Japanese equities managers say that Tokyo winning its bid for the 2020 Olympics should be a big positive for the Japanese economy.
The announcement triggered a 2 per cent rise in the Japanese stock market on Monday.
Official forecasts put the positive economic impact of the Tokyo Olympics at only 0.3 per cent of GDP between 2013 and 2020.
However, Taku Arai, Japanese equities product manager at Schroders says: "It's worth bearing in mind this figure relates only to specific Olympics expenditure and does not take into account related infrastructure investment prompted by the Olympics. Indeed some of Tokyo’s infrastructure does date back to 1964 [when Tokyo previously hosted the Olympics] and Tokyo 2020 is precisely the catalyst required to modernise it.
"In addition to these 'hard' economic benefits, the intangible effect on sentiment is also important, with consumer spending a likely beneficiary."
Mr Arai adds that the Olympics is another success for Japanese Prime Minister Abe and will put him in a stronger position to implement so-called "third arrow" measures eagerly anticipated by the Japanese stock market.
Simon Somerville, manager of the Jupiter Japan Income fund agreed that the feel good factor should make Mr Abe more popular and give increased force to his "third arrow" reform policy. He adds: "This increased sense of confidence and purpose among Japanese people should also mean that Mr Abe’s and Bank of Japan governor Kuroda’s pro-growth policies will become much more effective. The Olympic bid decision will also further drive his intiatives for PFI (private finance initiative) and PPP (public private partnership) funding."
