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Tokyo Olympic unease is spreading as hoteliers go unpaid and official sponsors wonder if there is any benefit to paying to extend their deals for another year.   © Illustration by Nakako Shiotsuki and Michael Tsang
The Big Story

Olympics postponement leaves Tokyo 2020 sponsors in the dark

Uncertainty over how or if the games will be held leaves partners in limbo

FRANCESCA REGALADO and RURIKA IMAHASHI, Nikkei Asian Review staff writers | Japan

TOKYO -- It would be off-brand for Motokuni Takaoka to say he loses sleep over anything. His company, after all, sells mattresses and bedding, and has supplied Olympic teams from Japan, the U.S., France, Germany, China and Australia since 2012. With the games scheduled to come to Tokyo in 2020, the company signed on as a sponsor.

For the Olympic Village, the 13-year-old company created a three-section, two-sided mattress that can be flipped and rearranged according to individual athletes' needs. The mattresses, repurposed from fishing line material, are lightweight, recyclable, and -- most important for the first Olympics to be postponed due to a pandemic -- easily washable. "Good for corona," Takaoka said, referring to the novel coronavirus.

With the games pushed back to 2021, 10,000 mattresses sit waiting in the empty Olympic Village in Harumi, eastern Tokyo, with another 8,000 in Airweave's warehouse. The inventory can be melted down and reused, or donated to government housing projects, but duvets specially designed with the Tokyo 2020 logo are not easily resold under the International Olympic Committee's stringent marketing rules.

The opening ceremony, originally scheduled for July 24, would have taken place a few days after Takaoka's 60th birthday, after which he had planned to retire.

"Now, I have to wait another year," he said, on top of spending a decade and about $50 million to develop Airweave's Olympic products.

With the Tokyo Games pushed back to 2021, 10,000 mattresses sit waiting in an empty Olympic Village, with another 8,000 in Airweave’s warehouse. (Photo courtesy of Airweave)

The ghost of the 2020 Olympics haunts Tokyo. New stadiums, train stations, airport terminals and condominiums stand ready to welcome athletes and spectators who will not come, at least for another year. It has taken Japan six years and at least $12 billion to get ready for the games. Local governments and businesses large and small are coming to terms with the largely foregone conclusion that Japan will never fully get its money's worth, and that Tokyo's grand spectacle will be scaled back.

The uncertainty over what the games will eventually look like -- and at the margin, whether they will happen at all -- has left sponsors and businesses who hoped to capitalize on the event unable to plan and unsure whether they should keep investing into the teeth of an economic crisis.

"We're just trying to survive until the end of the year," said a spokesperson for All Nippon Airways, a sponsor that was hoping to benefit from Olympic tourism but whose business has been severely impacted by the coronavirus. "We can't even start thinking about the Olympics."

Shifting sands

Even before the coronavirus pandemic began, some elements of Tokyo 2020 felt like a moving target.

In Tokyo's Taito Ward, the local government invested in infrastructure for the games. Although the district does not have any Olympic venues, it was on the marathon route, with runners due to pass by Asakusa Kannon Sensoji, a popular tourist destination. Ward authorities worked to make the area's facilities accessible to disabled spectators and athletes, and invested in heat-insulating pavements to improve conditions for the participants in the sweltering Tokyo summer.

However, on Oct. 16, IOC President Thomas Bach abruptly announced that the marathon was moving from Tokyo to the northern island of Hokkaido, to avoid temperatures that in August can pass 40 C in the capital. Tokyo Gov. Yuriko Koike said it was "a decision without agreement."

Narita Airport, near Tokyo, stands ready to welcome athletes and spectators who will not show up, at least not for another year. (Photo by Ken Kobayashi)

In Fukushima Prefecture, the torch relay was supposed to begin on March 26 but was canceled on two days' notice. The local government was forced to pay out 250 million yen ($2.33 million) to contractors setting up venues and providing security.

After weeks of speculation, the games were officially postponed on March 24, and the government declared a state of emergency across much of the country shortly afterward.

Companies that had been banking on a jump in business were suddenly faced with an economy that was shutting down, and a precipitous drop-off in tourism.

In Tokyo, professional hair and makeup artist Itatsu, who declined to give his full name, said he had been anticipating a busy summer. Itatsu's clients include models and celebrities, and until March he had been upbeat about the likely surge in media and advertising campaigns.

"Until March, everyone I work with talked about the Olympic Games," he said, "and we all shared an upbeat atmosphere and high hopes for jobs. There were supposed to be many jobs for commercials, advertisements, and events that were related to the games."

Tokyo 2020 committee President Yoshiro Mori, left, attends the arrival ceremony for the Olympic flame in Miyagi Prefecture in March, days before the games were postponed.   © Reuters

After the announcement of the postponement and the declaration of the state of emergency, Itatsu was not able to work for two months.

For some small businesses, the postponement and pandemic dealt a fatal blow. In Tokyo's Asakusa area, popular with tourists, Shigemi Fuji's 135-year-old rice cracker shop is shutting for good. "I had to ditch half of our inventory because few customers come these days," Fuji said.

Fuji is also chairperson of the Asakusa Tourism Federation, which has hosted several workshops for people in the tourism business on how to use translation apps to cater to tourists visiting during the games.

"The Olympic Games are just a one-time event, but I hoped that tourists would spread information about Japan, which could lead to more tourists coming," Fuji said. "I'm disappointed [by the postponement]."

There are similar stories across the country. In Fukushima, devastated by the 2011 tsunami and nuclear disaster, the games were supposed to represent "recovery." There, Daisuke Shimizu, a dairy farmer, paid 1 million yen to get his products certified as safe to supply the Olympic Village. Many in the region did the same, hoping to shrug off concerns about radioactive contamination.

It took 18 months for Shimizu to get his certificate. The games were postponed shortly afterward. "I was very disappointed with the announcement," he said. "All I hope is that the games will happen next year and I can finally grab the chance."

The lament for missed opportunities is tempered with a tentative hope that the games will be held next year, and those that can hang on until 2021 will finally reap the benefits.

For Toshikatsu Ogatsu, chairman of the Japan Hanabi Association and president of firework producer Marutamaya, the opening ceremony was supposed to be an opportunity for dozens of firework craftspeople to showcase their work. "We were aiming to set off the biggest firework [display] that anyone has ever seen before this summer. All of us were very honored to grab the once-in-a-century opportunity and get involved in this event," Ogatsu told the Nikkei Asian Review.

Instead, many annual fireworks festivals were canceled to curb the spread of the virus. Ogatsu's company experienced a 90% decline in sales. Many smaller craftspeople and companies have been hit hard, and it is unclear to what extent the "simplified" Olympics will give them a chance to make back their losses.

"I don't know how the simplification of the games affects our fireworks performance," Ogatsu said. "But we'll do our best with the budget and environment we are given and create beautiful fireworks that can be a symbol of recovery from disaster and pandemic."

Although details have been sparse, Toshiro Muto, CEO of the Tokyo Organizing Committee of the Olympic and Paralympic Games, has said that organizers are considering more than 200 areas where the games could be simplified. That could include inviting fewer Olympic VIPs, limiting the number of spectators, imposing strict caps on national delegations, and scaling down the opening ceremony by cutting out the traditional parade of athletes.

The IOC's Bach told reporters in July that reducing spectators is "one of the scenarios we have to look into."

The organizing committee's leaders have acknowledged the difficulty of selecting which spectators will be allowed to come and which tickets to refund, but holding the games without an audience is currently out of the question.

"The Olympic Games behind closed doors is clearly something we don't want," Bach said during a news briefing on July 15.

Over half of Tokyo residents were in favor of postponing the games beyond 2021 or canceling them altogether due to health and cost concerns.    © Reuters

With the logistics and the benefits of a scaled-back Olympics still to be determined, and public support for the games waning, there have been calls to simply cancel them. A poll conducted by Kyodo News in late June showed over half of Tokyo residents were in favor of postponing the games beyond 2021 or canceling them, out of concern for public health and the growing cost to taxpayers.

In July's Tokyo gubernatorial elections, candidate Kenji Utsunomiya stood on a platform that included abandoning the event, although he placed a distant second to incumbent Gov. Koike, who won in a landslide.

After her reelection, Koike continued to toe the party line. "I want to host them as a symbol of the world coming together to overcome this tough situation and of strengthened bonds among humankind," she said in a mid-July interview with Reuters, echoing previous comments by Japanese Prime Minister Shinzo Abe and Bach in seeking to portray the Olympics as an international triumph against the coronavirus.

A postponement would increase the financial burden on the Tokyo Metropolitan Government, which has already had to spend heavily to combat the coronavirus. Japan's budget spending and bond issuance marked a record high this year whereas the Tokyo Metropolitan Government has already spent nearly 95% of its 935 billion yen public finance adjustment reserve funds, which are set aside by the local government for an emergency.

Yuriko Koike,Tokyo's re-elected governor, faces daunting financial challenges brought on by the Olympics' postponement. (Photo by Takaki Kashiwabara)

In a rare disagreement, Tokyo organizers and the prime minister's office reprimanded the IOC in April, after an article published on the IOC website asserted that Abe had committed Japan to shoulder the additional costs of postponing the games.

The IOC, the Olympic governing body based in Lausanne, Switzerland, has pledged over $100 million to help national Olympic committees and athletes shoulder postponement costs. None was directly allocated to aid the Tokyo 2020 organizing committee, the local body responsible for staging the games in Japan.

"At this point, the IOC and the Japanese side are still evaluating and discussing the impact of postponement, and the Japanese side will continue to advocate its case," a spokesperson for Tokyo 2020 told Nikkei.

If the games end up being canceled, however, Tokyo 2020 could end up owing the IOC. From the broadcasting revenues it collects, the IOC makes a contribution to the host city committee to the tune of $800 million, which would be "subject to full or partial reimbursement in the cases of full or partial cancellation of the games."

Sunk costs

Unsurprisingly, the idea of canceling Tokyo 2020 is unpopular with those who have invested heavily in it.

In Tokyo's Koto Ward, which has 10 Olympic venues, the largest number of any district, Mayor Takaaki Yamazaki thinks holding the games next year will be difficult. Koto Ward has set aside 2.5 billion yen for public works and events around the Olympics, and Yamazaki is afraid that the reserves will "go to waste" if the games are canceled.

"I know municipalities don't have a say with the IOC, and we have to obey whatever the IOC decides," he said. "No matter how long it takes, the games should be held in Tokyo."

"Many people support cancellation because they don't know the cost of cancellation," said Soji Samikawa, head of the Olympics office at Keidanren, Japan's influential business federation. The lobby counts among its members several of the country's largest corporations that have invested years and millions of dollars into bringing the games to Japan.

Corralled by the advertising giant Dentsu, corporate Japan has backed the Olympics to an unprecedented degree. In total, 62 Japanese companies signed up as local sponsors for the games, pledging a total of more than $3 billion -- nearly three times the previous record -- to the Tokyo 2020 organizing committee in exchange for six years of marketing rights. That total does not include the contribution of Toyota Motor, one of 14 worldwide partners of the International Olympic Committee. Toyota's eight-year deal, signed in 2015, is reportedly worth more than $800 million.

At Airweave, Takaoka believes his company is the smallest to sponsor the event. Airweave is in the second tier of sponsors -- "official partner," which sits below "gold partner" and above "official supporter."

For the privilege of using that label on their products, companies in the second tier -- which include Nikkei -- pay an annual fee of at least 1 billion yen, a hefty investment for a company like Airweave, which turned in 16.4 billion yen in domestic sales in 2019 and 14.4 billion yen the year before.

The designation was validating for Airweave's years of supporting Olympians in the background. "It takes a lot of energy and a lot of time," Takaoka said of the effort to develop Olympic-grade mattresses. "The athletes came to us, and we wanted the chance to say 'official partner.'"

The 15 gold-tier sponsors, who paid a reported $128 million each for multiyear marketing rights, include heavyweights Fujitsu, Asahi Breweries, Asics, Canon, two of Japan's three largest banks and the property developer Mitsui Fudosan, which built the Olympic Village.

The postponement of the Olympics has challenged not only the enthusiasm of some sponsors but also the very notion of "Japan Inc.," a mythic monolith comprising Japan's political, bureaucratic and business classes.

This is in no small part down to a lack of transparency on the part of the organizers and the government. The event's biggest sponsors and supporters have often been left in the dark as major decisions were made out of sight. Even Keidanren found out about the postponement of the games from Abe's news conference.

"It is characteristic of the current Japanese administration," Mieko Nakabayashi, professor of political science at Waseda University, said of Abe's top-down leadership style, pointing to other unilateral decisions made by the prime minister in recent months, including a sudden request in March for schools to close nationwide, and the distribution of medical masks to every household in Japan.

"Most of the people in the wide range of bureaucracy didn't know, just his close aides," Nakabayashi said.

Sources told Nikkei that aside from a group meeting between the Tokyo 2020 organizers and partner companies in June, soon after the coronavirus state of emergency was lifted, sponsors and suppliers have not received guidance from the committee on what a simplified Olympics will look like or what it will mean for their investments.

While the committee has displayed a united front with its sponsors, companies are growing anxious about paying an additional sponsorship fee for a year's extension. Extending Tokyo's marketing rights, set to end on Dec. 31 this year, would create an overlap with France's rights to promote the Paris 2024 Games.

"The problem of the extra fee is very difficult," Samikawa of Keidanren said. "The downsizing of the Olympic events may mean lower costs. But first we need an action plan for downsizing, or else our members cannot pay the extra fee because they will need to explain it at next year's AGM," Samikawa added, referring to corporate Japan's annual June shareholders' meetings.

Battered by a coronavirus-induced economic slowdown, corporations would be hard-pressed to part with another 1 billion yen -- or more -- for an event that, ultimately, may not happen. Japan was already slipping into recession before the pandemic forced widespread shutdowns, and there is more pain to come. To cut costs, Sumitomo Mitsui Financial Group and Mizuho Financial Group, two gold sponsors, have announced plans to downsize or shut down bank branches, cut thousands of jobs, abolish automatic wage hikes and reduce pension payments.

Other businesses are experiencing direct financial strain from the committee's decisions. The Tokyo 2020 organizers have yet to begin negotiations with the Imperial Hotel to settle this year's bills, according to sources with knowledge of the situation between the two parties arbitrated by the Japan Hotel Association. The five-star hotel in Tokyo's Hibiya district had prepared 600 of its 931 rooms to host top IOC officials and guests for the duration of the games.

Tokyo 2020 declined to comment about specific partners, but a spokesperson told Nikkei, "Due to the postponement of the games, we are requesting cooperation from accommodation providers to adjust the previously arranged room reservations from 2020 to 2021."

The deadline to release the rooms without incurring fees passed before the postponement was announced on March 24. Based on published room rates, the sum owed by Tokyo 2020 could be as high as $15 million -- a significant amount for a tourism-dependent business whose bookings in April and May, during the state of emergency, were just 2% to 3% of their usual levels.

A spokesperson for the Imperial Hotel told Nikkei that the hotel remains eager to make new reservations for Olympic VIPs once this year's fee is settled. But the hotel would need Tokyo organizers to decide on a maximum number of rooms by the end of 2020. "Six months prior to July, we're going to have to start allowing other guests to book the rooms," the spokesperson said.

Companies are growing anxious about paying additional fees to keep their Olympic sponsorships through next summer, when the Tokyo Games will be up for a second chance. (Photo by Ken Kobayashi)

Before Abe's March announcement, corporate sponsors had hoped for the delay to last until 2022, buying more time for a coronavirus vaccine to be developed and tested.

Without a vaccine, any version of the games will have to acknowledge the risk of contagion from spectators and participants.

"Vaccine development is not a condition for the Olympics," Toshiaki Endo, an LDP parliamentarian and a confidant of Yoshiro Mori, the president of Tokyo 2020, told Nikkei. "We need this Olympics to revitalize the economy."

Delaying until 2022 would cause an overlap with the Beijing Winter Games. The summer and winter games were split after 1992, because the growing events became financially unwieldy for sponsors and broadcasters.

Takaoka, the Airweave CEO, has his sights set on Beijing. "We are not athletes who only have one or two chances at the Olympics," he said. "If the Olympics don't happen next year, we hope to supply other Olympics."

His optimism sets him apart from his fellow domestic sponsors, for whom the Tokyo Games will be all or nothing.

"2021 will be the last chance for us," Keidanren's Samikawa said. "If it doesn't happen next year, it will be very hard to justify the cost."

Additional reporting by Nikkei staff writers Makoto Taniguchi and Yusuke Takeuchi in Tokyo.

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