Sports

Commentary: The eye-watering costs of postponing the Tokyo Olympics

SINGAPORE: This year's Olympic games are cancelled. You may have other matters occupying your thoughts, toilet paper, virus-induced divorce rates or low Wi-Fi speed for Netflix.

But Japanese taxpayers have a big new worry to add to their plate.

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Massive investments have been poured into hosting the Games. For example, the New National Stadium, built by Azusa Sekkei Co for US$1.4 billion was already completed in November last year.

Besides this site for the Olympics and Paralympics, most other real estate investments in preparation of the Olympics are completed and have largely been paid for or financed.

The postponement of the Olympics may affect down-payments on loans, but not the physical upgrade Tokyo has enjoyed in the ramp-up so far.

THE ECONOMIC COSTS

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The economic impact comes as a pre-Olympic stimulus for construction, development, design and other services.

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Total costs of the Tokyo Olympics were said to have risen beyond US$12 billion, yet the City of Tokyo alone will spend another US$7.4 billion on projects, directly and indirectly related to the games such as installing barrier-free facilities for the Paralympics, training programmes for volunteers, and advertising and tourism plans.

News outlets Nikkei and Asahi have estimated that the Olympics would cost Japan about US$28 billion in total – almost quadruple of the US$7.3 billion declared when Tokyo won the bid in 2013. Only US$5.6 billion of operating costs have been covered with revenues from sponsors, ticket sales, marketing, and IOC contributions.

Most of the outlays have already been made, although the actual costs of delay are not clear yet. A cancellation altogether would have been rather disastrous – and therefore was being avoided at all costs.

The clocks have stopped for the Tokyo Olympics AFP/Philip FONG

Over 600,000 overseas visitors were supposed to flock the hotels and restaurants in the metropolis of Tokyo. The Japanese government was also expecting an image boost and bigger tourism dollars after a recent consumption tax hike.

Japan, like many countries facing the economic fall-out of a coronavirus pandemic, was banking on the Olympic for a boost in consumption, after more than two lost decades.

Since 1991 economic growth has languished, real wages dropped by 5 per cent, consumption is depressed, and inflation problematically low.

Prime Minister Abes programme, sometimes called Abenomics and consisting of strict monetary policy, fiscal consolidation and a growth strategy, has been well received and has had positive effects. But people are still waiting for growth, which was to come also from the Olympics, to materialise.

But now that widely anticipated event, seven years in the making, and all the dollars it would bring have been put on hold.

WHAT DOES THIS MEAN IN NUMBERS?

The delay of the Olympics is expected to lower economic growth by 0.5 to 0.8 percentage points. Things were already looking slightly grim for the country in February, when the number of foreign visitors to Japan fell by 58.4 per cent, when mainly Koreans and Chinese potential visitors chose to cancel their trips.

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Even when the Olympics is held, financing the gap of a year will add to the cost.

The costs of maintaining venues or storing materials are high. Some estimate the cost of the delay at US$2.6 billion – almost half as much an average Olympic Games between 1960 and 2016 cost.

Besides the costs, the revenues that can be expected from hosting the Olympics are not so clear cut. Researchers studied the benefits of tourism to Australia related to the Sydney Olympics and found that they were actually negative, meaning an overall loss of consumption was higher than compared to the base case in which the city had not hosted the Olympics.

The economic impact of cancelling the Games isnt limited to within Japan. US broadcasting giant NBC sold a record-breaking US$1.25 billion worth of advertisements for the Tokyo Olympics, which could now be deferred.

The IOC and 32 international sports federations held a teleconference where it was decided to respect the qualification process for the delayed Tokyo Olympics AFP/CHARLY TRIBALLEAU

The global sports industry and advertising industry will have to rethink the next 24 months.

THE PSYCHOLOGICAL TOLL

Psychologically, it is hard to overestimate the effect of this delay. The 1964 Tokyo Olympics was a coming-of-age story for Japan, whose debut on the world stage in hosting the worlds biggest sporting event events demonstrated to the world a rapidly advancing Asian democracy.

Since then, much has changed. Japan has arrived, is rich but is no longer growing quickly.

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