March 3, 2020 / 7:03 AM / a month ago

Breakingviews - Japan can handle Olympic defeat

FILE PHOTO: Summer sunshine is seen through Olympic rings displayed at Nihonbashi district in Tokyo, Japan August 5, 2019. REUTERS/Issei Kato/File Photo

HONG KONG (Reuters Breakingviews) - The Olympic flame could be extinguished by Covid-19. For now, the Summer Games are set to kick off as planned in Tokyo in late July, but with each passing day the outbreak poses a greater threat to large gatherings and international travel. Any loss from cancellation, though, would be more symbolic than economic.

As of Monday, the country had 254 confirmed coronavirus cases, excluding ones on a quarantined cruise ship, according to the World Health Organization. Prime Minister Shinzo Abe last week called for sports and cultural events to be scrapped or curtailed for two weeks. The International Olympic Committee says preparations are proceeding.

Debate constantly swirls about the value of the Olympics to any host country. This time around, a range of forecasts put the cumulative economic boost at roughly 30 trillion yen ($278 billion). A study published by the Bank of Japan in 2016 estimated that games-related construction spending would peak at around 0.6% of GDP in 2018 and make up around 0.2% of GDP this year. Some two-thirds of the total benefit may already have been achieved, with about 8 trillion yen left to go, much of it from travellers keen to watch swimming, gymnastics and other events.  

Japan also has been enjoying a tourism boom. There were a record 32 million visits from overseas last year, a 2.2% rise from 2018. The Olympics were to be an integral part of achieving an upwardly revised target of 40 million for 2020. With so much travel being curbed because of the epidemic, however, the country’s ambitions could be derailed even if the games are played. Foreign arrivals slipped 1.1% in January from a year earlier.

It’s also easy to exaggerate the impact of the Olympics. Fears about overcrowding and high hotel prices can be deterrents. Spending by overseas visitors, for example, increased by 18% month-on-month when London hosted in 2012. Soon after, it slumped to a 21-month low, according to Capital Economics, before starting to climb again. Japan already has plenty of tourism momentum on which to build. All things considered, even if the country misses out on the full benefits, it may have already won Olympic gold.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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