Olympics could be fourth arrow for Abenomics

Faster, higher, stronger: Tokyo’s bid for the 2020 Olympics could provide extra stimulus to Japanese economy.
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Doraemon is lending his support to the Tokyo 2020 bid
<div style="text-align: left;"> Doraemon is lending his support to the Tokyo 2020 bid </div>

If Tokyo wins its bid to be chosen as host city for the 2020 Summer Olympics, as the bookmakers are predicting, spending on the games could help to spur Japan’s economic recovery.

The International Olympic Committee will name the winner on September 7, with Istanbul and Madrid as the other main candidates. A win for Tokyo would obviously lead to additional infrastructure spending, and could also give an earnings boost to companies involved in media, consumption and security.

But the Olympic spirit could also have broader economic benefits, according to Nomura. “A 2020 Tokyo Olympics, together with the Abe administration’s economic strategies (Abenomics) and the long-term vision for Tokyo (Tokyo Vision 2020), could stimulate a revival in the Japanese economy,” said the Japanese broker in a report last week that identified six stocks that could benefit the most.

Plans for the Olympics include re-development of the national stadium, which was originally built for the 1964 games and is already scheduled for a $1 billion upgrade ahead of the 2019 Rugby World Cup, while other venues would need to be built from scratch and transport links to the Shinegawa district improved.

Consumers may also be inspired to spend more money on sports in the run-up to the games, said Nomura, particularly as golf will be included for the first time in 2016.

That could complement the government’s revitalisation strategy, which aims to achieve average nominal GDP growth of around 3% during the next 10 years, and to increase per capita gross national income by more than ¥1.5 million in 10 years’ time.

“If the government's growth strategies go according to plan, the benefits should be obvious to everyone by the time the Olympics are held (hopefully in Tokyo) in summer 2020, “ said Nomura. “In the same way that the 1964 Tokyo Olympics showed that Japan had entered the ranks of modern industrialised nations, the 2020 Tokyo Olympics could show that Japan is back.”

As compelling as all that sounds, the Japanese public did not embrace the bid at first, at a time when the 2011 earthquake and tsunami caused many to worry about energy shortages and public finances.

The Tokyo 2020 team even called on the services of Doraemon, a robotic anime cat from the 22nd century, to help persuade a sceptical public. And he may be helping. Nomura says that support for the bid is now growing, and that the benefits could extend beyond a local sales bump: the games could create a spirit of optimism throughout Japan.

“In the seven years leading up to the event, we think there could well be companies for which earnings could benefit from the rebuilding of social capital and changes in public sentiment.”

The six stocks that Nomura predicts will benefit from a winning bid are Taisei, the lead contractor for the new stadium; Taiheiyo Cement; East Japan Railway; Mitsui Fudosan, a property developer focused on Tokyo’s bayside area; Xebio, a sports retailer; and Sohgo Security Services.

The games would give Japan its first major world sporting event since it co-hosted the football World Cup in 2002 with South Korea.

¬ Haymarket Media Limited. All rights reserved.
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