Summer Olympics in Tokyo will be significant.
According to a report from Nomura, for some time, it has proposed three themes for Japanese stocks during 2013: (1) government change, (2) renewed stepping up of monetary easing by the BOJ, and (3) strengthening of economic measures to counter the scheduled consumption tax hike.
Fortunately, all three of these themes have become reality, thereby helping to ensure a strong performance by Japanese equities.
From a longer-term perspective, the IOC's decision in September 2013 to award the 2020 Summer Olympics to Tokyo will be significant.
Nomura noted that expectations for economic underpinning caused by expansion of infrastructure investment and the improvement in investor sentiment stemming from Tokyo’s selection as the Olympics venue are likely to prove pretty resilient.
"We think the starting gun for 2020 has now sounded. This is the basis on which we wish to consider long-term issues of interest for the Japanese equity market, in other words, five starting guns for 2020," said Nomura.
(1) Move out of deflation
The first issue is the move out of deflation. In the Upper House election campaign, Prime Minister Shinzo Abe said that in the two to three years until the next Upper House election, he planned to focus all policy resources on ending deflation.
(2) Corporate breakthrough
The second issue is the prospect of a breakthrough by the corporate sector. We still think that politics have changed and now it is the turn of the corporate sector to do so.
(3) Long-term business cycles: capex and public spending
The third issue is long-term business cycles, namely capex and public spending and their role in underpinning the Japanese economy.
(4) Active participation of women and expanding consumption by senior citizens
The fourth issue is the active participation of women in the corporate sector and expanding consumption by senior citizens. Japan's population is concurrently shrinking and growing older. The result has been a major downshift in Japan's potential growth rate over the past three decades.
(5) Abenomics growth strategies
The fifth issue is Abenomics growth strategies, the ultimate goal of which is to increase Japan's per-capita gross national income (GNI) by ¥1.5mn. In June, the government published a short-/medium-term schedule that included key performance indicators
Do you know more about this story? Contact us anonymously through this link.