Abe banks to Olympic wave to lift economy

Prime Minister Shinzo Abe of Japan speaks during the presentation by the Tokyo 2020 bid committee to host the 2020 Summer Olympic Games.

JAPAN - Japan is counting on Tokyo's hosting of the 2020 Olympics to lift the country's economy and sagging spirits.

The victory by Tokyo - which beat Istanbul and Madrid in the contest to host the Games - on Monday pushed up the stock market, particularly construction, property developers and other stocks expected to benefit from Olympics-related demand.

The Nikkei stock index closed at 14,205.23, gaining 2.48 per cent over last Friday's closing.

Also helping to lift stock prices was the government's upward revision of the gross domestic product (GDP) to 3.8 per cent growth for the April to June quarter, compared with earlier estimates of only 2.6 per cent.

The latest figure is expected to help Prime Minister Shinzo Abe decide on whether to go ahead with a planned sales tax hike from 5 to 8 per cent from next April.

Mr Abe had feared that the tax hike would cause a temporary drop in consumer demand immediately after its introduction.

But now, Japan's Olympics- driven economic activities are expected to offset any slump in consumer demand.

In Buenos Aires, where the selection of the Olympics host city had taken place, Mr Abe told a press conference he hoped the 2020 Games will become the "fourth arrow" of his Abenomics growth strategy to rid the country of its chronic deflation.

"(The Olympics) will definitely be a plus for growth. It will work as 'the fourth arrow' and bring benefits," he told a Japanese TV network. The other three arrows are monetary easing, government spending and structural reforms.

Said Chief Cabinet Secretary Yoshihide Suga in Tokyo: "It will definitely give a big impetus to shaking off deflation."

The hosting of the Games is expected to produce 2.3 trillion yen (S$29.7 billion) in new demand including investment in construction, replacement of television sets and other home appliances and sales of Olympics-licensed goods, SMBC Nikko Securities said in a recent report.

Meanwhile, the Tokyo Olympic bid committee said the Games will add a conservative estimate of three trillion yen to the economy and create 150,000 jobs.

The capital needs to improve its infrastructure to handle the expected flood of tourists.

With the world's eyes on Japan, observers predict that the timetable for blue-ribbon projects such as the high-speed maglev train may be brought forward to coincide with the Games.

Tokyo's success in bringing home the Games is also seen as generating a wave of optimism all over the country that will help Japan's economic prospects.

Echoing the sentiments of the nation, the leading Asahi Shimbun daily, in a special coloured page wrapping its evening edition on Monday, proclaimed: "Welcome back, the Olympics".

There was no morning edition on Monday for major papers due to a press holiday on Sunday.

Besides the trauma of being trapped in a long recession, the 2011 earthquake that destroyed large swathes of northern Japan, including the Fukushima nuclear plant 200km north of Tokyo, had also dampened spirits and cast doubts on the country's future.

When the Olympics were last held in Tokyo in 1964, the event signalled the rise of the Japanese economy from the ashes of World War II. The Games also saw the introduction of the Shinkansen bullet train, which is still one of Japan's most well-known icons.

Now, major gaming operators are eyeing sites for casinos in the expectation that the government will legalise gambling resorts in the capital.

Casino development will increase hotel rooms and entertainment venues during the Games. It will also add jobs and is expected to generate US$10 billion (S$12.8 billion) in gambling sales. Analyst Grant Govertsen told Bloomberg News that Tokyo could become the world's second-largest gaming market practically overnight, second only to Macau.

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