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Thursday, December 12, 2013

Japans Economy Derived from 2020 Olympics

Japans Economy Derived from 2020 Olympics
“Tokyo to host 2020 Olympics” has been the hottest headline in Japan. Prior to the bid, Madrid and Spain were expected to have better advantages of being chosen to host 2020 Olympics. Surprisingly, Tokyo stood out in the competition – five interlocking rings will arrive Japan in 2020.
It has been a long-cherished wish of the Tokyo metropolitan government and related industries in Japan to host the Olympic games, and the Olympics fever has wide spreaded on the locals. Hosting 2020 Olympics in Japan is not just a dream-come-true, it is paving a road to tremendous economic opportunities. Without a doubt, financial and investment industry is cheering for the news too.

◉ Attractive Projects Derived From the Olympics 1: Improvement of Infrastructure
The stock price of major general construction companies, such as Shimizu Corporation and Taisei Corporation, reached their highest values for the year in August. Investors are also showing their more-than-ever interest on the related projects.
The Tokyo metropolitan government had already determined to develop and improve athletic facilities for events such as swimming, volleyball, and badminton around Tokyo Bay if Tokyo were to host summer Olympics in 2020.  Now the metropolitan government plans to invest additional 130 billion yen, including the improvement on Shinkansen (Bullet train) tracks in Tokyo and a new Tokyo Gaikan Expressway( has started and will be finished by 2020.) The development of logistical infrastructure, such as roads to connect the Harumi area and inner city, are actively taking place.

◉Attractive Projects Derived From the Olympics 2: A Good Shot to End Deflation
It has been 56 years since last time Tokyo hosted a summer Olympics. The economy was active and prosperous for a good period of time. The 2020 Olympics is likely to and is expect to stimulate the economy, just like it did 56 years ago – win the bid to host Olympics, upward  demands for construction, salary increase then deflation ends. It is estimated that hosting the summer Olympics in 2020 would bring economic effects of 37.9 billion yen to Tokyo and create 152,000 jobs. To Japan, this huge income is more than just a good economic shot.

Attractive Projects Derived From the Olympics 3: Overseas Visitors
Olympics athletics, families, reporters and sports fans all over the world will gather in Tokyo. The demands for public transportation connecting city to the airports are likely to increase. Department sales and profit are expected to rise too.

Risks to the Olympic Projects
According to the estimates from Olympics and Paralympics Bidding Committee, the resulted Olympics-economic effects for Japan will be approximately 7 trillion yen from building construction and the increase of land value by the 2020. Other the other hand, this is only an annual 0.3% GDP increase for 7 years which is considered a limited improvement.  In addition, the positive impacts on stock value will vary by industry -  caution should be taken while investing in the non-infrastructure related and non-real-estate related business.

Economic Effects on the Olympics
What makes it attractive to host the games? To promote the national dignity and to be an attribute for the country, though there are criticisms as the bidding for Olympics costs a significant amount of money.  Followings are the resulted numbers from past events:

1. Tokyo Olympic (1964)
The 18th Summer Olympics was held in Tokyo, Japan on October 10th, 1964. It was the first time Olympics came to Asia. This event also delivered an important message to the world: Japan had recovered from World WarⅡ. It was a national project involving approximately 28.1 billion yen.
The Tokyo Olympics also created an opportunity for Japan to join the Organization for Economic Co-operation and Development (OECD). A huge amount of fund was invested in the athletic facilities and the traffic network in Japan. To keep tack of game process, the demand of mobile TV went up. The sales of color televisions also increased. This positive effect from Olympics was known as “Olympic economic boom.”

2. Beijing Olympics (2008)
It was reported that China also had an Olympic economic boom from Beijing Olympics. According to the preliminary study by Nomura Securities Co., Ltd., during year 2002 to 2008, the Olympics generated 960 billion yuan to China (approximately 14.9 trillion yen) –  308.1 billion yuan (approximately 4.8 trillion yen) and 308.1 billion yuan (approximately 4.8 trillion yen) from direct economic and indirect economic effects, respectively.
The development of athletic facilities in China, construction of basic facilities and increase of visitors brought more than seven times economic effects than Athens Olympics did.
Furthermore, according to the Beijing Olympic Economy Research Association, total direct income during the Beijing Olympics was approximately 2 billion US dollars (212.3 billion yen). Based on China Statistical Information Network and Bureau of Statistics of Beijing, the annual average growth rate of GDP in Beijing was 11.8% from 2005 to 2008, the so-called “Olympics Input,” and was 0.8% higher than the “11th Five-year Plan.”

3. London Olympics (2012)
In July 2013, the British government announced that the 2012 London Olympics generated 99 billion GBP (approximately 1.5 trillion yen) to the country. This was more than the cost of hosting, 89.2 billion GBP (approximately 1.3 trillion yen).
Above figures also include total amount from new contracts of companies, the increase in sales and new investment from overseas one year after the Olympics.
However, some analyses on targeted projects indicate that the figures were inflated to be appealing.

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