Japan: how coronavirus crushed Abe’s Olympics dream

On New Year’s Day, in front of a crowd of 58,000, Vissel Kobe faced Kashima Antlers in the 99th Emperor’s Cup. Football was average, but the setting was magnificent. It was the first event to be held in Japan at the $ 1.4 billion national stadium and a test for the show it would soon host: the Tokyo 2020 Olympic and Paralympic Games.

The test was impeccable and the preparation for the opening ceremony on July 24 looked like a cake walk. Among Olympic organizers, who had overseen more than $ 25 billion in preparation, and among Japanese and international companies, who paid more than $ 3.1 billion to make the 2020 Games the most sponsored sporting event in all the time, a collective sigh of relief broke out.

For the government of the metropolis of Tokyo, which estimated that, since the gain of the candidacy in 2013 until a decade after the games of 2030, the event would give a boost of 32 billion yen (294 billion dollars) to the national economy, everything seemed to be going well. And for Shinzo Abe, the longest-serving Prime Minister of Japan, the games offered a powerful symbol of national recovery after the 2011 Tohoku earthquake and its “Abenomics” revitalization and reform policies.

The coronavirus has stopped every part of it in its tracks.

After months of helplessly watching the disease evolve from a crisis in the Chinese city of Wuhan to a global pandemic, Japan accepted the inevitable last week and agreed with the International Olympic Committee on the very first postponement of the Games. ‘summer – a delay until 2021 at the latest.

Shinzo Abe, fourth from left, and Tokyo Governor Naoki Inose, third from left, celebrate after Tokyo heard it would host the 2020 Olympic Games at the 125th IOC session in Buenos Aires © Ian Watson / AP

The key questions now revolve around how the economy will be hit hard, how the confusion will be debilitating and even if the games can continue next year. The Japanese hotel industry – already shattered by cancellations in February and March – had hoped that the 2020 games would allow them to recover revenue this year. Shigemi Sugo, secretary general of the Japan Hotels and Ryokans Association, told reporters that its members were already reporting cash flow problems.

More generally, we have the feeling of a great national project destroyed.

“I arrived at this location at the age of 14 for the 1964 Olympics,” said Kane Tabata, taking photos of the National Stadium on the day the announcement was postponed. “I didn’t have tickets at the time, but I had two this time. I don’t want to get my money back. I just want to be alive when they happen. “

Masamichi Adachi, chief economist of UBS in Japan, believes that such expressions of pessimism should be taken seriously. The Olympics, and the chances that they will continue, have become a grim measure of how quickly the world can recover from the pandemic.

Average real economic growth in developed countries that have hosted the Olympics since 1992 shows the strongest growth in the coming years of the Games, as money is spent on construction. The actual year of the games provides only a limited boost. According to this analysis, the postponement of the games should not cause serious economic damage in the short term.

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“The concern is the long-term consequences if the games are completely canceled next year, especially since such a situation would mean that the pandemic is not yet under control. [That could] weigh on long-term growth expectations, “says Adachi.

Reflecting these concerns, Abe told the nation on Saturday that the Olympic torch, which arrived in Japan last week, will remain lit and will remain in the country until the Games.

“This torch is the light of hope that will guide mankind out of the long dark tunnel we are currently facing,” he said, sparking even more expectations for the two-week sporting event. . “My goal is to make games a symbol of humanity’s victory.”

Until the handover of the Olympic Games in Tokyo in 2013, many people – in Japan and abroad – concluded that the aging, losing country with an economy that had suffered three “lost decades” may never again shine brightly or globally. The matches, despite doubts about the heat of Tokyo in summer and the considerable cost overruns, were an opportunity to reset this. The 1964 Tokyo Olympics proved that Japan recovered from the war; the 2020 games were to prove its resilience to demography, its technological relevance and the strength of its people.

Beyond its direct financial value for Japan, explains the CEO of one of the 15 “gold” sponsors of the games, Tokyo 2020 was “a national act of economic messaging” which had kept the stock markets, companies and reforms of the country under international control. spotlight on investment for seven years. Global portfolio fund managers say he has drawn attention to good stories of domestic growth in Japan – such as tourism and exposure to China – that would otherwise have been overlooked.

Mandatory Credit: Photo by KIMIMASA MAYAMA / EPA-EFE / Shutterstock (10592116e) Visitors take commemorative photos with the new national stadium (background), the venue for the opening and closing ceremonies of the Tokyo Olympic and Paralympic Games 2020, Tokyo, Japan, March 24, 2020. Japanese Prime Minister Shinzo Abe is to speak with the President of the International Olympic Committee (IOC) Thomas Bach by telephone regarding the possible postponement of the Tokyo 2020 Olympic Games due to the pandemic COVID19 coronavirus. Tokyo 2020 Olympic and Paralympic Games, Japan - March 24, 2020

Visitors take photos with the new national stadium, the venue for the opening and closing ceremony of the Tokyo 2020 Olympic Games © Kimimasa Mayama / EPA

All this has been put aside, subjecting the leadership of Abe – who on Saturday committed the government to an “unprecedented” recovery plan to fight the virus – under even more intense control.

“No one knows for sure if the epidemic will be brought under control in a year and that Japan will be able to organize the Olympic Games next summer,” said Shigeru Ishiba, the former defense minister widely expected to succeed. to Mr. Abe. “If it was [further] Delayed, it is unclear whether there would be a general mood for Mr. Abe to make another three years as Prime Minister. “

The IOC and Japanese organizers are expected to spend the next four weeks working out the basic details of the postponement. The main sources of income for the IOC are global broadcasting rights and sponsorship agreements. These relate to the games themselves, so the contracts should be renewed. The organization earned $ 5.7 billion over the four-year “Olympic cycle” covering the 2014 Sochi Winter Games and the 2016 Rio de Janeiro Summer Games.

National sponsors risk losing face if they step down, especially now that the 2021 games were explicitly touted by Abe as a symbol of hope for global healing of the coronavirus.

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But advertising officials say the national unity that seemed to underlie Tokyo 2020’s commercial backers already seems vulnerable. The senior executives of several major sponsors say they see no clause covering the deferral in their contract and therefore cannot yet assess where they are financially. Others said that when, or if, they were asked for more money to run the sponsorship deals in the next year, they didn’t know if the already stretched marketing budgets would come out.

“We would like to continue our sponsorship,” said Takashi Uchida, president of Tokyo Gas, one of the main sponsors. “But right now, we can’t really say whether we will or not, because we have no information at our disposal about the additional financial burden we will have.”

Before the postponement decision was taken – as the coronavirus spread around the world – Japan’s relatively slow infection rate allowed the Abe administration to present a “business as usual” approach to games. But since the announcement last Tuesday, the country appears on a different foot.

The number of infections started to climb faster and the country’s top experts warned of a “second wave” in the coming weeks. As Tokyo, the world’s largest city, faces a foreclosure, the government has formed a new task force on the crisis.

For weeks, many people have questioned Japan and the IOC’s assurances about the increasing death toll worldwide and growing criticism from athletes – that the postponement or cancellation did not even seem to be in order of the day. Some have accused the government of suppressing declared infection rates in an effort to keep the Olympic hopes alive – a vigorously denied accusation.

A campaign banner for the Tokyo 2020 Olympic Games from Coca-Cola, a global Olympic partner, is displayed at the new Chitose Airport in Chitose, Hokkaido, northern Japan on February 27, 2020. Photo taken on February 27, 2020. REUTERS / Issei Kato - RC2WKF98SSY9

A campaign banner for the Tokyo 2020 Coca-Cola Olympics at the new Chitose Airport in Chitose, Hokkaido, northern Japan, in February © Issei Kato / Reuters

In reality, say those directly involved on both sides, the weeks leading up to the postponement were marked by desperate turnover of emergency meetings, conflicting proposals and negotiation deadlocks as Japan and the Olympic movement were pushed more and more towards new territories.

On March 16, IOC President Thomas Bach organized a series of marathon conference calls with his so-called “Olympic family”: the leaders of 33 summer sports federations, seven winter sports organizations, 206 national Olympic committees and 220 elected for athletes.

IOC leaders began investigating a postponement but were then faced with the nightmarish logistical implications. For example, most apartments in the Olympic Village, where thousands of athletes were to stay, have already been sold to people who were to move in after the Games. Some Olympic venues were not available next year and hundreds of thousands of nights had been booked in hotels.

Million Million Chart Showing Tourist Arrivals Over 30 Million Per Year Before the Japan Olympics

But the plan was to continue. The IOC said that “with more than four months to go before the Games, there is no need to take drastic decisions at this stage”.

Within seven days, this position had collapsed. It was undermined when other large sports organizations began to act. On the same day, the IOC declared that it would continue, the governing bodies of football decided to postpone for one year the Euro Championships and the Copa America – flagship national tournaments which will be played in June in Europe and America. South. Olympic athletes have also started to voice their concerns as more and more qualifying events have been canceled.

Students of Ariake-nishi Gakuen School wear protective masks after the coronavirus hatch, as they attend an event six months before the Tokyo 2020 Paralympic Games in Tokyo, Japan, February 25, 2020. REUTERS / Athit Perawongmetha - RC2M7F9MPZBR

Ariake-nishi Gakuen students wear masks after the coronavirus epidemic as they attend an event Six months before the Tokyo Games in February © Athit Perawongmetha / Reuters

Any decision had to be mutual, say legal experts, because the IOC’s host city agreement means that if one of the parties unilaterally postpones or cancels the games, it can expect multi-billion dollar lawsuits. But as criticism has increased, Mr. Bach’s private position has changed decisively in favor of the postponement. The problem was trying to convince the Abe government.

“The Japanese feared a loss of face, a failure to deliver the games,” said a person close to the IOC management. “When it got less on Japan, and more on the rest of the world traveling there, it left Abe politically unhooking.”

The focus is now on limiting the blow to the Japanese economy which seemed likely to enter into recession even before the withdrawal from the Olympic Games. For several years, Tokyo has engulfed itself in the Olympic hype, hotel reservations and the commercial anticipation of a nation which, since obtaining the right to host the games, has seen incoming tourism go from 10 million visitors per year to nearly 32 million in 2019. Analysts have estimated that these figures would be increased in 2020 by an additional 2 million.

Observers say it is premature to expect the rescheduled 2021 games to provide additional economic momentum.

Kiichi Murashima, Japanese economist at Citigroup, offers a clear assessment of what might happen next. When read, he said that about 275 billion yen of spending by incoming visitors could be lost. Even if the macroeconomic impact of the postponement is not as great as some fear, he says the damage to certain sectors should be serious.

FILE - In this photo from April 4, 2016, Team Canada's Hayley Wickenheiser wears her silver medal after losing 1-0 to Team United States in the gold medal game at the World Women's Hockey Championships in Kamloops, British Columbia. Regional Olympic officials are rallying around the IOC and supported its position on the opening of the Tokyo Games as planned. Their support comes a day after direct criticism from athletes in the midst of the coronavirus epidemic.

Hayley Wickenheiser, the former Canadian ice hockey player who represents the athletes as an IOC member, said the persistent insistence that Tokyo 2020 would go as planned © Ryan Remiorz / AP

“The political response will be of crucial importance in order to prevent bankruptcies of businesses, especially small businesses, and the resulting impact on the credit costs of financial institutions,” Murashima wrote in a statement. notes to investors, adding that the total loans from domestic banks, shinkin Banks – regional lenders – and other financial institutions accounted for around 3.5 billion yen for the accommodation sector and 4 billion yen for catering services at the end of March 2019.

If Japan is perceived to be hit particularly hard by the coronavirus due to its preparations for the games, this could also be embarrassing for the IOC. The Olympic Games – faced with growing skepticism about the games business model and a shortage of bidders – desperately needed a host as gung-ho and as pocketed as Tokyo.

Mandatory Credit: Photo by FRANCK ROBICHON / EPA-EFE / Shutterstock (10593353d) Tokyo Governor Yuriko Koike Holds Reading Board

Tokyo Governor Yuriko Koike has warned that the city could be locked because it is facing an “explosive infection crisis” © Franck Robichon / EPA

Bent Flyvbjerg, professor of major programs management at the University of Oxford, is the author of a 2016 report on Olympic finance which convinced some cities withdraw their offers as potential hosts. His study of winter and summer games from 1960 shows that the costs have always exceeded and that the hosts have constantly overestimated the benefits that would result.

“Optimism is natural,” says Professor Flyvbjerg. “[But] there is still a huge gap between expected revenue and what is actually delivered. “

After the postponement of the Games, Yasuhiro Yamashita, the president of the Japanese Olympic Committee, said that the time had come to “reset our state of mind”. It was an emotional exhortation to do what Japan was forced to do so many times before after devastating earthquakes, war and even the arrival of foreign combat helicopters on its shores in the 19th century. Some doubt that this is possible, others suspect that Japan, with its history of constant adaptation to disasters, may be particularly well placed to do so.

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