Coronavirus effect: The cost of postponing Olympic Games in Japan

The giant Olympic rings are seen in the dusk through a tree at the waterfront area at Odaiba Marine Park after postponing Games due to the outbreak of coronavirus disease (COVID 19), in Tokyo, Japan March 25, 2020. [REUTERS/Issei Kato]

As of Thursday, 10:00 am, March 26, 2020, the novel Coronavirus (Covid-19) had infected more than 473,000 people globally, with over 21,000 deaths confirmed.

According to corona.help, Japan had registered more than 1000 infections, with over 40 deaths. However, the country had made 310 recoveries, with over 950 cases still active.

It’s this challenge of trying to stop the spread of the virus while trying to provide treatment for the already ailing that’s forced Japan to postpone the biggest event it had this year, the Tokyo 2020 Olympics.

The Olympics have never been postponed. In fact, of the three times they were cancelled, it is reasonable to say the world was not a place favourable enough for sports.

On Tuesday, March 24, Japan’s Prime Minister Shinzo Abe and the International Olympic Committee President Thomas Bach held a telephone meeting and agreed to postpone the Games in order to protect athletes’ health as well as all involved.

"I proposed to postpone for about a year and President Bach responded with a hundred per cent agreement," Shinzo Abe told the press.

The Prime Minister’s Office of Japan also made the announcement on Twitter.

“After his telephone talks with IOC President Bach, PM Abe spoke to the press and explained that the two have agreed that the Tokyo Olympic Games would not be cancelled, and the games will be held by the summer of 2021,” said the Prime Minister’s Office.

“In the present circumstances and based on the information provided by the WHO today, the IOC President and the Prime Minister of Japan have concluded that the Games of the XXXII Olympiad in Tokyo must be rescheduled to a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community,” read a joint statement from the IOC and Tokyo Organising Committee.

Even though IOC President Bach said the games could take place ahead before the summer of 2021, many financial news outlets have already started to analyse the costs Japan faces.

GameYetu takes a look at how much it could cost Japan postponing the Tokyo Summer Olympics:

Operational costs and Olympic costs

Thomas Bach, President of the International Olympic Committee (IOC) attends an interview after the decision to postpone the Tokyo 2020 because of the coronavirus disease (COVID-19) outbreak, in Lausanne, Switzerland, March 25, 2020. [REUTERS/Denis Balibouse]

When Tokyo was granted the rights to host the event in 2013, Associated Press reported the total projected overall cost to be 829 billion yen (7.3 billion dollars).

As of December 2018, Tokyo 2020 Olympics organisers set an operating budget of 5.6 billion dollars, with the extra 1.7 billion or so to be accounted for by the Japanese government.

"With less than 600 days to go until the games, we are finally entering a fully-fledged implementation phase. As many aspects of the games have become more detailed, Tokyo 2020 has seen increases in some new areas but has successfully reduced expenditures in other areas, resulting in the updated budget remaining the same as the previous version," organizing committee CEO Toshiro Muto said.

Now with the games pushed to next year, and with no clear time-frame given on when health experts will find a solution to the coronavirus, Japanese financial newspaper Nikkei reports the added costs could go as high as 2.7 billion dollars.

Olympics organisers will have to bear the brunt of paying for maintenance at arenas, renegotiating new contracts on locations as well as choosing other venues to play. They may also have to release staff due to cost-cutting. The committee will also have to give local sponsors and brands a clear outline of what they will get for their money.

 "The general target is summer of next year. We have to go through scheduling, international events. Many things will have to be adjusted before we come up with a certain time frame," president of the organising committee Yoshiro Mori admitted.

Even though there is always confusion about ‘Olympic costs’, Japanese government bodies and local organisers approximated 1.35 trillion Japanese yen (12.6 billion dollars) to be the expected amount to be spent preparing for the Olympics. This was according to the budget’s fourth version announced last year by the Tokyo Organising Committee of the Olympic and Paralympic Games (TOCOG). 603 billion yen (5.4 billion dollars) was to be paid by the committee.

Japan’s National Audit Board, in a report (177 pages) prepared for the Legislature last year said the Olympics would cost much more than organisers had approximated. The audit listed an added 1.06 trillion yen (9.7 billion dollars), which it referred to as ‘Olympic-related, claiming then costs were never included. It noted the city of Tokyo said it would spend 810 trillion yen (7.4 billion dollars) on Olympic-related projects.

A rickshaw driver takes a souvenir photo for his clients at Asakusa district amid coronavirus disease (COVID-19) concerns, in Tokyo, Japan March 25, 2020. [REUTERS/Ju-min Park]

Organisers argued several of these costs were not tied directly to the Olympics, but the audit cited building barrier-free facilities for Paralympians, advertising, tourism plans as well as training programs for volunteers as costs not highlighted.

Overall spending was projected at around 3 trillion yen (28 billion dollars) following calculations by financial newspapers.

“In order to disclose information to the public and gain their understanding about operations that the government should shoulder, the government Olympic and Paralympic office should disclose more by grasping the overall picture of the operations and costs,” the audit read.

The new national stadium is Tokyo’s most expensive facility yet, having taken up 1.43 billion dollars of the $7 billion already spent on temporary and permanent venues.

The city was planning to use 42 venues for all 33 sports including the five new ones, an extra venue put up for the Paralympics. Now with the games postponed, Muto disclosed it was not clear how many venues would be available next summer.

The five new sports included Baseball/Softball, Karate, Sport Climbing, Surfing and Skateboarding.

"Some venues we might have to keep renting until next year. Because at some venues it takes about a year to get them ready. We can't take them down and then set them up again for the Olympics. That also means added costs," he said.

Athletes’ village headache

With over 11,000 athletes and staff expected, the Athletes Village located at Tokyo Bay was meant to house Olympians and staff during the games – then sold after. One quarter of the complex, which in total has 5,632 apartments, has been sold. However, following the Covid-19 outbreak, sales at the site have now been suspended, according to developers.   

Volunteers

Another challenge Japan could face next hear is finding 80,000 volunteers to help with the daily operations like assisting non-Japanese speakers to find train lines and street addresses.

Tickets

With only 7.8 million tickets available and close to 5 million having already been sold within Japan, the demand has exceeded expectations.

"We don't have a final conclusion about what our policy will be. As much as possible, we want to make sure that people who have already bought tickets will get special consideration," said Muto.

According to the Statista Research Department, as of March 2020, approximately 640 billion Japanese yen (5.7 billion dollars) would go down the drain from the one-year postponement of the Tokyo 2020 Summer Olympics. Around 390 billion yen (3.5 billion dollars) of this loss would be the preparation costs.

“Over 218 billion yen (1.9 billion dollars) would be the loss of the originally expected long-term economic impact of the 2020 Olympics, such as the post-use of new permanent facilities and Olympic village, the expansion of tourism industry, or the urban development of Tokyo Prefecture,” the website said.

An article on Asian Nikkei Review on Tuesdays, March 24 said Japan is facing the possibility of close to 6.4 billion dollars in economic losses should the games be postponed. Private economists have estimated the overall domestic financial loss to reach 600 billion yen to 700 billion yen.

NB: DATA GOT FROM STATISTA RESEARCH DEPARTMENT, ASSOCIATED PRESS, ASIAN NIKKEI REVIEW