TOKYO: The 2020 Olympics could seal the revival of Japan’s long-stagnant economy, analysts say, an echo of the 1964 Tokyo Games that showcased a nation risen from the ashes of defeat.
Staging the world’s biggest sporting jamboree “is clearly a plus to [economic]growth” Prime Minister Shinzo Abe told journalists in Buenos Aires, hours after the Japanese capital was named as host.
‘Japan has had 15 years of economic stagnation . . . and we’ve lost confidence in ourselves. But I hope this will be a chance for us to regain that confidence,” Abe said.
In the 1960s, the Games were the coming-out party of a country that had grown to respectability after the ignominy of occupation following World War II.
The 1964 Olympics heralded the arrival of what was to become a huge and vigorous economy—until recently the world’s second biggest—and one that shook up the global order until it all came to a shuddering halt at the end of the 1980s.
Two decades of anemic growth and investment-sapping deflation saw China push a floundering Japan into third place, as repeated attempts to kick-start the economy did little but add to a mountain of debt.
But Abe’s election in December kindled hope of a recovery, and his economic plan, dubbed “Abenomics,” has encouraged the green shoots of a recovery that optimists say might really take hold.
Now they hope that a second bite of the Olympic cherry could cement that recovery and recharge a country once known for its economic vigor.
“The most important thing about the 2020 Tokyo Olympics is that it has reduced risks of Abemonics failing in the middle,” said Hideyuki Ishiguro, senior strategist at Okasan Securities.
The Tokyo Metropolitan government estimates that hosting the Olympics will see about three trillion yen ($30 billion), or less than 1 percent of Japan’s gross domestic product, being spent in the seven years to 2020.
But Ishiguro said that the real impact will be much bigger.
“The Tokyo government’s estimate doesn’t include redevelopment of roads and other social infrastructure in the greater Tokyo area, nor the government’s plan of repairing and rebuilding infrastructure nationwide,” he said.
The stock market in Tokyo was quick to react, opening up almost 3 percent on Monday as investors speculated there would be a boom in construction, real estate and sportswear firms.
Ishiguro said that the actual economic impact of Tokyo 2020 will not be as large as that from the 1964 Games, when the country had to kit itself out with all manner of infrastructure—including the impressive bullet train network.
In the early 1960s, “the cost of building facilities for the Games was just about 30 billion yen, but including construction of infrastructure such as expressways, water and sewage, it amounted to 960 billion yen,” Ishiguro said.
“Likewise the synergy effect this time will be much bigger than Tokyo’s estimate,” he added.
Daiwa Securities strategist Eiji Kinouchi forecasts the knock-on effect of the Olympics will be 150 trillion yen, comprising some 55 trillion yen in investment and a bump in tourism worth a whopping 95 trillion yen between now and then.
Japan’s plan to double the number of foreign tourists by about 2020 “will be easier to achieve with the Olympics,” Kinouchi said.
The tsunami of 2011 and resulting nuclear disaster at Fukushima precipitated a sharp drop in the number of foreign visitors, although this has begun to recover, thanks in part to a much weaker yen.
But the lingering catastrophe, including regular revelations of new problems at the site, could act as a brake, especially because of its affect on international confidence, experts say.
Abe sought to allay fears in his final pitch to the International Olympic Committee in Buenos Aires, stressing the plant, 220 kilometers from Tokyo, was under control.
“It has never done, and will never do, any damage to Tokyo,” he said.
Analysts said that public proclamations like this will help keep Japan focused on clearing up the mess.
Most commentators agree that one of the most important boosters that staging of the Games will bring is offering a confidence prop to both investors and consumers.
“The Abe administration can’t avert painful reforms such as of tax to achieve sustainable growth,” said Yoshikiyo Shimamine, senior economist at the Dai-ichi Life Research Institute.
“If the hosting of the 2020 Olympics proves successful in every aspect, then it will impress the world with the image that Japan is back from two lost decades,” Shimamine said.