Presentation for BIJ October 24, 2013 Event

1. **Business in Japan
October 24, 2013 Event Presentation
ファイト！
Impact。。。
Impact。。。
。。。Of The 2020 Tokyo Olympics and Your Business
2013/10/29
Darrel Whitten, Investor Networks
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2. No Economic Miracle for Japan
(Forbes, September 12, 2013)
Orwellian View: The Olympics Curse
• Current estimates of direct GDP impact only 0.6%~0.7%, or much lower than 1964
Tokyo and 1998 Nagano Olympics (3%-plus). Could easily be offset by strong yen, higher
energy costs or adverse reaction to VAT hikes.
• Pre-Olympic impact studies overstate the benefits. 1972 Munich, 1976 Montreal had big
losses, 2004 Athens pushed Greece toward economic collapse. Costs of hosting susceptible
to a) big cost over-runs, b) empty/unused venues, c) negligible tourism/ investment bump.
• Has historically been a big event for terrorists to target, requiring massive security,
traffic flow controls, etc., leading to some SME business failures.
• Virtually every Olympics host country since WWII saw its GDP growth drop – in some
cases, sharply – in year following the Olympics
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Darrel Whitten, Investor Networks
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3. The Olympic Hangover
- Growth Dips in the Morning After
Sources: The Guardian, Fidelity
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4. Japan Gets its Mojo Back
Disney-esk: Olympics as a Revival Catalyst
•
Biggest impact will be on Japanese government, business, and consumer confidence over
the next seven years.
•
Successful Olympics will restore foreign investor confidence in Japan regarding its a)
economic management and b) future growth prospects.
•
Will force government to focus on early cleanup of the Fukushima Daiichi nuclear power
plant
•
Increased Japanese business and consumer confidence as well as foreign confidence in
Japan means more spending.
•
More spending means higher sustainable economic growth and a recovery in government
tax revenues.
•
Government tax revenue growth means greater debt sustainability.
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Darrel Whitten, Investor Networks
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5. The Forecasts...
- Largely ignore the indirect impact
Capital Economics
Total spending of JPY720 billion, but excluding pre-planned capex, additional net JPY460 billion
(0.04% latest quarterly annualized GDP). Ignores consumption impact.
Tokyo Olympic Bid Committee
Total economic impact nearly JPY3 trillion (0.6%) of Japan GDP, some 157,000 new jobs (of
unknown duration), JPY278 billion personal consumption boost.
Nikko Securities
Total economic impact of JPY4.2 trillion (0.8%). Is assuming a bigger
tourism, food and drink spend.
Daiwa Securities
Olympics could drive a major recovery in Japan tourism, with tourism
doubling from 5% GDP to 10% and contributing JPY95 trillion. Government
infrastructure investment would add another JPY55 trillion during the period =
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total JPY150 trillion (cumulativeWhitten, Investor Networks
28% of GDP).
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6. " Japan has had 15 years of economic stagnation...
and we've lost confidence in ourselves. But I hope
this will be a chance for us to regain that
confidence..."
Shinzo Abe, Japan Prime Minister
“ We Can Make it if We Pull Together”
• For the first time in modern history, Japan’s government and central bank are singing off
the same economic policy song sheet.
• First time in seven years. Japan has a stable government.
• Tokyo core infrastructure dates back to the 1964 Olympics.
• Japan is aware of the Olympics curse… “compact Olympics” concept to refurbish and reuse
where possible. Resale of Olympic village for residential use.
• Abenomics quickly gained traction
1. Sharp reversal in extremely strong yen
2.Record low bond yields despite massive debt
3.Green shoots of economic recovery, e.g., 3.8% GDP growth in latest quarter
4.Stock prices (Nikkei 225 index) up 62% from pre-Abe lows
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Darrel Whitten, Investor Networks
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7. Who to Emulate?
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8. Beijing Olympics
- Not the Model for the 2020 Tokyo Olympics
Pull Out All the Stops
• Most expensive Olympics ever. China estimated to have spent USD40 to USD 44 billion
on the Beijing Games
• Large amount of new construction. All 31 Beijin-based games venues. Renovation and
construction of six venues outside Beijing as well as 59 training centers.
• But… In terms of stage of economic development, more like 1964 Tokyo Olympics
• Four-year Olympic spend only 0.3% of China's total GDP each year
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Darrel Whitten, Investor Networks
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9. Realistic Expectations
- Pre-Olympic Euphoria Skewed Forecasts
- But economic impact was significant and
- There were demonstrable lasting benefits
Source: Credit Season co.uk
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10. Consumer Spending Detail
- Shows Broadly-Based Benefits
Source: Confused.com
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11. Investor Speculation
- Rally Long over Before the Olympics
Buying the Buzz
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BoA Merrill Lynch Japan Olympic Bid Index (20 stocks), such as
- Oriental Land (Disyneyland Operator)
- Mizuno, Asics (Sportswear)
- Dentsu (Advertising)
- Secom (Security)
- Kajima, Taisei (Construction) ***Already seeing profit-taking
- Taiheiyo Kogyo (Cement)
- Mitsubishi Estate, Mitsui Fudosan (Condominiums) ***Immediate uptick in condo sales、but
、
VAT hikes a negative
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Currency of Olympic host nations tends to appreciate ***Not desirable
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Property prices of Olympic host nations tend to appreciate ***Property agents beating the drum
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Darrel Whitten, Investor Networks
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12. •
The Tokyo Olympics will go a long way in restoring Japanese confidence in their
future.
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The economic impact could well be bigger than current conservative estimates.
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The event will generate broadly-based business opportunities.
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But…the Government isn’t about to go overboard and over-spend on the
opportunity.
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….And neither should you
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