Why the Olympics has become a millstone for Japanese economy

“Japan is back!” declared Shinzo Abe, the then Japanese prime minister, after he made a surprise appearance dressed as Super Mario at the closing ceremony of the 2016 Rio Olympics. Tokyo 2020 was supposed to be a moment of national glory, a chance to put the Fukushima nuclear disaster of 2011 firmly in the past and to showcase Japan’s technological pre-eminence in spearheading an environmentally sustainable Olympics.

Yet the 2020 Tokyo Olympic Games is beginning – a year later than planned – without spectators. As athletes converge on Tokyo, the city is back in emergency restrictions for the fourth time.

The government remains determined to make the games a Covid-secure success. But with Japanese multinationals shying away, infections surging and costs three or four times higher than the original estimates, it is barely even clear if this spectacle can go the distance.

Great economic hopes

Tokyo 2020 was supposed to be a great economic stimulus, replicating the achievements of Tokyo 1964. It was thanks to hosting the Olympics that Japan invested in infrastructure such as the famous Shinkansen bullet train.

In Tokyo, they built an expressway linking the international airport in Haneda to the centre, and widened some of the city’s major arteries, while an important new highway between Osaka and Nagoya was also opened. These infrastructure improvements helped to bring about the Japanese economic miracle over the next couple of decades.

But this time around, there were signs of trouble long before the pandemic. The main Olympic stadium, which was designed by the late British architect Zaha Hadid, had to be re-designed from scratch as its complex roof structure became too expensive. Instead, the organisers built a stadium at roughly half the cost.

As costs spiralled, the organisers looked at moving some events out of Tokyo to existing venues elsewhere. Not only would this reduce costs, it would help spread the benefits of economic development – in an echo of UK-style “levelling up”.

Just like Britain, Japan suffers from widening inequalities between the capital and the rest of the country. For example, house prices rose 15% in Tokyo between 2002 and 2018 while falling between 5% and 15% everywhere else. Over the same period, the disparity in wages grew from about 20% to more like 35%.

The Japanese regions were sceptical of the whole idea that the Olympics would help level up. Local business people knew that construction projects would still be concentrated around Tokyo, with limited benefits to their regions. There was also talk that demand in Tokyo would cause a supply shock, leaving manufacturers in the regions clamouring for materials.

That particular concern might have been overblown in the end, and some moves did see investment. For example, cycling has been moved to Izu some 125 miles west of the capital, and the city’s velodrome has been upgraded.

Other moves failed, however. Miyagi prefecture in northeast Japan, 250 miles from Tokyo, was considered for rowing and canoe sprinting. This was seen as a way to accelerate the slow pace of reconstruction following the March 2011 earthquake and the meltdown of the Fukushima Daiichi nuclear plant.

But again financial reality intervened. Disputes over cost-sharing and other logistical issues emerged, and it was decided to hold rowing in Tokyo Bay as originally intended. Another venue in Miyagi is hosting football, while baseball and softball are taking place in Fukushima itself.

Despite such efforts to save money, the government’s estimate for the cost of the Olympics had risen from the initial $7.3 billion to $12.6 billion by late 2019. Then came the pandemic. Thanks to the postponement, the official estimates are a $22 billion cost, and some are saying it will be nearer $30 billion. Meanwhile, the huge stimulus from international tourists that the Japanese authorities would have been expecting from the Olympics is no longer happening.

What now?

Even before it began, domestic support for the Olympics was weak, as the wider economic benefits were unclear, especially outside Tokyo. With Covid infections currently accelerating in Japan, and Tokyo particularly badly hit – 4,943 new national cases on July 21, including 1,832 in the capital – the public mood has shifted further against the games. According to a recent survey, 55% of Japanese think the games should not go ahead, and 68% think that infections can’t be controlled by the organisers.

As expected, some athletes arriving in Japan have tested positive, including participants from Uganda and the United States, along with British athletes “pinged” on a flight en route to Tokyo as close contacts to people with infections.

The possibility of the games turning into a super-spreader event seems to have prompted Toyota to pull its TV adverts. The leaders of Panasonic, NTT, Fujitsu, NEC and Keidanren, the employers’ association, are skipping the opening ceremony. Increasingly, the idea that there needs to be a trade-off between health and the economy seems to be losing traction.

The Japanese government is still determined to go ahead with the games, despite being warned of accelerating community transmission by its scientific advisers. The fourth Tokyo state of emergency began a few days ago, curbing people’s movements until August 22.

Bars and restaurants are having to curtail late-night services as part of the restrictions, inflicting further pain on a sector that has already been hit hardest by Covid-19. Tokyo’s nightlife is being blamed for the spike, never mind that the government has been unwilling to impose tougher restrictions, claiming it is prevented by the constitution.

In this situation, running a Covid-secure Olympics looks increasingly like a major challenge. With the system of isolation bubbles at the athletes’ village already failing, it brings to mind events on the stricken cruise ship Diamond Princess, where Covid spread like wildfire after it left Yokohama in February 2020.

Just like the United Kingdom is trying to plough on with its own plan for opening up the economy as cases surge, it is only a matter of time before both nations find out whether the supposed trade-off between health and the economy is workable – or is actually a false dichotomy.

Taku Tamaki is a Lecturer in International Relations at the Loughborough University.

This article first appeared on The Conversation.