AP/Wide World Photos

The Nikkei 225 jumped two percent last November when the Tokyo Stock Exchange announced that it is considering the addition of a REIT market, a move insiders say could end a 10-year bear market in Japanese land.

"I think the REIT structure will do well there," said Richard Gunthel, managing director BT Alex Brown. "I think it’s going to be a boom to the capital market in Japan."

Media reports say a REIT market would introduce liquidity into a stagnant property market, provide investors with a prospective investment for capital appreciation and help financial institutions move collateralized property off their stack of bad loans. If established, trusts would have to have more than 800 shareholders, minimum net assets of five to 10 billion a year ($48 million to $95 million) and release financial statements twice a year, according to a Reuters report. However, Japanese legislators must review and reshape current regulation before the REIT market trades.

"The problem is current proposed legislation doesn’t carry with it tax transparency," said Gunthel. "The thought is that in the next legislative round, [lawmakers] will exclude the corporate level tax and have all the income tax in the holders hand and have some kind of U.S. feature to force income to be distributed and taxed at least once. I think its going to happen and be very well received."

Once the laws are in place, the Japanese REIT market will likely mimic the U.S. REIT market phenomenon. "I think it will play out very similarly to the way it played out here," said Gunthel. "You’ll start to see entities created for issuance with re-priced assets. That will stimulate a lot more consolidation and equitization. And, that will start to lift prices."

While a Japanese REIT market will have little effect on the U.S. markets, there may be some reallocation of investor funds in the future.

"I don’t see money withdrawing from the U.S. REIT market going to Japan now," said Gunthel. "There may be some allocation preferences within Tokyo, however, where people see meaningful growth."