June 18, 2024


Savvy business masters

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.

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

READ: Commentary: Maybe the Tokyo Olympics should be postponed

READ: Commentary: Organisers may have little choice than to cancel the Tokyo Olympics

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

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 Abe’s 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.


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 isn’t 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

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.


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 world’s 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.

After the earthquake in Tohoku and the Fukushima nuclear disaster in March 2011, and a series of accounting and quality scandals from Japan Inc, it was up to the Olympics to redeem the country. All stops were pulled to make sure the Olympics would become a showcase of Japanese pride in 2020.

READ: Commentary: COVID-19 forces Japan to rethink its view of toilet paper

READ: Commentary: Japan shows how not to deal with a COVID-19 outbreak

Now that the opportunity to celebrate sports with the world has been put on hold, feelings of disappointment and misfortune in the country are strong and could have a strong negative influence on domestic consumption.

After the recent consumption tax hike depressed consumption, this cancellation is most unwelcome – and aggravates Japan’s growth problem.


The IOC allowed Japan the opportunity to publicly announce the postponement while it affirmed commitment to a 2021 timeline and to hold the Olympics in Tokyo “at the latest” in summer 2021. This gives a sense of control even if large events seem to be controlled by a virus.

A constructing site is seen next to the National Stadium, the main stadium of Tokyo 2020 Olympics a

A constructing site is seen next to the National Stadium, the main stadium of Tokyo 2020 Olympics and Paralympics, in Tokyo, Japan March 25, 2020, a day after the announcement of the games’ postponement to 2021. REUTERS/Naoki Ogura

Yet, there is hope. Postponed is not cancelled. There is even some speculation that post-coronavirus, people will return to travelling with a vengeance once the gates open.

After NOlympics 2020, here’s to hope, perseverance and resilience – truly Japanese traits – that the holding of Tokyo Olympics in 2021 will give many more reasons to celebrate.

Patrick Reinmoeller is professor of Strategy and Innovation at IMD Business School in Switzerland and Singapore.

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