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In the wake of the Olympics, should you invest in Japan?

31/08/2021

It’s not been an easy year for Japan. While their management of the pandemic was initially successful, a delayed rollout of the COVID-19 vaccines and the declaration of a fourth state of emergency in Tokyo just a few weeks before the start of the Games, local enthusiasm for the Olympics has been low. 

While it was expected that the Olympics would bring a boost for the national economy, figures before the Games began suggested that 80% of the Japanese population opposed this year’s Olympics. Despite that, though, there may still be some great opportunities for UK investors with an interest in the country. 

 

The power of the Olympics

Experts state that, in a normal year with a significant medal haul, markets tend to rise. Akiyoshi Takumori of Sumitomo Mitsui DS Asset Management states that in every Olympics where Japan has received gold medal numbers in the double digits, the Nikkei 225 Stock Average has risen. With 22 gold medals in this year’s Games, will things go the same way? 

Analysts are unsure. The growing number of COVID cases, as well as the country’s upcoming general election this autumn, could have an impact. The ruling Suga party could see a fall in approval rating if the pandemic is not adequately handled, which could, in turn, impact on Japanese stocks. 

 

Looking to the longer term

Japan’s vaccine rollout should be 80% complete amongst those aged 12 and over by October, with the country now having secured enough doses to speed up current vaccination rates. The slow vaccine rollout, however, may not affect every market, with some experts hinting that Japanese companies that sell overseas could be ripe opportunities to pick up a bargain. 

Others cite additional longer term reasons to look to Japan for investment: the attractiveness of the valuation of the country’s equities, the opportunities for a reliable income stream and a pick-up in Japan’s capital goods sector, to name but a few. 

Archie Ciganer, portfolio manager of the T. Rowe Price Japanese Equity Fund, is also confident for the future. He says, “Given Japan is one of the most cyclical and open markets – highly levered to the health of the global economy – we believe it will be a major beneficiary of the global recovery”. Could the country’s income growth potential be strong as it recovers from COVID-19?

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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