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Amid Decreased Revenue, Who Is Footing the Bill for Tokyo Olympics?

¿Quién paga la cuenta de los Juegos Olímpicos de Tokio?

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The positive impact of the Tokyo Olympics on the world’s third-largest economy will be much less than expected due to the restrictions imposed by the pandemic, which are also placing an increasing burden on Japan’s public coffers.

The extraordinary measures that the hosts had to implement to pull off Tokyo 2020 in the context of the global health crisis have made these Games the most expensive to date, with a cost of some $14.9 billion that it is still unclear who will pay.

The pandemic

Tokyo promised the world cost-effective games when it won the 2013 Olympic host election process. But the budget ballooned, as is often the case, as the construction of the venues progressed, to double the first estimate.

The figures then ballooned due to the added costs of anti-contagion measures ($872 million) and the extension of venue rental and maintenance contracts resulting from the one-year delay in the Games, as well as staff costs, to reach the aforementioned provisional amount.

That budget estimate corresponds to last December, and is expected to be significantly higher once cost overruns are added for the Games that concluded last August 8, in addition to the Paralympics, which will take place between August 24 and September 5.

Tokyo 2020 has also had a positive impact on Japan’s gross domestic product (GDP) of some $15.195 billion on the Japanese economy, analyst Takahide Kiuchi of the Nomura Research Institute told EFE.

All this money was injected into the national economy “by building stadiums and other facilities” and “encouraging purchases of televisions, transportation or accommodation expenses related to the event, among other things,” according to Kiuchi, author of a study on this subject.

But this impact was “notably reduced” by the veto on foreign visitors and the decision to hold the competitions behind closed doors, said the expert, who estimates the losses from such measures at $1.364 billion and $825 million respectively.

Who pays the bill?

The budget for the Games is shared mainly between the host city, the Japanese central government and the organizing committee, a public-private entity whose income depends mainly on contributions from sponsors and ticket sales.

According to the agreement between the International Olympic Committee (IOC) and the host city, the local authorities, in this case, those of the Tokyo Metropolitan Area, must bear the potential deficit or additional expenses incurred by the organizing committee.

“Reduced ticket revenues will ultimately burden the city of Tokyo and its citizens,” Kiuchi said in this regard.

The IOC, which pays for a minority fraction of the Games and is financed mainly through broadcasting rights, boasts that Tokyo 2020 has achieved record television viewership, streaming and social media coverage.

The problem of extra expenses has been causing friction between the different Japanese administrations. The governor of Tokyo, Yuriko Koike, has asked for new discussions with the IOC and the central government to address the issue, while the government headed by Yoshihide Suga, of a different political ideology, has given the impression that it will not contribute any more money.

This mess is taking place just a few months before the general elections scheduled for autumn, to which Suga is heading with his popular support at a low ebb and a public debt to GDP ratio of 256 %, the highest among OECD countries.

The Japanese economy is also weighed down by the succession of states of emergency declared in Tokyo and other regions to contain the virus, which entails losses of income for the businesses affected — above all bars and restaurants — and by the huge disbursement by the government in the form of aid and stimuli.

A report by the Nomura Institute estimates that the total cost of these measures against the pandemic will amount to almost 20 billion dollars, which would be 1.3 times more than the positive impact of the Games.