Simon Denyer

Pulitzer Prize-winning journalist and author. Former bureau chief with The Washington Post and Reuters.

Aug 15, 2021
Published on: Washington Post
2 min read

TOKYO — A day after the Tokyo Olympics concluded, social media posts in Japan showed photos and videos of a man believed to be Thomas Bach, the International Olympic Committee’s president, strolling through Ginza, a popular shopping district in Tokyo.

Those posts went viral. And not as kudos for helping finally pull off the Tokyo Games. Instead, many in Japan view Bach as complicit in pushing Japan to host the Olympics despite the public health risks and the financial toll on taxpayers.

Every Olympics is expensive for the host city or nation. But those hosts typically have gains to show in return, including global recognition and millions of tourists who spend money at local businesses.

But those benefits won’t materialize for Tokyo, host of the most expensive Olympics to date and the first to hold Games with mostly empty venues — and hardly any domestic revenue — because of a pandemic.

“If you’re just looking at those spreadsheets, you know, there was no reason for this game to go on, at least from Tokyo’s perspective,” said Victor Matheson, who studies sports economics at College of the Holy Cross in Worcester, Mass.

By conservative estimates, the Tokyo Olympics cost $15.4 billion — a tab largely borne by Japanese taxpayers and more than double the forecast when the city bid for the Games. Japanese government auditors have estimated that the true cost is at least $25 billion, which includes projects related to the Games.

The official $15.4 billion tab is on par with the past two Summer Games: in Rio de Janeiro in 2016 ($13.7 billion) and in London in 2012 ($15 billion).

Every Olympics since 1960 in Rome has run over budget, according to a 2020 study co-authored by Bent Flyvbjerg, a professor at the University of Oxford who studies the economics of the Olympics.

“This is like having a tiger by the tail, you know, when you say yes to hosting the Games. You actually have very limited possibilities of stripping down cost” because the majority of the business decisions are made by the IOC and international athletics organizations, Flyvbjerg said. “Even under the best circumstances, putting on the Olympics is quite a burden financially. … Covid-19 definitely hasn’t made it easier for Tokyo.”

To be sure, even the most expensive estimate comes out to less than 1 percent of Japan’s gross domestic product — one of the world’s largest economies.

Still, experts say the unique realities of these Games were sure to put an unprecedented burden on Tokyo and the Japanese government, which is facing a ballooning national debt that is worsening because of the pandemic.

By effectively banning spectators and closing the Games to outside visitors, Japanese officials forfeited nearly $800 million in revenue that they had expected. Rather than an influx of up to 10 million tourists, as some optimistic projections had held, fewer than 100,000 official Olympics-related travelers were approved, which included athletes, team personnel and journalists. These visitors were sequestered in the Olympic “bubble” — the approved official Games venues, hotels and other special sites — for the vast majority of their stay in Japan.

“The bulk of this is going to have to come from people’s taxes … and the government will try to further borrow money from the public. So it’s going to be, at the end of the day, a huge burden on taxpayers,” said Noriko Hama, economics professor at Doshisha Business School in Kyoto.

That loss of revenue comes on top of the economic struggles already created by the pandemic and the state of emergency declared in Tokyo and other parts of the country, which limits how late businesses can stay open and has largely shut down borders to tourists.

The postponement of this year’s Olympics added $2.8 billion to the tab, according to organizers, who had to extend contracts and keep temporary venues longer than planned. And then there were other costs associated with the pandemic, such as the daily processing of tens of thousands of coronavirus tests from inside the Olympic bubble.

Tokyo secured a record $3 billion in domestic sponsorships, an impressive feat, Matheson said. But it’s unclear how much of that will come through in the end, he said. For example, Toyota pulled its domestic advertisements from the Olympics in the days leading up to the Opening Ceremonies.

Hosting the Olympics can often lead to long-term benefits. Investment in infrastructure will last well beyond the Games. Cities also can rebrand or introduce themselves to the world as travel destinations. But Tokyo is already a global draw, and the infrastructure benefits will probably be minimal, Matheson said. And Foreign journalists were largely limited to the Olympic venues, restricting their ability to showcase Japan’s culture, he said.

“The reporters couldn’t go out to do their special-interest story of people, of, you know, people walking in the Imperial Gardens, and they couldn’t go to their story of ‘We’re down in the Ginza district, the most spectacular commercial street in the world,’ ” he said. “All you could see is the inside of the gym rather than … all the sort of things that would make a fun trip to Tokyo.”

On the other hand, the IOC secured about $4 billion in revenue from broadcast media rights and international sponsorships, Matheson said.

Yuji Nakamura, a professor of public administration at Japan’s Utsonomiya University who has studied the Tokyo Olympics since 2013, said he expects Tokyo will be left in a similar situation as Montreal, which hosted the Summer Games in 1976 and experienced the largest cost overrun to date: 720 percent. It took 30 years to pay down that debt, according to Flyvbjerg’s study.

“Both the Tokyo government and central government couldn’t get their money’s worth. … In the end, the price has to be paid by the taxpayers and future generations,” Nakamura said.

If the cost reaches $25 billion to $30 billion, that could amount to about $940 per Tokyo resident, according to Naofumi Masumoto, visiting professor of Olympic studies at Tokyo Metropolitan University and Musashino University. That is money that could go toward other needs of the metropolitan government, such as providing hospital beds for coronavirus patients and purchasing vaccines, Masumoto said.

These Japanese experts expect that the Olympic spending will probably require special government bonds or taxes, or a cost-sharing deal with private companies.

“Without something along those lines … they will never get financial houses in order,” said Hama, of Doshisha Business School.

It is unclear if there will be any significant political fallout for Japanese Prime Minister Yoshihide Suga, who is facing an election this fall and is lagging in opinion polls. Despite fears that the Games could become a global superspreader event and strong public opposition leading up to them, sentiment appeared to shift once they began, and Olympics-related coronavirus cases were largely contained to the bubble.

“I think the political costs at this point, because there were no evident disasters during the Olympics themselves, are probably going to be limited,” said David Leheny, professor in the Graduate School of Asia-Pacific Studies at Waseda University in Tokyo.

“Because there was so much apprehension about it, the fact that there weren’t any disasters, mixed with the fact that there were so many Japanese winners, many of them who were charming, appealing figures in many ways, people are going to be primed into thinking that the Olympics had gone as well as possible,” Leheny added.