The economics of the Tokyo Olympics

In ‘normal’ circumstances, now would be an exciting time for the world and especially the host nation with the Olympics upon us. But these are not normal circumstances, and the lead up to the already delayed Tokyo Olympics has been far from ideal.

The onset of COVID-19 in early 2020 forced the hand of a reluctant International Olympic Committee (IOC) to grant Tokyo a 12-month delay, and with COVID outbreaks still occurring in the city and indeed in the rest of Japan some in the community think holding the Olympics is still a big health risk to Japan and the visiting athletes and officials.

COVID-19 has already put a huge dent in the usual economic benefits a host nation and city gains from holding the Olympics. An Olympics without spectators has hit Tokyo hard.

According to Japanese forecasts, hosting the Tokyo Olympics and Paralympics without spectators is estimated to result in an economic loss of up to ¥2.4 trillion in (A$29.1 billion) Japan. The closed door Games is expected to incur a loss of ¥381.3 billion (A4.6b) in spending related directly to the games, or 90% of the original projection for the events.

Furthermore, given the Japanese people’s waning enthusiasm for major events like the Olympics, the stimulus effects on household consumption expenditures will halve to ¥280.8 billion (A$3.4b) and corporate marketing activities will be dampened. The economic gains from promotional sporting and cultural events after the games will also be reduced by half to ¥851.4 billion ($A10.3b).

Of course, this is better than outright cancellation (which would cost an estimated Y4.5 trillion ($A54.6b) to the Y640.8 billion (A$7.8b) price tag on a postponement), as my colleague David Rowe points out, there are severe consequences for a host city of cancelling an Olympics, including punitive legal action by the IOC.

And all this, even without a major COVID19 outbreak and all its economic and health consequences. So why do it? There are various reasons for wanting to host the Olympic Games and other major prestigious events. As well as the trade and tourism benefits it puts the host city and country “on the map” globally in terms of profile.

Sometimes hosting an Olympics signals a country’s progress in the world. In the case of Seoul in 1988, hosting the Olympics signalled the end of a long military dictatorship and an emerging open democracy for a newly prosperous South Korea. Or in the case of Beijing in 2008, hosting the Olympics symbolised the rise of China in the world economy as a newly emerging superpower.

In the southern hemisphere Sydney 2000 and Rio 2016 enabled Australia and Brazil to showcase themselves as the ‘Great Southern Lands’ when most eyes of the world typically focus on the northern hemisphere.

Even in the case of Tokyo itself back in 1964, the hosting of the Olympic Games was the chance to show the world the modern Japanese economy of innovation and technology, not the producer of cheap manufactured goods that had dominated the Japanese economy immediately after damage done from World War Two.

For example, the famous Shinkansen, or bullet train was shown off at Tokyo 1964 and the Expo in Osaka in 1970. In fact, I attended both the World Expo of 1970 and the later one in Aichi in 2005, and noticed the stark difference in the globally minded Japan of more recent times compared to the earlier days when few Japanese had been outside the country and we were still yet to see the modern Japanese economic miracle in full swing. You can imagine how important the hosting of the games was to Japan then.

Of course when Tokyo bid and won the games no one had ever heard of Covid19. And this is something that future cities will have to bear in mind when bidding. Even before the pandemic, there had been an Anti-Olympic games movement brewing, to dissuade cities from bidding because of the costs associated with hosting the Olympics.

This is probably one reason why the IOC has gone for the double-bid approach and locking the games up with experienced host cities like Paris and Los Angeles who have hosted the games before. They are considered to be a ‘safe pair of hands’ and able to weather the economic cost of being an Olympic host city.

Finally, what does this all mean for Brisbane 2032? By the time Brisbane is upon us the world would have the experience of Tokyo, Paris and Los Angeles under our belt and how COVID19 was dealt with in Tokyo.

Brisbane 2032 also has the advantage of being hosted across venues in metropolitan Brisbane but also the Gold Coast and the Sunshine Coast. In terms of infrastructure, 80 per cent of venues have already been built, and the costs of hosting the Games will be shared across the Commonwealth, Queensland and local government entities along with private-public sector partnership arrangements.

When you look at the history of hosting the Summer Games, Australia has an excellent track record with ‘the friendly games’ in Melbourne in 1956 and of course ‘the best Olympic games ever’ according to IOC President Juan Antonio Samaranch at Sydney 2000.

In the meantime, we should remember Japan is very important to Australia both in terms of trade, as a strategic partner and as a friend. Let’s hope the Tokyo Olympics goes as well as it can, without a COVID scare, and with a much boosted morale for Japan and the world. And given the national excitement of Ash Barty’s win at Wimbledon (this author included) a few Australian gold medals would give us a good shot in the arm!

Tim Harcourt is Industry Professor and Chief Economist at IPPG, University of Technology Sydney (UTS). He is the author of The Airport Economist and Footynomics – The Economics of Sport. www.theairporteconomist.com