Year of the Ox Outlook: Will the Tokyo Olympics happen?

Each Chinese New Year, AsianInvestor makes 10 predictions about developments that will affect global financial markets and the portfolios of Asian investors, especially asset owners. For our final prediction we consider whether Japan will have to cancel the Olympic Games after delaying it already for a year due to the Covid-19 pandemic. 

Will Japan have to cancel the Olympic Games?  

Answer: No

Japan should still host the Olympic Games this year, but it will likely be an event without much fanfare.

Officials in Japan and the International Olympic Committee (IOC) are keen to organise the games as currently planned. However, not everyone is convinced that the event, scheduled between July 23 and August 8 in Tokyo, should go ahead after being delayed already for a year.

Japan only rolled out its vaccination programme on February 24, later than the US and Europe. With large parts of the country currently under a state of emergency due to the virus, there are doubts as to whether the Japanese government can bring infection numbers under control ahead of the games.

A survey conducted by Kyodo News on February 6 and 7 revealed that 80% of the Japanese porpulation favoured cancelling or postponing the event. In January, Canadian IOC member Richard Pound also said, "I can't be certain [the Olympics will happen] because the ongoing elephant in the room would be the surges in the virus."

The prospect of cancellation remains because of the fragile state of the medical care system in Japan. The system has been pushed to the brink of a crisis, and hospitals will likely continue to be under severe stress in the coming months during the rollout of the vaccine, Shigeto Nagai, head of Japan economics at Oxford Economics, told AsianInvestor.

That said, he and other market experts believe that the event will still be held because Prime Minister Yoshihide Suga’s administration has already laid out plans to ensure that it goes ahead. The nationwide Olympic torch relay is due to begin on March 25.

"We still assume that the Olympic Games will be held on a very limited scale, given that cancellation will inflict significant damage on the Suga administration," Nagai said.

If the games were to be cancelled, it means the nation would not have overcome the Covid-19 pandemic in the coming months, which will negatively affect several other non-Olympic activities, most particularly tourism and hospitality-related services, he said.

The damage to Suga of a cancellation would also be sizeable, given that the goal of containing Covid-19 to successfully hold the games has been the administration's priority. The prime minister's approval rating has fallen as he has struggled to handle the coronavirus situation.

Any cancellation would prompt the ruling Liberal Democratic Party to start looking for the next leader to contest the national election to be held in October this year, according to the economist. If that happens global investors may start losing confidence in Japan's political landscape, which has seen eight years of relative stability under the Abe administration, he said.

"If Tokyo can't host the Olympic Games this year, Beijing will also be unable to host the winter edition of the event next year. The Winter Olympic is just six months after Tokyo’s Olympics," a Japan pension fund expert told AsianInvestor. "The games could be held without spectators in the worst case [scenario]," he said.

The chief investment officer of a family office in Hong Kong also said he did not think that the games will be cancelled because Japan will lose "face". It should hold a "mini", scaled-down version of the event, so fewer people are exposed to the risk of Covid, he added.

Meanwhile, Japan’s government and Olympic officials are shoring up support for the games. Suga said on February 19 that Group of Seven (G7) leaders had given unanimous support for his bid to hold the Tokyo Olympics this summer.

Earlier this month, the IOC also reiterated its commitment to hold the event when seven-time Olympian Hashimoto Seiko was appointed on February 18 as the new president of the Tokyo 2020 organising committee.

The IOC remains as committed as ever to the safe and successful delivery of the Olympic and Paralympic Games Tokyo 2020, according to the statement.

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