Tokyo 2020: An all-over confidence boost

And its congratulations to Toyko; commiserations to Madrid and Istanbul 

IN CASE you haven't heard the news,  earlier this week, Tokyo was selected by a majority vote to become the host city of the 2020 Olympic Games. Sure, its seven years away but the Games have already had a positive effect right from the moment of announcement. The Topix Index rose 2.2% and unsurprisingly, winners were construction,  tourism and real estate companies. The biggest performers included Taisei Corp, a building firm expected to play a role in the Games' infrastructure, who rose by 14% on the day of the announcement. This rally is of course short-lived, but the shares of companies in real estate, infrastructure, construction, transport, tourism and retail related to the Games are valuable equity to hold overall - I see growth in these. Coupled with 'Abenomics' (read about it here), the Olympics is something that will boost consumer confidence and their mood, the optimism of investors and output. It is a force that will help halt Japan's two decades of deflation. You could say that Tokyo 2020 is the fourth arrow of Abenomics. It has been predicted by Japan's bid team that the Games will create 150,000 jobs in Japan and generate $30 billion. The government estimated that an additional 0.3% of GDP will be generated. This is quite a modest amount and I believe it will be more similar to that of the UK's, at 0.6%-0.7%.

The Olympic Village will be in close proximity to Tokyo Bay, which has seen its share of problems over the past 20 years such as abandonment and deflation of property prices. With the Games, I see property price in this area rising a considerable amount due to rejuvenation - influx of people, businesses, shops, transport, parks, stadiums -  into the area, just as Tokyo 1964 turned the wasteland of Komazawa into an Olympic Village and then into a trendy neighborhood in central Tokyo. An example closer to home would be Stratford. The development of Tokyo Bay will benefit landowners - prominent corporate owners include Mitsubishi Estate and Daiwa House Industry who have already seen their stocks rally. From the property developers and real estate side, I suppose they are also eager to make Tokyo become a hot property market in Asia again. 

In the next post: I will discuss some recent M&A deals that have interested me

JH