Look beyond Japan’s Olympic omnishambles

Japan's insistence on going through with the Olympics in the midst of the global pandemic has been described as a "suicide mission". But the long-term case for investors in Japan is encouraging.

Welcoming “90,000 visitors from all over the world during a pandemic” to a “densely populated city where vaccinations trail Bangladesh… gee, what could go wrong?” asks William Pesek in Nikkei Asia. Japan insists that it can safely hold the Olympic games in July, but opinion polls show that more than 80% of the country’s citizens are opposed. Pressure is growing on the prime minister, Yoshihide Suga, who has backed the games. The head of e-commerce giant Rakuten, Hiroshi Mikitani, has dubbed the Olympics a “suicide mission”. 

 Japan has so far done a relatively good job at containing the virus, but was forced to declare a state of emergency last month in response to a new wave of cases. Uncertainty about the Olympics has weighed on markets. The Topix index has gained 7% so far this year, making it a global laggard. 

Overseas investors dumped a net  ¥1trn (£6.5bn) in local stocks during the second week of May, says Hideyuki Sano on Reuters, the biggest outflow since March 2020. The economic costs of cancelling the Olympics would be limited as Japan has already barred foreign tourists from attending. The games look set to deliver a stimulus equivalent to just 0.3% of GDP. That is a poor return given the risk of importing “multiple Covid-19 variants”. 

Still, the long-term case for Japan is encouraging, says Simon Constable in The Wall Street Journal. The market was once shunned for its poor corporate governance, but reforms have forced Japan’s boardrooms to take shareholder value seriously. Schroders reports that the market’s average return on equity, a key gauge of profitability, has risen from 5% in 2013 to 6%-7% in 2019. That should spark more interest from global investors once the Olympics omnishambles has been sorted out.

Recommended

Share tips of the week – 2 June
Investments

Share tips of the week – 2 June

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
2 Jun 2023
Which house-price index is the best?
Property

Which house-price index is the best?

Britain is obsessed with house prices, and we have at least four house-price indices to choose from to measure the rate of increase in the value of ou…
1 Jun 2023
The top healthcare funds to buy
Investments

The top healthcare funds to buy

Increasingly rapid progress in drugs and healthcare technology makes these trusts top tips, says Max King.
1 Jun 2023
7 winners and losers in the leisure sector
Investments

7 winners and losers in the leisure sector

It’s been a wild three years for hospitality, but crisis creates opportunities, says Michael Taylor of Shifting Shares.
1 Jun 2023

Most Popular

Best savings accounts – June 2023
Savings

Best savings accounts – June 2023

Interest rates have been creeping up - we look at the best savings accounts on the market right now.
1 Jun 2023
Savings inertia - why we should all be obsessed with interest rates and savings accounts right now, says Kalpana Fitzpatrick
Savings

Savings inertia - why we should all be obsessed with interest rates and savings accounts right now, says Kalpana Fitzpatrick

Are savers still missing out on hundreds of pounds by not moving their cash for better interest rates?
30 May 2023
One day left for households to claim the £200 Alternative Fuels Payment to help with heating bills
Energy

One day left for households to claim the £200 Alternative Fuels Payment to help with heating bills

Households could be due a £200 payment if they heat their homes using alternative fuel sources and aren’t connected to the mains gas grid - but time i…
30 May 2023