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Tokyo 2020 Olympics

Olympics delay to cost Japan $6bn in economic losses

Corporate sponsors and hotels to miss windfall, while rebooking venues is difficult

TOKYO -- Japan is faced with the possibility of $6 billion in economic losses if the Tokyo Summer Games do not proceed as planned, now that Prime Minister Shinzo Abe and the International Olympic Committee acknowledged for the first time Monday that a postponement was on the table due to the coronavirus pandemic.

If the games are delayed, the overall domestic financial loss could reach 600 billion yen to 700 billion yen ($5.42 billion to $6.32 billion), private economists estimate. The impact would apply both to the nation -- which has invested heavily in making the Olympics a national showcase -- and to companies such as Bridgestone that have poured an estimated $3 billion into sponsorships.

Bridgestone told the Nikkei Asian Review on Monday that it was preparing for a potential postponement.

"We understand that some considerations should be made regarding the postponement of the games, as the health of athletes and people is important," said the tire company, which has a worldwide sponsorship contract with the IOC through 2024. "The situation is changing day by day, and we will look carefully at the situation and prepare for possible changes, as we think there will be various possibilities."

Market observers were counting on the 2020 Olympics and Paralympics to help Japan's economy rebound from a dip prompted by the consumption tax hike in October 2019. Economic benefits were expected to spread to a wide range of sectors, from construction to service.

Goldman Sachs estimated this month that Japan would lose 550 billion yen in inbound and domestic consumption in 2020 if the Olympics do not take place as planned.

Estimates of the economic boost for Japan have been based on growth enjoyed by previous host countries. Though most of the investment in infrastructure for the Summer Games has already been made, the vast amounts of consumer spending during the event remain at stake.

An audit at the end of last year found that the Japanese government has spent over 1 trillion yen on infrastructure projects related to the Olympics.

Many players in the tourism sector also have counted on the boost expected from the Tokyo Olympics, particularly as business so far this year has been hurt severely by the coronavirus pandemic.

Imperial Hotel last week lowered its net profit forecast for the fiscal year ending this month to 2.3 billion yen, down 37% from the previous year. The hotel operator, with locations in Tokyo and Osaka, is suffering from the sudden decline in foreign guests who normally account for half of bookings. The occupancy rate for March has been below 50%, compared with 80% in the same month last year.

The hotelier said Monday it had a "significant amount" of bookings from the Olympic organizing committee, and had yet to calculate the financial loss if the Summer Games were postponed. Hotel Okura, also in Tokyo, is fully booked by the IOC during the event.

A lengthy postponement also would affect the value of the Tokyo Games for the many blue-chip corporate names that were lined up as sponsors by Japan and the IOC. Japanese companies might seek revenue or reimbursement for their $3 billion investment in the Tokyo Olympic organizing committee.

Toyota Motor and Panasonic, like Bridgestone, are worldwide partners of the IOC. Canon, Asahi Breweries, Mizuho Financial Group and NEC are among the official partners, which have contracts with the Tokyo organizing committee.

Toyota, Panasonic, Asahi Group Holdings and Canon declined to comment.

One sponsor said the contributions made were significant and should not change regardless of a delay.

"We don't know whether the Olympics will be postponed, and if so, for how many months or how many years," the sponsor said. "We don't know what a delay would mean in terms of cost, but we are not thinking about increasing our contribution at this moment."

Another local sponsor declined to speculate about the fate of the 2020 Games.

"There's nothing we can do. We're just watching what is going to happen," the sponsor said. "The IOC never said there won't be a delay or cancellation. They keep all possibilities open."

At Airweave, which looks to supply 18,000 sets of bedding to athletes in the Olympic Village, President Motokuni Takaoka said he had not been informed by the organizing committee about how sponsorship fees or terms would be affected by a cancellation or postponement. The company is sticking to its original plan, he said.

But canceling the Olympics would cause financial damage for the company, Takaoka said. Airweave purchased advertising space for the summer, which would be wasted with a postponement.

Yet "the Olympics [contributed to the company] in developing new products as well as for marketing purposes," he said. Airweave this month announced a new custom mattress product originally developed for the Olympic athletes.

Beyond the economic impact, it is unclear whether the Olympic venues would be available in a year or two. The Tokyo Games are slated to stretch across 42 sites nationwide.

Makuhari Messe, where the wrestling, taekwondo and fencing events will be held, is one of Japan's busiest convention centers. It hosted 940 events in fiscal 2018 and is receiving inquiries for dates a year or more in the future.

Tokyo Big Sight, which is to serve as the main press center for Japanese and international media, is already taking reservations for July and August 2021.

"We are finalizing contracts for several events," a representative said.

Yoshiro Mori, president of the Tokyo organizing committee and a former Japanese prime minister, on Monday cited the need to move quickly in determining site availability.

"We need to find out whether every one of our venues would be free" for a future date, Mori said. "It would take a tremendous amount of time, and we need to hurry."

The Olympic Village will be converted into condominiums after the games. Mitsui Fudosan Residential and nine other developers have begun selling the 4,145 units, with a planned move-in date of March 2023.

"We are supposed to accept any delays to move in, and won't be receiving any compensation," one buyer said.

Security poses a challenge as well. About 14,000 private security guards will be needed across the various venues and their surroundings. A joint venture among several hundred security companies including Secom and Alsok is to provide the staff this summer, but a delay would mean trying to secure the same number of people again in a year or two.

Postponing the Olympics to summer 2021 could cause conflicts with other major sports events, like the swimming world championships in Fukuoka and the track and field world championships in the U.S. state of Oregon. The IOC likely will take the lead on negotiations with different sports federations.

Additional reporting by Eri Sugiura, Mitsuru Obe, Akane Okutsu and Takanobu Iwamura.

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