The Tokyo Olympic Games is reaching the point of no return.
With seven weeks until the opening ceremony, the Japanese government, the International Olympic Committee (IOC) and major stakeholders are gambling political reputations and billions of dollars on staging an Olympics that could lift global spirits and show the world how to begin a return to normality — or, in the worst case, it could create a superspreader event that savages Japan’s tottering economic recovery and blights the image of the world’s biggest sporting showcase.
Mired in controversy since the COVID-19 pandemic caused it to be delayed early last year, the Games have become a weather vane for opinion on how governments and populations should beat the virus.
Illustration: Mountain People
Initially, the goal was to delay the 205-nation spectacle until the pandemic was under control, but as months passed and vaccine rollouts struggled to quench new outbreaks, the tournament has become symbolic of a divide between those who want to keep restrictions until COVID-19 is stamped out, and those driven by the financial and reputational cost of not holding the event, even while the threat remains.
Here is what is at stake, whether the Games go ahead or are canceled at the last moment, from the reputation of Japan’s top political echelon to the investments of sponsors, governments and organizers, as well as the health of the city’s population, and the dreams and well-being of the world’s greatest athletes.
Scrapping the Games could inflict a direct economic loss of as much as ￥1.8 trillion (US$16.4 billion), Nomura Research Institute economist Takahide Kiuchi said, but the economic fallout could run much wider than that. As well as the lost spending by participants, their entourages and local residents, the cancelation would be a blow to the mood of the nation that could depress spending and investment across the economy. Organizers must count the cost of a ban on overseas spectators, whom Tokyo had hoped would help pay for all of the stadiums and infrastructure built for the event.
An analysis by Yuki Masujima of Bloomberg Economics showed that canceling the Games could wipe out most of Japan’s projected growth for this year. His 1.7 percentage point hit to the Japanese economy is based on a worsening local virus situation triggering the cancelation of the event and forcing the government to extend restrictions.
Even worse would be the Games going ahead and turning into a superspreader event.
While not his main scenario, Kiuchi said that such an event could put Japan into an emergency that would be more costly than calling off the Games.
On the other hand, a successful Games could have the reverse effect, not only bringing in revenue and boosting spending, but lifting the mood of companies and households. In an ideal case, it would propel a shrinking economy in emergency mode into a recovery that would be further fueled by an accelerating vaccination drive.
It might also have an even larger effect globally, sending a signal of optimism across the hundreds of nations that tune in to watch their athletes compete.
Japanese Prime Minister Yoshihide Suga is gambling his job on pulling off a successful Olympics in the face of opposition from the public and many top business leaders. He faces a party leadership election by September and a general election that must be held by October. While his ruling Liberal Democratic Party is unlikely to be toppled by a splintered opposition in the national vote, Suga’s prospects are more precarious.
His support rating is at its lowest since he took office last year. A catastrophic Games and public backlash could propel Suga toward the revolving door that dispatched six prime ministers in five years before his predecessor.
Even a safe and successful Games might not bolster Suga’s public approval rating. While the typical trajectory shows voters in host countries turn from curmudgeonly to exuberant when the Olympic flame is lit, he still faces judgement on his handling of the nation’s vaccine rollout.
Others have also found that the Games can be double-edged. British Prime Minister David Cameron got no particular boost from the 2012 London Games, a survey following the event showed, despite widespread praise for the event. By contrast, then-London mayor Boris Johnson became a favorite to take over as British prime minister following the Games.
The Japanese medical establishment is becoming increasingly nervous about bringing together 78,000 people from around the world for the Olympics and the Paralympics.
Organizers had initially planned to have about 10,000 doctors, nurses and medical personnel on standby for the Games, but have needed to cut that number to about 7,000 because of the need for staff to deal with ongoing outbreaks.
The organizers are even struggling to meet the reduced goal.
Only 80 percent of the personnel have been recruited, Tokyo 2020 Organizing Committee president Seiko Hashimoto said.
That is almost half of the original goal.
“We have strong reservations about hosting the Olympics at the expense of the lives and health of patients and nurses,” Japan Federation of Medical Workers’ Unions secretary-general Susumu Morita said.
Failure to ensure enough medical support for the spectators, athletes and delegations could mean a decision to ban not only overseas fans, but also local spectators, leaving athletes performing in empty arenas.
While spectators in the stands are a boost for the host city, the Olympics has long been about broadcasting rights — beaming events to more than 3 billion viewers. Comcast paid US$4.4 billion to have its NBC network show the Olympics in the US from 2014 to last year — about US$1.1 billion per tournament — and the station is proceeding as if the Olympics is to begin as scheduled.
NBC executives are betting that pent-up demand from last summer’s postponement will help drive higher viewership and turn around recent rating declines for the Games.
That would be a boost for the network as it has agreed to pay another US$7.75 billion to air the Games from this year to 2032. It is a big money-spinner for the company, which earned US$250 million from the 2016 Rio de Janeiro Games.
“Our plans continue full force to present the Games on our NBC platforms this summer,” NBC Sports spokesman Greg Hughes said.
The financial consequences of another postponement or cancelation are not clear.
In March last year, just before the pandemic forced the Games to be delayed, NBC said that it had sold a record US$1.25 billion of advertising for the Olympics.
The company has not detailed what happened to those advertising commitments. Some customers might have repurposed that spending on other NBC programming last summer, others might have asked for their money back.
Discovery, which broadcasts the Olympics in Europe, is counting on the event to promote its new online streaming service, Discovery+, while NBC is pushing its own service, Peacock, at home.
The two companies have said that they are insured against the Games being canceled.
“There should be no losses should there not be an Olympics,” Comcast chief executive officer Brian Roberts said last year before the Olympics were postponed.
However, he also said that if the Games did not occur, there “wouldn’t be a profit.”
Among the biggest casualties should the Games be canceled are the insurance companies that have underwritten the risk for not only the broadcasters, but also the national teams, sponsors, and hundreds of other companies and organizations that depended on the event.
The cost of cancelation to insurers is estimated to be US$2 billion to US$3 billion, hitting an industry battered by losses last year, including the about US$800 million of event cancelation insurance taken out by the IOC, plus additional coverage purchased by local organizing committees and likely claims from broadcasters, sponsors, professional sports teams and hospitality, Bloomberg Intelligence analyst Charles Graham said.
In March last year, just before the postponement of the Games, Swiss Re said that the Tokyo Olympics posed the biggest single risk at the time to the world’s second-largest reinsurer, with a potential hit of US$250 million.
A Swiss Re spokesman last week said that this remains the case.
Munich Re, the world’s largest reinsurer, said that it is involved in insuring the Tokyo Olympics and would be “affected” if the Games were called off, but declined to provide additional details about its exposure.
Aon, which last year agreed to buy Willis Towers Watson to create the world’s largest insurance broker, declined to comment on what effect a cancelation might have on the company.
Even so, any potential impact would not derail the earnings outlook of individual insurers, Graham said.
“It would be the largest single event loss, but not large enough to be a major earnings event,” Graham said. “To give some perspective, the two largest global reinsurers — Munich Re and Swiss Re — alone incurred US$2.7 billion of event cancelation losses in 2020.”
For athletes in more than 30 sports, the quadrennial Summer Olympics is the most important event on their calendar, not only for the glory of achieving the pinnacle of their sport, but also because it can determine rewards, sponsorship deals and professional careers.
Just making an Olympic team requires a huge investment in time, dedication and money.
“The Olympics are pretty special,” said US archer Brady Ellison, 32, who is hoping for gold after winning bronze and silver medals in previous Olympics. “When you train for the Olympics, your life runs in four-year segments.”
Training to be at peak performance for July last year and then finding that the Games were delayed caused extra hardship, stress and expense for many participants. For Philippine weightlifter Hidilyn Diaz, 30, it meant seven months away from her family, while she trained in Malaysia.
“I miss my mom and her food,” she said. “But this is what I want. This is what I love to do.”
If the Games do not go ahead, retiring athletes would probably never see another opportunity to win a medal at the Olympics.
For those who can compete next time, at the 2024 Paris Games, it would mean a return to training and world tournaments — but only three years to prepare instead of four.
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