Watching Sumo can tell us about Japan’s economy

1200x-1Watching sumo on television can provide an insight into how the economy is faring, according to one of Japan’s top economists.

He senses positivity and optimism, in contrast to the negative and pessimistic reports about the economy elsewhere in the media.

The economic analysis of the sumo starts with the wrestling itself. Forbes informs its readers that last month, a sumo wrestler named Kotoshogiku became the first Japan-born wrestler in a decade to win a tournament after domination by Mongolian fighters.

“It was a great day for all people in Japan”, a Tokyo-based real estate dealer told Forbes.

The theory is that sporting success raises people’s spirits and makes them more willing to spend and invest. Plausible, but not particularly scientific.

However, the advertisements which are shown during a sumo match, appear to provide an indication of how companies spend their money.

Sumo is most widely watched on NHK, the national broadcaster which does not show advertisements. However, it does relay pictures from the wrestling ring, which show people parading around with banners.

Those banners, which are rather old fashioned, carry ads for comics, snacks and beer. They cost around $500 dollars each. NHK allows them to be seen on TV, even though it does not receive any income from them.

Akiyoshi Takumori, an economist at Sumitomo Mitsui Asset Management, believes that by counting the number of advertisements, investors can gauge whether executives are bullish on the economy and willing to spend their companies’ cash.

“The ads are like supplementary traffic lights to the main ones, regular economic indicators,” Mr Takumori  told Bloomberg. “If you watch them, you can tell whether the main lights will turn red or not.”

Away from the wrestling ring, the red lights were being flashed by Nomura, the leading bank. Its latest report clearly predicts another downturn in the Japanese economy, pushing it back towards recession.

Nomura says that although it expects the negative interest rate policy adopted by the Bank of Japan last month to have some effect in terms of weakening the yen, it is unlikely to provide a major boost to the economy, given such factors as the negative impact on earnings at financial institutions.

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