What Economic Impact will the Tokyo 2020 Olympics have on Japan?
Eight brand-new arenas, 10 temporary venues, citywide infrastructure from high-tech train stations to heat-blocking pavements, and a sprawling Olympic Village pinned to the Tokyo Bay marina. This is the cost of hosting Tokyo 2020. But talking about the precise Olympic finances is somewhat of a guessing game; to put it judiciously, the organizers are not known for their financial transparency. The Tokyo Games were estimated to cost $7.3 billion during the 2013 bid campaign. In December 2020, following the Games one-year postponement, the International Olympic Committee (IOC) claimed they would cost double that. Independent valuations  with no vested interest  have put the total closer to $30 billion. The Total Bill of the Olympics  Whatever way you look at it, hosting the Olympics is an expensive endeavor. But Japan is merely following in the frivolous footsteps of its predecessors. The Sochi 2014 Winter Games cost a whopping $55 billion dollars, about $10 billion more than the entire net worth of Japans richest person, Masayoshi Son. Greece plunged into recession after the 2008 Lehman Brothers collapse, and many still point to the Athens 2004 deficit as a major contributing factor. Official estimates put the cost of Rio 2016 at $13 billion, forcing the government to cut spending in the healthcare, education and policing sectors to foot the mounting bill. When Montreal held the Games in 1976 Jimmy Carter was en route to the presidency, Vietnam was fresh in the memory and the Atari VC2600 was a console of the future; by the time theyd paid it off in 2006 we had George Bush, Iraq and PlayStation 3. The Olympics are not a money-maker in any tangible way, and leave long-lasting financial shockwaves rippling in their wake. In fact, Los Angeles in 1984 was the last, and by some estimates only, time a Summer Games turned over a profit  and only because the infrastructure was already in place. Perhaps the sheer number of zeroes being plunged into Tokyo 2020 is best exemplified by the icon of the Games: the Japan National Stadium. The government tasked one of the worlds top architects with the job, Zaha Hadid, who designed a futuristic stadium in her trademark, reality-warping style. But when construction estimates ran to $2 billion  putting it as the worlds most expensive sports stadium  the plans were scrapped. Hadids replacement, Kengo Kuma, designed a stadium using steel, and wood from every one of Japans 47 prefectures. Though arguably more in keeping with Japanese architectural tradition, costs still ran up to $1.4 billion. This is Tokyo 2020 planning writ large: will-they-wont-they construction plans, pricey imports and skyrocketing bills. The answer is no, says Tokyo-based economist Jesper Koll. The construction is basically done, and for all intents and purposes, paid for. Though stadiums will be operating at around 50 percent capacity (at best) during the Games, further returns are expected over the coming decades. Unlike the Beijing Birds Nest and the Athens Olympic Stadium  which quickly turned into abandoned wastelands  the Japan National Stadium will continue to stage sports and cultural events beyond Tokyo 2020. The prospective boost from inbound tourism disappeared when Japan announced no overseas visitors would be permitted to enter during the Games. Estimates put the maximum returns from tourism, which included up to one million spectators, at $11 billion. That seems like a staggering overnight shortfall. But given the national economy is valued at $5.5 trillion, says Koll, Its a rounding error, in terms of the overall macroeconomic impact on Japan.  The Olympic Games #Tokyo2020 will be held from 23 July until 8 August 2021. Hady Kahy, a Tokyo-based economics professor, isnt quite as bullish. Kahy expects it will take Tokyo years, if not decades, to clear the bill. He describes this as a largely intertemporal problem, due to 10-plus-year projects being crammed into three to four years. [The] deficit will not add to future deficits in itself  just the debt  but it will take away a part of future budgets to pay back that debt, says Kahy. If a Covid-19 spike follows the Olympics, there will be further implications for Tokyo. Economic losses from Japans three government-imposed state of emergencies have cost approximately $58 billion, $57 billion and $17 billion, respectively. From the economics perspective those are numbers, Kahy says. But with every business bankruptcy we have to remember that there is a family, or more sometimes, losing its income and many job opportunities lost with all the combined social and mental fallout, that is going to be reflected in higher numbers of mental problems and probably suicides.  The PR Campaign  In reality, Tokyo 2020 was more about symbolism than profit. It represented Japans return to international stardom and augured an end to decades of deflation and post-bubble hardships. Tokyo 2020 was also billed as the Recovery Games, presenting to the world Japans complete recovery from the 2011 Great East Japan Earthquake disasters. The Games were about branding too. They were an advertisement for Cool Japan: a country of neon-splashed cityscapes and misty mountain shrines; a world of culture, technology and omotenashi. Tokyo 2020 was supposed to shunt forward the same PR juggernaut which contributed to a massive tourism surge between 2012 and 2019. After eight years of back-to-back increases in overseas visitors, Japan had predicted a record 40 million in 2020. [Tokyo] was unlikely to be a money-making Olympics in the best of cases  [Tokyo] was unlikely to be a money-making Olympics in the best of cases, says Koll. The Olympics were going to be a showcase of the lifestyle superpower Japan, the lifestyle superpower Tokyo that was going to be the principle long-term benefit, in terms of branding Japan as the most successful post-industrial society with the highest quality of life.  With the immediate economic impacts halted due to Covid-19 and the branding campaign battling a year of Olympic PR struggles, it stands to reason that perhaps Japan should have made plans to cancel Tokyo 2020. The Host City Contract  The Host City Contract, signed by the IOC, the Japan Olympic Committee, and the City of Tokyo, gives the former an incredible amount of leverage. Only the IOC can unilaterally terminate the contract, thereby canceling the Games, and has sole discretion over whether it decides to give any contributions. As noted in Clause 66, the IOC can terminate the contract if it has reasonable grounds to believe the safety of the participants of the Games would be seriously threatened or jeopardized for any reason whatsoever.  Strange that a potential melting pot of Covid-19 variants and states of emergency across the nation dont fulfill that criteria. When you realize the IOC made a record $1 billion profit between 2013 and 2016 (78% of which came from broadcasting rights for the Sochi and Rio Games), it puts its reticence into context. Or as Koll rather bluntly states: Its simple greed.  Its simple greed  In Breach of Contract  Most legal interpretations suggest if Tokyo tries to prevent the Games from happening it would be a breach of contract, followed by significant cost incursions. Tokyo-based Swiss lawyer Michael Mroczek, however, believes Tokyo could cancel the Games, without remittance, under certain conditions. It is worth stressing again that a claim of damages [from the IOC] would be possible, only if the City of Tokyo is not able to prove that it was not at fault in canceling the Games, he says. The question that arises is whether the cancellation of the Olympic Games due to the pandemic would be considered the fault of the City of Tokyo or not.  Furthermore, based on Article 119 of the Swiss Code of Obligations which primarily governs the Host City Contract, Mroczek says, Tokyos obligation to plan, organize, finance or stage the Olympic Games would automatically extinguish if the performance becomes impossible and the impossibility is not caused by the City of Tokyo.  But the Olympics are being pursued with a dogmatic fervor; at less than a month to go there seems little can be done to stop them. Mroczek concedes the above scenario is no more than a Hail Mary, particularly in light of a clause which indemnifies the IOC in the case of damages. Either way, the economic fallout of Tokyo 2020 is unlikely to harm Japan in any long-lasting, tangible way. But the nations reputation is on the line. And as the various legal, public health, political, and financial forces intermingle, the Olympics are set to leave an uncomfortable legacy indeed.