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The Japanese Economy - Tokyo 2020

The Possible Economic Impact of the Tokyo Olympic Games at 2020

The Tokyo Olympics, scheduled to be held in 2020, can be expected to have positive effects on the Japanese economy. Such effects will come mainly through the following two demand channels: (i) an increase in foreign tourism, and (ii) an increase in construction investment associated with this event.

The number of foreign visitors to Japan has been growing steadily, mainly due to the easing of visa requirements and the depreciation of the yen. The government’s target of reaching 20 million foreign visitors by 2020 will likely be achieved. Nevertheless, taking other countries as a yardstick, there is still ample room for an increase in the number of foreign visitors, and it is certainly possible to further promote tourism in Japan, for example by reinforcing measures to attract foreign tourists in the run-up to the Tokyo Olympics. The experience of past host countries shows that the key is to achieve a lasting increase in tourism by promoting touristic resources nationwide. For Japan, this means, for example, establishing routes that allow tourists coming to Japan for the Olympic Games to make excursions to regional areas in addition to visiting the Tokyo metropolitan area. Construction investment associated with the Tokyo Olympics includes not only that directly related to the building of facilities for the Olympic Games, but also various types of indirectly related construction investment, such as the construction of new hotels and the refurbishment of existing hotels in the private sector, urban redevelopment, the construction of commercial facilities, and the enhancement of transportation infrastructures. Based on the experience of previous host countries, construction investment associated with the Tokyo Olympics is projected to increase substantially during 2017 and 2018 and then peak out toward around 2020. To avoid large business cycle fluctuations due to the boom-and-bust in construction investment, it is necessary to create new demand through various measures to help strengthen economic growth such as deregulation in addition to the measures to attract tourists mentioned above. At the same time, in order to meet such new demand, supply-side efforts should be taken to tackle the structural labor shortage facing Japan today by increasing labor productivity and further raising labor participation of women and the elderly

BOJ - Economic Impact of the Tokyo 2020 Olympic Games

The 2020 Olympics could help prop up aggregate demand. However, the positive effect is likely to be short-lived, and less pronounced, given that the economic impact of such events tends to be milder in developed economies than in developing ones. While inbound tourism and domestic consumer confidence may recieve a boost and support the government's bid to end deflation, in the long run, other factors, such as structural reform efforts, will play a bigger role. Rather than focus on transient trends, we base our investment view on a long-term perspective, which is why we prefer to look beyond the 2020 Olympics and target more sustainable developments. 

Capital Ideas

The Tokyo Metropolitan Government said the 2020 Tokyo Summer Olympics and Paralympics will create economic benefits totaling 32.3 trillion yen ($283.50 billion) across Japan. The international sporting events are also expected to create some 1.94 million jobs, the municipal government said. The estimate of economic effects covers the 18 years from 2013, when Tokyo was chosen to host the Olympics and Paralympics, to 2030. It is a combination of direct and legacy effects that will be created by staging the events. 

Direct effects consist of expenditures on construction and maintenance of venues for games and on management of the events, including security and transportation costs as well as spending by visitors, marketing expenses by sponsor companies and other expenditures. The Tokyo government estimates them to be 5.2 trillion yen.

Legacy effects are estimated at 27.1 trillion yen. They include expenditures on infrastructure improvements, barrier-free measures, an increase in the number of tourists visiting Japan from abroad, use of venues for other games and an increase in the numbers of sports players and sporting events.

Nikkei