December 15, 2014 / 5:05 AM / 4 years ago

Japan's inbound tourism growth boosts retailers, railroad operators

* Yen at 7-year low pushes foreign tourist numbers to record
    * Tourism and related stocks gain on surge in tourist
    * Railways, resort operators, retailers the main
    * Foreign tourist numbers expected to keep on rising

    By Ayai Tomisawa
    TOKYO, Dec 15 (Reuters) - Investors are snapping up Japanese
stocks in the retail and transportation sectors, thanks to a
weaker yen that has lured a record number of foreign visitors in
one of the few bright spots for the economy. 
    The yen has tumbled to seven-year lows making Japan cheaper
for tourists and helping companies that cater to tourists such
as railway operators and certain retailers.
    Tourism spending is a boon to Japanese firms battling a
stagnant domestic economy, which slipped into recession in the
third quarter, and a declining population. 
    Foreign visitor numbers hit a record 11 million from January
to October, up 27 percent from the previous year, according to
the Japan National Tourism Organization.
    These tourists spent 1.468 trillion yen in that period,
surpassing last year's full year figure of 1.417 trillion yen,
according to the Japan Tourism Agency. In July-Sept alone, they
spent a record 550.5 billion yen, up 41.2 percent year-on-year.
    "The trend has just started. Foreigners will continue
enjoying bargains in Japan as a weak-yen trend is likely to
last," said Daiju Aoki, senior economist at UBS Securities. "We
expect double-digit growth in tourism spending to continue."
    The yen has lost about a third of its value over the past
two years since Prime Minister Shinzo Abe has pushed through
monetary easing and government spending to revive the economy. 
    Railroad companies are among the stocks that investors say
benefited. Keisei Electric Railway Co, which connects
Tokyo's downtown and the Narita Airport, hit a 23-year high
recently and is up 43 percent this year, compared to a 5.3
percent rise in the Nikkei share average.
    Central Japan Railway Co, which runs bullet trains
between Tokyo and cities in Western Japan including Kyoto, a
major tourist attraction, has hit a multi-year high, and is up
37 percent this year.
    Other beneficiaries include Oriental Land Co, which
operates Tokyo Disney Resort, which hit a record high this month
and is up 74 percent year-to-date.
    Real estate investment trusts (REITs) that invest in hotels
are also booming. Japan Hotel Reit Investment Corp hit
a multi-year high this month and is up 56 percent this year. 
    Some shares have risen so much that some investors think
they are now fully valued.
    For instance, Oriental Land is already one percent above the
 target price of analysts at Nomura, which recommends shares as
    "Some of these stocks' valuations are expensive," said
Makoto Kikuchi, the chief executive of Myojo Asset Management,
adding that income from foreigners accounted for only a small
portion of the group's sales.
    However, some other shares, such as retailers that have been
stepping up efforts to woo foreign tourists, could rise more.
    To encourage foreign shoppers the government in October
expanded tax-free items for foreign tourists to include
consumables such as snacks, drinks and cosmetics on combined
purchases over 5,000 yen.
    "Retailers like Bic Camera are worth looking at as more
foreign tourists buy Japanese goods such as candies and pens,"
Masashi Oda, chief investment officer at Sumitomo Mitsui Trust
    Bic Camera Inc.'s inbound sales for the first
quarter through November soared 2.5 times on the year, the
company's spokesman said.
    Their shares rose 100 percent so far this year to 1,182 yen.
But SMBC Friend Securities think the shares could rise to 1,500
    "Since consumables became tax free, sales of alcohol
beverages and drugs has been rising dramatically. We are also
seeing sales growth in cameras and watches as the number of
foreign visitors is increasing," he said.

 (Reporting by Ayai Tomisawa; Editing by Nachum Kaplan & Shri
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