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25 January 2021, 9am

Massive hit to Japanese economy

Possible impact of Olympic cancellation

by Brett Larner

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The worst case scenario for the Tokyo Olympics – cancellation – has become more than just a possibility. Kansai University professor emeritus Katsuhiro Miyamoto, 76, has estimated that cancellation would result in an economic loss of over 43.5 billion USD (35.8bn EUR).

The one-year postponement from last year has already inflicted a 46.2 billion USD loss. Apart from further postponing or cancelling the Games there is also the option of staging the Olympics without spectators.

Government sources say that another postponement is not a realistic option. Tokyo has projected a direct economic effect of over 49.4 billion USD in building and maintenance of facilities and infrastructure to put on the Games. Professor Miyamoto estimates that the loss of revenue from operating expenses, participants’ consumption, domestic consumption and the like that would follow a cancellation of the Olympics would result in a loss of just under 33.4 billion USD.

Another 10.1 billion USD would disappear through losing the legacy effect of post-Olympic facility usage, education and urban development, bringing the total loss from a complete cancelation to over 43.5 billion USD or about 1% of Japan’s GDP. This would be roughly equivalent to the 40.5 billion USD spent at all department stores nationwide last year. “On top of the coronavirus, cancellation would be another serious hit to the economy,” commented Professor Miyamoto.

If the Games do go ahead, they face a rough road. In a downsized version it would be highly likely that events would be closed to spectators. According to preliminary calculations, halving the number of spectators and cutting back the opening and closing ceremonies would still result in a loss of almost 13.4 billion USD. Staging it without any spectators would bring the loss to over 23.3 billion USD. “The Olympics should go ahead even without spectators, but how other countries hit hard by the coronavirus would be able to deal with the situation remains unclear,” said Professor Miyamoto. “If the International Olympic Committee made the decision to cancel the Games, the economic and political fallout would be extremely severe.”

In preparation for the Tokyo Olympics, 42 venues in nine prefectures have almost been completed along with investment in accommodations, road improvement and other infrastructure by local governments. “80% of the economic spillover occurs prior to the Games,” commented Professor Miyamoto. A private research institute in the UK claimed that the 2012 London Olympics resulted in an economic spillover effect of around 19.3 bilion USD with 82% of the effect coming before the Games opened.

If the Tokyo Olympics were cancelled, the value of properties such as the main stadium built for the Games would be significantly reduced by not being able to apply the “Olympic” brand name to them. There is concern about additional losses to the financial burden of maintaining them under those circumstances. “The investment in preparations has already been made and they are all but completed,” said Professor Miyamoto. “If the Olympics were cancelled it would have a tremendous impact on consumer sentiment, and the value of the Olympic Village and other facilities would be significantly reduced.”

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