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  • Writer's pictureDhyana Nikunj Shah

What were the economic impacts of the Olympics on Japan?

Was the Olympics worth delaying it or should they have been cancelled entirely?

The Olympics is the largest multi-sport event held every four years, increasing the empirical advantage it provides to its host country. The year 2020 was Japan’s year to shine and support its economy with the Olympics after the crippling effect of the 2011 tsunami and earthquake. The Tokyo prefecture alone was forecasted to have an economic impact of 20 trillion Japanese Yen, combined with an impact of 32 trillion Japanese Yen across the nation, as represented in the graph below:

However, the COVID-19 pandemic threw everything into turmoil. With a staggering increase in the COVID cases, Japan was forced to postpone the Olympics to 2021. While many said that canceling the events altogether would have been a better option. Today, even after the events have ended, the controversy remains.

Nevertheless, despite postponing the Olympics, the prospects for the event were shattered when a new wave of virus infections began in April 2021. Hosting the Olympics brought with it a fear of surging infectious cases and an even longer nationwide lockdown, dragging the nation into a pit of economic losses from which it may never recover. Additionally, 55% of the Japanese were against the games being held, and 68% did not believe that the organisers would be able to control the spread of the infection.

The postponement brought with it a pile of costs as large as 2,482 billion Japanese Yen. This money incurs an opportunity cost, as it could have been used to support the nation and spent it on the much-needed healthcare during the pandemic.

More than 90 people tested positive, including athletes and the nation’s citizens affiliated with the Olympics, thus increasing the health expenses borne by the economy. The system of isolation bubbles for athletes also proved to be extremely expensive and unsuccessful. This put the athletes and the Japanese citizens involved in the Olympics at tremendous risk. Since infrastructure and investment were already in place, and as such the construction industry had reaped the benefits of the Olympics; there was no clear economic incentive to host the event. Despite this, the Japanese Government ultimately decided to continue with the event. It was held amidst a COVID-19 state of emergency and without any spectators. The lack of tourists meant that Japan would be unable to raise back its tremendous spending on the Olympics, adding to its growing pile of debts.

A surge in tourism after the pandemic was predicted to boost the economy. However, the pandemic has seen an astounding drop in tourists, forecasted to drop further thus not benefiting the economy.

Tokyo initially tripled the record for most domestic sponsorships, but slowly the firms began distancing themselves from the event. One of the most dominant Japanese companies, Toyota, announced that it would not air Olympic advertisements on a domestic platform, and its CEO would not attend.

Considering all this, hosting the Olympics at a later date, did prove to be of some benefit to the Japanese economy. The stadiums built for the event, costing approximately $3 billion, are an investment for the long run. The stadiums could prove to be an incentive to improve athletics and provide a platform for future events to be hosted in the nation. The Olympics has also allowed Japan to showcase its rich cultural assets to the world. Furthermore, the massive infrastructural feats will likely have positive externalities over the long term in industries including tourism.

On another positive note, digital ad sales rose over ad sales rose over 80% for the Olympics, with multinational companies such as NBC Universal paid over $1 billion to get broadcasting rights for the majestic event. As the event was delivered via television, Japan saw a boom in OLED TVs, increasing consumption and slowly aiding its economy in the path to recovery.

The implications of postponing the Olympics were both positive and negative. Nonetheless, the decision to postpone the games has poor short-term outcomes but may prove to be beneficial in the long term.

By Dhyana Nikunj Shah - First Year Bachelor of Economics


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