Tokyo 2020 Olympics is a winner for Japanese economy

Japanese economy will get shot in the arm from increase in tourism and more spending on infrastructure, but initial costs and legacy benefits are much more difficult to predict.

Visitors and tourists in the Asakusa district of Tokyo, Japan in March. The country anticipates a surge in tourism ahead of Tokyo hosting the Olympics in 2020. Akio Kon / Bloomberg

TOKYO // An increase in foreign tourism and construction investment are two positive effects the Tokyo 2020 Olympics and Paralympics will have on the Japanese economy, according to a Bank of Japan report.

Since 2013, when Tokyo was chosen to host the Games, the number of foreign visitors to Japan has gathered pace, primarily on the back of an easing of visa requirements for tourists and of the yen’s depreciation.

The government’s target of 20 million foreign annual arrivals by the year 2020 will most likely be achieved early, according to the BoJ. Assuming the current pace of increase continues, the total number of annual visitors to Japan could reach 33 million by 2020, it says.

That level is essentially on a par with the number of foreign visitors to the United Kingdom, which hosted the Olympic Games in 2012. The number of visitors to Japan could rise even further if efforts by the public and private sectors to promote tourism in Japan are successful, the BoJ says.

Construction investment associated with the Tokyo Olympics includes not only for the building of Olympics facilities, but also other projects such as the refurbishment of hotels, urban redevelopment, the construction of commercial facilities, and the enhancement of transport infrastructure. Most private-sector analysts estimate total construction investment to come in at around ¥10 trillion (Dh32.9 billion), the BoJ says.

It calculates that Japan’s annual real GDP growth will be pushed up by about 0.2 to 0.3 percentage points in the period from 2015 to 2018. As a result, Japan’s real GDP level next year will be about 1 per cent (about ¥5tn to ¥6tn) higher than would otherwise have been the case. However, with construction investment subsequently likely to decline, the positive impact on GDP is expected to wane, the bank says.

Some experts qustion the impact on the private sector. The Hamburg University department of economics professor Wolfgang Maennig says no private investor will invest in a hotel, for example, just because of a 16-day sporting event.

Private investors will only part with their cash if they are confident of a sustainable increase in tourism or an increase in income and employment after the Olympics, says Mr Maennig, a 1988 Seoul Olympic Games rowing gold medallist.

“But there is a general consensus among economists that there are no significant [economic] effects from the Olympics,” he says.

If private investors do invest, they do so on false perceptions, Mr Maennig says. Public or state investors, on the other hand, may well invest in projects aligned with the Games.

“But as their budget is limited, they have to do so by giving up other investment or consumption expenditures, implying that there cannot be a net positive effect,” he says.

The Organising Committee of the Olympic and Paralympic Games (Ocog) unveiled in December an updated “Ocog and Other Entities” budgets plan, the former at ¥500bn and the latter at ¥1.1tn to ¥1.3tn.

Based on the London 2012 London Games, about 10 per cent of the Ocog budget is estimated to be earmarked for the Paralympics. The Tokyo 2020 Ocog budget is privately funded through a major International Olympic Committee (IOC) contribution, sponsorships, ticket sales and licensing revenues, thus meaning zero cost to the public purse.

The Other Entities budget includes a construction budget of ¥590bn, and a contingency of ¥100bn to ¥300bn.

Some experts question the vailidity of the Ocog figures.

The sports economics specialist Victor Matheson, a professor at the College of the Holy Cross in Worcester in Massachusetts, calls the budgets document “blatantly dishonest”. The books are only balanced and the taxpayer is paying nothing only if you do not count the US$10.3bn to $12.1bn “other entities” costs, Prof Matheson says.

"It is pretty easy to balance your budget when you simply move over two thirds of your costs off of the books," he tells The National.

It is this sort of smoke-and-mirrors approach, he says, that undermines the public trust in the IOC and local organisers, and deservedly so. “This sort of nonsense is an utter disgrace.”

It is also why bidders in democratic countries over the past two years have lost every public referendum put to the public over whether to host the summer or winter games, Prof Matheson says. In 2014, marketing for both the Olympics and the Paralympics was entrusted to Dentsu, a Japanese international advertising and public relations firm.

The company is finding Olympic and Paralympic Gold Partnership and Official Partnership sponsorship sales to companies operating in Japan, says Hajime Ito, the head of Tokyo 2020 Olympic & Paralympic Games project office at Dentsu’s sports division.

“Dentsu’s goal is to acquire as many partner companies as possible and make the Games a success,” Mr Ito says.

Sponsors are divided into Worldwide Olympic Partners, Tokyo 2020 Gold Partners, Official Partners and Official Supporters. The Olympic Partners (Top) programme is the worldwide sponsorship programme managed by the IOC. The Top programme supports the organising committees of the Olympic Games and Olympic Winter Games, the national Olympic committees and the IOC.

Among the Worldwide Top Partners are Coca-Cola, Atos, Bridgestone, Dow, GE, McDonald’s, Omega, Panasonic, Procter and Gamble, Samsung, Toyota, Visa and Recruit Holdings.

The Olympic Games domestic sponsorship programme is managed by the Ocog within the host country under the direction of the IOC. The programmes support the operations of the Ocog (Tokyo 2020), the planning and staging of the Games, the host country’s Olympic committee (Japan Olympic Committee) and the host country’s Olympic team (Team Japan).

The Olympic Games domestic sponsorship programme grants marketing rights within the host country or territory only.

The Ireland-based journalist Eamonn Fingleton, who has published three books on the economies of East Asian countries, says Tokyo is a good place to hold the Olympic Games.

A key factor is that the Japanese capital has lots of hotel accommodation, Mr Fingleton says. “Although the Olympics will strain even Tokyo’s capacity, hotel rates should remain relatively reasonable,” he says.

Certainly in normal times, hotel rates in Tokyo are quite low, far lower than in, for instance, New York or London. This in part is due to Japan’s highly effective city zone planning system that has allowed hotel development to match demand growth, Mr Fingleton says.

Another important factor is public transport, he says.

“The subway, in particular, is one of the world’s most efficient.”