Monday, September 9, 2013
ANALYSIS: Infrastructure, Tourism Likely To Benefit From Tokyo Olympics
TOKYO (NQN)--With Tokyo selected Sunday morning to host the 2020 Summer Olympic Games, a range of related stocks were rising Monday, along with hopes for broader economic benefits.
- National Stadium in Tokyo is going to be rebuilt before the 2020 Summer Olympic Games.
Following the International Olympic Committee's announcement, Prime Minister Shinzo Abe made clear the government's determination to change the Japanese economy. "We want to host the 2020 Games to help put an end to our economic deflation, which has lasted for 15 years," Abe said.
Investor expectations are growing that the Tokyo Olympics will benefit a broad range of sectors, including infrastructure development and tourism, because of rising demand for rebuilding and reinforcing aging infrastructure, such as roads and bridges, nearly 50 years after the city last hosted the event.
The Tokyo metropolitan government estimated the Japanese economy will grow by about 3 trillion yen between September this year and the same month in 2020 thanks to the Olympics. Of that amount, 474.5 billion yen is expected to go to the construction industry. The estimate is calculated based only on demand directly related to the Games, such as developing and constructing the athletes' village and building or renovating venues. The estimate excludes costs for the development of roads, railways and other infrastructure.
In March, the Infrastructure Ministry released a study regarding temporary measures that should be implemented for maintenance, management and renewal of social capital. In it, the ministry noted that in 20 years about 65% of roads and bridges, 62% of floodgates and other river management facilities, 56% of piers and 45% of tunnels will be more than 50 years old. The government said it will conduct general inspections for infrastructure management and start the necessary repair work swiftly. If that process is accelerated due to the Olympics, the economic effects of the Games will likely surpass the government forecast.
Infrastructure companies, including Sho-Bond Holdings Co. (1414), Yokogawa Bridge Holdings Corp. (5911) and Japan Bridge Corp. (5912), and road paving companies, including Nippo Corp. (1881) and Maeda Road Construction Co. (1883), are expected to see their earnings improve. Among general contractors, investors appear particularly interested in Taisei Corp. (1801) because the company receives a large volume of orders in the Tokyo metropolitan area.
The service industry, meanwhile, is estimated to gain 651 billion yen thanks to the Olympic effect. Household spending is expected to increase because people will spend more on transportation and lodging fees to go see the events and buy Olympics-related goods.
The government set a goal of raising the number of foreign visitors to Japan to 30 million in 2030 as a part of its growth strategy. Tokyo's hosting of the 2020 Summer Games will likely push up the number of overseas tourists and make it easier for the government to achieve that target.
The number of foreign visitors will likely continue rising even after the Games because the city will be seen even more as a cosmopolitan city. For that reason, airline stocks, such as Japan Airlines Co. (9201) and ANA Holdings Inc. (9202), land transportation stocks such as East Japan Railway Co. (9020), travel agency stocks, including H.I.S. Co. (9603), and lodging facility stocks, such as Imperial Hotel Ltd. (9708), are expected to rise in line with expectations of higher demand. A broad rage of companies, including department store operator Isetan Mitsukoshi Holdings Ltd. (3099) and theme park operator Oriental Land Co. (4661), are also expected to see a consumption increase.
With people's enthusiasm for sports likely to grow, stocks of sports gear makers, including Mizuno Corp. (8022) and Asics Corp. (7936), and operators of sports equipment stores, including Xebio Co. (8281), are also likely to benefit from the event. Because Asics and Mizuno are official partners for the 2020 Olympics and will supply sports gear to popular athletes, their global brand recognition may improve.
If concerns about a slowdown in domestic demand ease thanks to the economic effects of the Games, the government will be more likely to implement the consumption tax rate hike as scheduled in April 2014, even though Abe is said to have reservations about it. Overseas investors, who are hoping the Japanese economy will change, are expected to buy more stocks if the tax hike, seen also as an international pledge, becomes more likely.