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Japan’s new Olympic hopes bring promise

But while the GDP impact appears negligible, there are potential positives for Japan from the Olympics. Mr Arai notes: “The intangible affect on sentiment is also important, with consumer spending a likely beneficiary. Sentiment indicators had just been starting to flag, so this would be a timely boost if it materialises. It is another success for and completes a remarkable 12 months for him. The immediate impact is likely to boost his popularity and put him in a stronger position to implement ‘third arrow’ measures eagerly anticipated by the stockmarket. Optimists are already referring to the Olympics as the ‘fourth arrow’.

“To complete a good day for Japan, second-quarter GDP growth was revised up. Real GDP growth for the second quarter was revised upward from 2.8 per cent to 3.8 per cent year-on-year. Consumption and capital expenditure were stronger than initial estimates and this supports the market’s confidence for a steady recovery of the Japanese economy.”

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Mr Somerville agrees the social impact of the Olympic bid will be more positive than the growth aspect, improving confidence among the Japanese people and increasing the feel good factor for Mr Abe.

“This increased sense of purpose among Japanese people should also mean that Mr Abe’s and Bank of Japan governor Kuroda’s pro-growth policies will become more effective. The Olympic bid decision will, in my view, also give increased force to Mr Abe’s ‘third arrow’ reform policy and further drive his initiatives for PFI [private finance initiative] and PPP [public private partnership] funding.

“Just as the 1964 Olympics demonstrated Japan had joined the industrialised nations, by 2020 I expect the Olympics should enable Japan to show the economy is back in shape following the 2011 tsunami and long economic crisis.”