Coronavirus: Tokyo Olympic Games delay a blow to Japan’s economy but secondary to Covid-19 fallout

Estimates of damage from the postponement of this year’s event in Tokyo by one year range from 600 billion yen (US$5.4 billion) to 2 trillion yen (US$18 billion)

But the delay is overshadowed by the coronavirus outbreak which has deepened Japan’s recession fears having already caused tourism to grind to a halt

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This is the first time in their 124-year history that the Olympic Games have been moved or delayed during peacetime. Photo: Reuters

Finbarr Bermingham,He HuifengandSu-Lin Tan

Published: 6:30pm, 25 Mar 2020Updated: 10:56pm, 25 Mar 2020

From tour operators and event sponsors, to merchandise hawkers and film studios, the postponement of the 2020 Olympic Games in Tokyo has added another wrinkle of anxiety to growing concerns about the outlook for the Japanese and world economies.

But the real concern is still reserved for the coronavirus pandemic which forced the delay, the effect of which would have negated any positive financial boost from the Games had they gone ahead, economists said.

Nonetheless, while much of the economic benefit from the investment in infrastructure for the Olympics has already been banked, a cascading effect from the one-year postponement, which was announced on Tuesday, is certain to ripple through consumption and business confidence.

Companies around the world expecting a bumper payday off the back of the event are hoping their goods can keep and that orders will return when the Olympics eventually take place in 2021.

The postponement is clearly better than a cancellation, and [in that regard] it is a lifesaver for Japan

Yasuhide Yajima

“The impact of this epidemic on tourism is extremely significant. The delay of the Olympic Games is even worse,” said Eiha Jo, founder of Tokyo-based tour company, China Enterprise. “My company served over 600 high-end Chinese tourists last year. They went to Japan to play golf, access health care services and look for properties to invest in. But I’m afraid I will see a big drop in business, compared to last year.”

Analysts in Japan are now pinning their hopes on next year’s rescheduled event to rejuvenate the economy, which many expect to fall into recession in the first quarter after an annualised growth drop of 7.1 per cent in the fourth quarter of 2019. A recession is defined as at least two consecutive quarters of negative growth.

“The postponement is clearly better than a cancellation, and [in that regard] it is a lifesaver for Japan,” said Yasuhide Yajima, chief economist at NLI Research Institute, a unit of Japan's largest life insurer, Nippon Life Insurance. “Still, the decision will blow off the standard scenario for this year that had envisaged some recovery of the Japanese economy around the sporting event.”