<<If the prime rate in Japan is 1/4%, what is the mortgage rate over there, and can I get a Japanese mortgage to buy property in the U.S.?">>
Effectively yes, thought the question is, do you want to?
There's no free lunch of course, and the "gotcha" here is that if you borrow yen and invest in dollars, you will bear foreign exchange rate risk - you must repay your loan in however many yen are due, without regard to the JPY-USD exchange rate.
In return for bearing this risk, you are able to borrow at a low rate.
As a matter of fact, people on this shorting thread should understand the concept magnificently, since borrowing JPY and buying USD is equivalent to...... shorting the Yen!
Which on an unleveraged, long term holding basis can be done quite cheaply (i.e., a minimum of transaction costs) through your friendly local futures broker. If you short one 12.5 million Yen CME futures contract for roughly every $90,000 worth of your mortgage, you will be paying approximately 5% per year less US dollar interest, and will fully participate in both the upside and downside of JPY-USD exchange rate fluctuations.
- Daniel |
