Japan's shock victory against Spain in the soccer World Cup has resulted in a boost for sports- and broadcasting-related stocks in Tokyo trade Friday. There's both an immediate and longer-term benefit to soccer-linked stocks.
Japan qualified for the knockout round-of-16 by pulling off its second major upset win against a European soccer superpower in this tournament. It came from behind to beat the 2010 World Cup champions Spain, 2-1.
The result in Qatar was confirmed at the final whistle just as Japan was waking up for its day. Hub Co. (T:3030), which operates a chain of English-style pubs in Japan, saw its shares shoot up 13.2% at the open, and hold impressive ground through a 7.0% gain at the close on Friday.
The pattern of Japan's win vs. Spain was virtually identical to Japan's equally surprising 2-1 win against four-time World Cup winners Germany. In both cases, the Samurai Blue rejigged while facing a 1-0 deficit at halftime to score two quick-fire second-half goals, despite ceding most of the possession. The importance of the Spain result is greater, however, since the outcome eliminated Germany from the tournament, and saw Japan top its four-team group.
Other than five-time world champions Brazil, no team has tasted greater success at the World Cup than Germany. But for the second consecutive World Cup, Die Mannschaft will be on the first flight home. Despite beating Costa Rica 4-2, Germany's earlier loss to Japan and a 1-1 draw with Spain saw them finish third in their group behind Spain and Japan.
Japan will therefore progress to play Croatia. Croatia lost to France in the final of the last World Cup, but are now an ageing team led by the creaking legs of 37-year-old Luka Modric. Spain also progress as the second-place finisher, to face Morocco, which surprisingly topped the Croatia group, with third-place Belgium and fourth-place Canada sent home.
Japan's progress means sustained interest in the tournament itself in the world's No. 1 and No. 3 economies. The United States is already confirmed to play the Netherlands on Saturday, having finished second in the England group.
In Tokyo, digital advertising agency CyberAgent (T:4751) (CYGIY) , majority owner of the Abema streaming service that is showing the games in Japan, ended the day with a 4.0% gain. Intraday, it rose as high as 7.3%.
Sports-clothing and soccer-boots maker Mizuno (T:8022) opened on a 2.8% gain, although investor enthusiasm waned in light of a broader market selloff. Nevertheless, Mizuno ended 1.0% to the good on a generally down day.
Online marketplace Mercari (T:4385) (MCARY) saw its shares gain 3.7% by the close. The gains were often sharpest as Tokyo trade began, hot on the heels of the victory.
Japan's largest e-commerce site, Rakuten Group (T:4755) (RKUNY) , finished with a 1.1% gain.
The streaming service Abema is 55.2% owned by CyberAgent, although its joint venture partners, TV station TV Asahi Holdings (T:9409), down 1.0.%, and the advertising agency Dentsu (T:4324) (DNTUY) , down 1.7%, performed in line with the broader market. TV Asahi has a 36.8% stake in Abema, while Dentsu holds 5.0%.
The most-direct winner out of the result might be Adidas (ADDYY) , the shirt sponsor for the Japan team. Its shares opened with a slight 0.3% gain in Europe, although increased sales of shirts in Japan, or to Japan fans, may not move the needle for a US$23.4 billion market cap.
Japan's national sport is sumo, and baseball is generally considered the unofficial flag carrier. But soccer has a firm following among Japan's 124 million citizens. The Japanese team, like South Korea, is also followed by shirt-buying fans in other East and Southeast Asian nations that don't generally share the same kind of success.
There could be long-running gains for sportswear manufacturers if soccer participation increases in Japan after the World Cup. Not only is the J-League popular but Japanese players are increasingly making a name for themselves in Europe's major leagues. Of the 11 starting players against Spain, 8 of the Japan team are based in Europe, half of them in the German Bundesliga.
It's been a broadly down day for Japanese equities. The broad-market Topix ended the day down 1.6%, with the same size fall for the Nikkei 225 index of Japanese large caps. The selling was slightly stronger in small- and mid-caps.
As a result, Japan's win wasn't overwhelmingly positive for sporting-goods manufacturers. Sector bellwether and running-shoe specialist Asics (ASCCY) (T:7936) fell 1.2%.
We are seeing a reversal for some of the trends that drove the yen to its weakest levels since 1990. Any dovish sounds out of the U.S. Federal Reserve combine with any suggestion of a shift in policy at the Bank of Japan to weaken the dollar and strengthen the yen.
The weak yen benefitted the shares of major exporters and companies such as Japan's carmakers that have production outside the country. A stronger currency should help reduce imported inflation but would hurt those foreign-currency sales outside Japan.
The Japanese currency broke below ¥134 to the U.S. dollar during Friday's Asian trade. Its weakness peaked out in October at rates just above ¥150 to the greenback. Both in early November and now in early December there have been sudden surges of greater strength in the yen.
There will be little change in the Bank of Japan's super-accommodating monetary policy at least until the end of the term of current BOJ Governor Haruhiko Kuroda. But Kuroda will step down on April 8, so it's likely his successor will be nominated shortly after Japan's parliament reconvenes in January.
While there won't be a major shift in BOJ policy, there have been rumblings of the need for subtle change. Former BOJ board member Makoto Sakurai said in mid-November that a policy review is necessary once Kuroda steps down.
BOJ Executive Director Shinichi Uchida, meanwhile, told the Japanese parliament that he wouldn't rule out raising policy interest rates, even if he agrees with Kuroda that it's still too early to exit from the BOJ's accommodative monetary policy. The market reads that as meaning Japan might raise 10-year yields, currently managed around 0%, or short-term rates, now still at -0.1%.
The prime catalyst for the original yen weakness was U.S. dollar strength, not the Japanese economy. So remarks such as U.S. Fed Chairman Jerome Powell's suggestion that the Fed may ease up on its rate-hike size and pace, reinforced by occasional comments from other Fed board members, have eased the dollar pressure against the yen and other Asian currencies.
