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Hot summer expected to warm up economy

Hot temperatures this summer are expected to spur consumer spending, which in turn will boost corporate earnings and give a lift to the entire economy.

According to the Japan Meteorological Agency, temperatures this month and in August are expected to be much higher than last year, when businesses were hit hard by a cool summer.

If this summer is as hot as 1994 — when temperatures were sizzling — Japan’s gross domestic product will increase by around 2 trillion yen for the year through next March 31, according to estimates by the Dai-ichi Life Research Institute.

“The hotter summer temperatures are, the greater their impact will be on consumer spending on goods such as air conditioners,” said Toshihiro Nagahama, senior economist at the research institute.

The institute says a rise in temperature of just 1 degree increases spending on summer products by 2.5 percent.

Air conditioner sales in value terms, for example, plunged 44 percent in July 2003 from a year earlier, while sales of nonalcoholic beverages fell 8.8 percent in volume.

Higher air conditioner sales mean a boost in electricity use.

Leisure-related spending can be expected to pick up with more people taking trips.

The economic benefits of this year’s hot summer are expected to continue into the autumn as good harvests are expected for many agricultural products, boosting the income of farmers and expanding their personal spending.

Investors are hunting for stocks expected to benefit as the mercury rises.

“Investors have already begun to snap up companies that will benefit from hot weather on expectations that their earnings will increase,” said Takahiro Funato, senior manager at the investment research information department of UFJ Tsubasa Securities Co.

Shares of Daikin Industries, the largest manufacturer of commercial-use air conditioners, reached this year’s high of 2,975 yen on the Tokyo Stock Exchange on Thursday.

Also hitting new highs for this year were Ito En, the top producer of tea-leave products and green-tea drinks, and Morinaga Milk Industry, a leading ice cream producer.

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