What would an Olympics cancellation cost Japan?

Japan and Olympic organisers insist the Games in Tokyo are on, despite the coronavirus outbreak. With a dearth of reliable figures, opinions on the cost of a cancellation vary, yet experts agree on one point: Games or no, the main risk to Japan’s economy is a prolonged coronavirus epidemic.

At the end of 2019, organisers estimated the total cost of the Games at about 1.35-trillion yen ($12.6-billion).But the actual costs have been hotly debated, with an audit report estimating government spending from the bid in 2013 until 2018 at 1.06-trillion yen, nearly 10 times the budget.

Japanese businesses have also poured money into the event in sponsorships, paying out a record 348-billion yen ($3.3 billion). That figure doesn’t include the partnerships signed between companies and the International Olympic Committee for rights to sponsor several Games.

Analysts at Capital Economics say most of the spending has already happened. That means the effects of outlays, most notably on construction of venues, has already been factored into gross domestic product (GDP) in recent years.

But a cancellation would be a drag on tourism and general consumption. Visitors from South Korea made up the second largest contingent of tourists to Japan, behind only China, which together accounted for nearly half the 31.9-million visitors in 2019.

Japan has a diversified economy not heavily reliant on tourism. But with domestic spending already weak, the hit from a cancellation could ripple through and further depress local purchasing.

Economists at research firm Nomura predict a 0.7% contraction in GDP for 2020, but warn that could be 1.5% if the Games are cancelled.

Takashi Miwa, an economist at the firm, said the main impact would be on domestic spending, because a cancellation of the Games “would badly affect Japanese consumer confidence”. It could also deprive the country of 240 billion yen ($2.28 billion) in spending by foreign spectators.

So far 4.5-million tickets have been sold in Japan. Using a projection of 300000 foreign visitors, economists at SMBC Nikko Security forecast a cancellation and continued spread of the virus would shrink Japan’s GDP growth by 1.4%. That forecast assumes the virus is still spreading globally in July. The group estimates a 0.9% drop to GDP growth if the outbreak ends in April. — AFP

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