Introduction
Along with the majority of planned events for 2020, the Tokyo Olympics were postponed from 24th March 2020 to the summer of 2021.
This event, however, was unique in facing a challenge of unprecedented proportions.
The Covid-19 pandemic threw preparations off course that were seven years in the making, placing financial sponsors in jeopardy.
There are a host of components at risk due to the delay, chief among them being the financial implications not only for the Tokyo Games, but also for the wider Japanese economy.
More specifically, it is important to consider the financial burdens endured by previous host economies, examine Japan’s preparations pre-pandemic, investigate the financial impact incurred by the delay, and finally reflect on Japan’s response to the pandemic.
These issues beckon the question: will Japan’s financial gamble to postpone the Tokyo Olympics of 2020 pay off?
The Cost of Past Olympic Games
The cost of Tokyo 2020 can only be adequately assessed in the context of past host nations. For the purposes of this article, Athens 2004 will be examined in terms of the financial challenges faced by Greece.
The 2004 games are perhaps the most effective example to demonstrate how the cost of the Olympics can negatively affect the economy of a country years after the occurrence of the event.
The fanfare that surrounds the host country can certainly be an enticing prospect, inviting a welcome opportunity for the particular region to flex its muscles on the global stage. This was especially applicable to Greece in 2004 due to its status as the birth nation of the games.
The Athens Olympics were reported to have cost $11 billion more than double the initial budget, rendering it the most expensive Olympic event in history at that point.
In recent years, the argument has arisen that a direct link exists between the Athens 2004 games and the severe financial crisis of Greece some years later.
As Bloomberg News reported, within days of the closing ceremony on 29 August 2004 it became apparent that the financial repercussions of the games were to be worse than expected. The 2004 deficit was 6.1% of GDP, the highest in the European Union.
It is important to note, however, that Greece’s recent financial difficulties cannot be entirely reduced to the cost of the Olympics. This viewpoint is substantiated by US economist Andrew Zimbalist, whose expertise lies in the financial impact of major sporting events.
He states that whilst it is difficult to argue that the Olympics were an important factor behind the Greek financial crisis, it is ‘likely that they contributed modestly to the problem’.
Be that as it may, from a financial perspective, it is clear that Athens 2004 was not a boost to Greece’s struggling economy.
In a similar vein, Beijing 2008 was not without its financial challenges. Furthermore, in the years after 2008, China was still paying for a games that cost $70 billion, with many of its Olympic facilities underutilised.
Moreover, costing $14.8 billion, London 2012 was considered to be a relative financial success compared to the Sochi Winter Olympics which cost an eye watering $51 billion.
Whilst hosting the Olympics is an inherently risky financial endeavour, some countries navigate the challenges more successfully than others.
Tokyo’s Pre-Pandemic Preparations
In light of the financial impact of the 2004 Olympics on Greece, we may now assess Japan’s preparations through a similar financial lens.
On 7th September 2013, Jacques Rogge, the president of the International Olympics Committee, announced that Tokyo would be the host city of the 2020 Olympic Games.
At the time, many doubted Japan’s capacity to host the games. Only two years previously, the country had endured the Fukushima nuclear disaster in March 2011. From an economic standpoint, it seemed questionable that Japan could host an event of Olympic proportions.
In 2013, Japan’s public debt stood at more than double the size of its $6 trillion economy.
Despite Tokyo relying on a number of refurbished venues, the cost of the games was estimated to be just shy of $8 billion.
Despite these challenges, some remained optimistic about the financial impact of Tokyo 2020.
According to SMBC Nikko Securities, it was predicted that the games could bring $40 billion to the Japanese economy as well as creating more than 150,000 jobs.
Moreover, the IOC stated that in the summer of 2019, Tokyo was better prepared than any city before it. Impressively, an approximate 3.22 million tickets were sold during the initial domestic sales phase in June 2019, providing Japan with a confidence boost.
However, budget figures released in December 2018 put the total cost of Tokyo 2020 at $12.6 billion, nearly double the original estimate of $7 billion.
However, this concern was offset by local sponsorship revenue exceeding $3 billion – more than any other Olympic event in history. All things considered, Japan seemed well positioned to enter its Olympic year.
Impact of Covid-19 Pandemic: Delay from 2020 to 2021
The emergence of the Covid-19 pandemic forced all of this progress to a halt. Despite reassurances in early 2020, on 24th March the news that Japan had been dreading materialised – Tokyo 2020 was to be delayed until the summer of 2021.
This was an unprecedented decision as the games had never been postponed in peacetime. One of the key challenges facing Japan was navigating the financial blow.
As reported by The Japan Times at the end of 2020, it was estimated that the delayed Tokyo Olympics will cost an extra $2.4 billion.
More specifically, an additional $1.5 billion will be needed to for the operational costs of the delay and $900 million is to be spent on coronavirus countermeasures.
To further exacerbate matters, Tokyo faced a sponsors crisis at the end of 2020. Despite Tokyo successfully raising a total of $3.1 billion in sponsorship funds, many of these companies endured hardship as a result of the pandemic. For example, in May 2020 worldwide Olympic sponsor Toyota forecasted a collapse in profits.
Furthermore, in a survey conducted by NHK, two thirds of corporate sponsors for Tokyo 2020 revealed that they were unsure if they would extend their contracts past December.
However, the beginning of 2021 was accompanied by some positive news. The domestic sponsors of Tokyo 2020 agreed to contract extensions, thereby avoiding the embroilment of the games in further financial complications.
Tokyo 2020 president Yoshiro Mori commented that the games will benefit from $214 million in additional contributions from domestic sponsors, including the Nippon Telegraph and Canon.
Overall, it seems that Japan has been able to regain its balance following the shock of the pandemic, and productively tackle the financial challenges that the health crisis presented.
Japan’s Response to Covid-19
It is worth exploring Japan’s response to the pandemic in more detail. One of the most significant developments in light of Covid-19 is the ban on international spectators.
In March 2021, it was officially announced by Japanese authorities that no international fans will be permitted entry to the delayed Tokyo 2020 Olympics.
This decision came amidst growing concerns that the public health risk caused by the pandemic will simply be too great to accommodate international spectators, as justified by evidence of new variants of the virus.
From an economic perspective, this ban is yet another setback for Japan. Approximately 600,000 tickets were sold internationally, and these will all be refunded in line with the ban.
This will have a negative financial impact, as the absence of international fans and limited home spectators means that people will be spending less money within the local economy.
Moreover, there has been controversy surrounding Japan’s plans to vaccinate athletes ahead of the civilian population.
To date, Japan’s vaccination programme is far behind that of most major economies, as only one vaccine has been approved.
Since February, only one million people have received their first dose of the vaccine, with an increase in new cases also being a cause for concern.
However, the Japanese government has been quick to shoot down rumours that priority for vaccination was being provided to Olympic athletes.
Even so, Japan’s slow progress with vaccine distribution raises concerns over its preparations for this summer.
Conclusion
Overall, despite Japan’s strong preparations pre-pandemic, its progress has been hit with huge financial challenges in the delay of Tokyo 2020.
Despite the measures taken to ensure financial stability for the games, it is clear that a balance needs to be struck between ensuring profitable games and mitigating the public health risk posed by a pandemic that remains a global threat.
It appears that Japan has prioritised the success of the Olympics over the protection of the health of its population, with 61% of the population disapproving of the Olympics taking place this year.
Taking these factors into consideration and placing Tokyo 2020 within the broader context of the global pandemic, both cancelling and proceeding with the games present distinct financial risks.
Cancelling the games altogether, which is where public opinion in Japan lies, would be a financial catastrophe.
However, in light of the pandemic, these financial implications are dwarfed in the minds of many by the significant public health risks posed by the prospect of hosting the event.
Ultimately, with less than one hundred days to go until the opening ceremony, we will see how the Japanese economy fares with the consequences of a delayed Olympics.
