remains below the lower bound of that range.

Despite the tightening, the Japanese yen weakened and moved past 157 per dollar, reflecting investor disappointment with the relatively cautious tone of the central bank. Government bond yields rose, with the 10-year yield exceeding 2% for the first time since 1999, while the stock market reacted more calmly. The rate hike has become another signal of a structural shift in Japan’s economy, where inflation has remained above the central bank’s target for almost four years and wage growth is gradually reshaping the country’s long-term financial landscape.

Conclusion

Analysts at International Investment note that the weakening of the yen has played a positive role for foreign investors, as dollar-based capital has gained an additional pricing advantage. At the same time, returns in the local currency may remain low or even negative. With inflation accelerating in early 2026, Japan’s economic environment has become less stable, which is already starting to put pressure on businesses, households and politics, and is increasing the market’s sensitivity to further decisions by the central bank.