Japan will score in the Cup come rain or shine

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The Independent Online

As preparations for the World Cup reach their peak, Japanese companies are whipping up a major new market for weather derivatives.

As preparations for the World Cup reach their peak, Japanese companies are whipping up a major new market for weather derivatives.

Japan's weather is a highly unpredictable beast, as the teams and tourists will soon discover. Although the tournament has been timed to end before the onset of the typhoon season, every June there are thunderstorms, torrential downpours and high winds.

For businesses up and down Japan, much is riding on the tourism and travelling associated with the World Cup, and insurance companies are offering weather derivatives so they can hedge themselves against loss of custom caused by Mother Nature. Buying interest is centred on the days when key matches are being played, although theme parks such as Tokyo Disney are more interested in buying contracts for the days between games, when tourists are expected to visit.

The derivatives, marketed by large insurance groups such as Mitsui Sumitomo and Tokio Marine, are particularly aimed at hotels, restaurants and other businesses that have invested heavily in preparation for the expected tens of thousands of fans.

In a basic "rain" contract, a customer would pay a premium of 1m yen (£5,500) and receive 1.5m yen for every day it rains at least 10 millimetres.

But the World Cup has created a market for more complex weather derivatives. One group offers a contract based on typhoons, which can easily keep the entire population indoors and stop travel.

Using data that goes back to 1970, the Benfield Greig Hazard Research Centre in London has identified a "high probability" of at least one tropical storm during June.

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