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How Japan's Olympics turned into an economic disaster

·5 min read

The Olympic Games was supposed to offer Japan a bright new start.

Former Prime Minister Shinzo Abe hoped it would reignite national pride, rebrand the nation on the global stage and show Japan could go toe-to-toe with regional rival China.

Instead, the Tokyo Olympics Games 2020 risks becoming a public relations disaster, exposing deep flaws in Japan’s political leadership.

“To be honest, I did not expect the Olympics to be happening like this,” Toshiro Muto, Tokyo 2020 chief said earlier this week.

“I thought the coronavirus would be gone or settled by the time the Olympics started. It hasn’t, and in some ways the problem has gotten more serious.”

Today, after being delayed for a year due to the pandemic, Tokyo 2020 will officially get underway with no spectators, fears of outbreaks in athletes’ bubbles and waning support.

The cost has more than doubled to around $15.6bn (£11.34bn) from its original estimate, with $3bn being added to the bill as a result of Covid safety measures.

Prime Minister Yoshihide Suga remains under increasing pressure to cancel the event, with Muto this week saying he would keep an eye on Covid infection numbers and hold "discussions" if necessary.

Japan, which avoided the worst of the infections last year, has seen several new peaks of coronavirus infections in 2021. Yesterday, it reported 1,979 new cases - the highest since 2,044 were recorded on January 14.

In total, it has reported about 853,000 cases and 15,100 deaths since the pandemic began, most of them this year.

The vaccination progress in the country has been slow. About 23pc of Japanese are fully vaccinated - a long way short of the level believed necessary to have any effect on reducing the risk in the general population.

Amid rising cases, support for the Olympic games has fallen. A recent survey by broadcaster JNN found that 34pc wanted to cancel, or postpone them again.

It wasn’t supposed to be this way. When it won the Olympic bid eight years ago, Japan had reason to be optimistic. “The Tokyo 1964 Games completely transformed Japan,” according to this Games’ Foundation Plan.

“Motorways and Shinkansen bullet train lines constructed at the time helped form the foundations of Japan’s economic growth, and remain indispensable to the country’s economic and cultural infrastructure.”

It even “enhanced Japanese people’s awareness of the outside world and helped bring about rapid growth of Japan’s economy,” it said.

Woman holding sign - REUTERS/Androniki Christodoulou
Woman holding sign - REUTERS/Androniki Christodoulou

Before the pandemic, there was general support for the games. The Olympics were the crown jewel in the government's strategy of turning tourism into an economic growth engine.

Abe said the Games could reignite an economy blighted by decades of sluggish productivity growth and intermittent bouts of deflation.

He pitched it as “a trigger for sweeping away 15 years of deflation and economic decline”, adding the event to his “three arrows” plan of loose monetary policy, fiscal stimulus and economic reforms to enliven the nation.

The event has sparked some economic activity. The bill included useful work such as rebuilding the 1964 National Stadium, for instance.

But much will be lost. Naohiko Baba at Goldman Sachs had anticipated visitors would spend ¥203 bn (£1.4bn), three-quarters of which would come from international spectators.

Tokyo 2020 chief Toshiro Muto - Philip Fong/Pool via REUTERS
Tokyo 2020 chief Toshiro Muto - Philip Fong/Pool via REUTERS

Much of the expected ¥215 bn of domestic spending will also be lost due to crowds being excluded from events.

Even if the event had gone as planned, it is not entirely clear it would have boosted the economy by much.

Tom Learmouth at Capital Economics notes that ticket sales plus extra visitor spending even in a normal year would only amount to 0.03pc of GDP, “so it is pretty trivial for the economy in comparison with the impact of the virus on economic growth.”

A look at the London’s 2012 Olympic Games shows tourism would have had little benefit in Tokyo. “The impact on tourism in the UK from the London Olympics appears to have been negative,” says Douglas McWilliams at the Centre for Economics and Business Research.

“More people were put off travelling to London than were attracted,” he says. There was some regeneration of parts of east London, however, which estate agents continue to credit with boosting prices in the area by increasing its desirability.

More significant may be a “halo” effect if the host country gets a reputational boost from the Games, says McWilliams.

In 2012 he estimated the UK could get a £21bn export boost over five years as the successful Olympics burnished Britain’s brand.

But he is “not sure that there will be a great halo effect for Japan Inc.”

Businesses have spent more than $3bn on sponsoring the Olympics, yet companies including Panasonic and Fujitsu have decided against sending top staff to the opening ceremony, while Toyota has chopped an advertising campaign planned to link in with the competition.

Suga has spent months insisting the Olympics will go ahead, albeit with increasingly strict restrictions.

He will have to hope sporting fever catches on quickly. A general election is set to take place before October, and his party suffered in Tokyo’s local vote this month with Covid and the Olympics both widely blamed for the result.

Wider reputational harm has also taken place, with traditional pre-Games excitement over the prospect of watching the world’s greatest sports stars replaced with an unedifying series of gaffs from senior management.

A spate of remarks deemed sexist, racist and disablist, both recently and in the past, have prompted several top bosses to resign.

These include former Prime Minister Yoshiro Mori who stepped down as chief of the Olympics in February after he apologised for reported sexist comments.

He was quoted as saying: “If we increase the number of female board members, we have to make sure their speaking time is restricted somewhat, they have difficulty finishing, which is annoying.”

On Thursday, Tokyo 2020 organisers fired the show director for the opening ceremony over a decades-old skit referencing the Holocaust.

Meanwhile, on Monday, a composer for the ceremony stepped down following an outcry over old interviews in which he described abusing disabled schoolmates.

Far from boosting Japan’s reputation on the world stage, the Games might end up tarnishing it with uncomfortable signs of a distinctly outdated corporate and public culture.