By Daniel Hunter

Taku Arai, Japanese Equities Product Manager at Schroders, believes that Tokyo's successful bid for the 2020 Olympics bid will spur economic growth.

"Over the weekend, Japan celebrated Tokyo being awarded the 2020 Olympics. The country benefited from being viewed as the 'safe' choice by the International Olympic Committee relative to Istanbul and Madrid," he said.

"Despite the anti-social hour (5.00am Sunday morning Tokyo time) interest was high, as evidenced by the significant viewership. The announcement triggered celebration, a sentiment that carried on into the stockmarket on Monday, with the Japanese equity market rising 2%.

"Some of the most obvious beneficiaries of the Olympics, such as construction and property companies, had already begun to move before the announcement as Japan had become the bookies' favourite. However, that did not stop a further rally into these areas, along with sports-goods manufacturers and transportation companies.

"Official forecasts put the positive economic impact at only 0.3% of GDP between 2013- 2020. This figure was repeated in the FT Lex column this morning, which compared it in an unfavourable light with the equivalent estimate of 3.6% at the time of the 1964 Tokyo Olympics. Whilst it is probably correct that the impact will be less, it's worth bearing in mind this figure relates only to specific Olympics expenditure and does not take into account related infrastructure investment prompted by the Olympics.

"Indeed some of Tokyo's infrastructure does date back to 1964 and Tokyo 2020 is precisely the catalyst required to modernise it. In addition, Tokyo would be the exception not the rule if initial cost estimates were not exceeded significantly.

"In addition to these 'hard' economic benefits, 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 Mr Abe (who made a well received speech at the final presentation) and completes a remarkable 12 months for him.

"The immediate impact is likely to boost his popularity further and put him in a stronger position to implement 'third arrow' measures eagerly anticipated by the stockmarket. Indeed 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% to 3.8% 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. This also increases the likelihood of the consumption tax being raised as planned in April next year.

"Uncertainty around Abe's decision on the consumption tax increase has had a negative influence on the Japanese equity market for the last month. We expect such uncertainty to fade as we see further development of positive macroeconomic measures in Japan. The consumption tax increase may create some headwinds next year (albeit a necessary move from a long term perspective) but for today, at least, a feel-good factor was the dominant sentiment owing to the weekend's announcement.

"Our view on Japanese equities remains positive given solid earnings prospects of Japanese companies and steady economic recovery exiting from deflation. We think Tokyo winning the 2020 summer Olympics venue provided further confidence on the positive outlook for the Japanese market."

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