2020 Sumer Olympics POSTPONED to 2021

After months of discussion and plenty of assertions that canceling the Summer 2020 Olympics in Tokyo would be completely out of the question, the International Olympic Committee (IOC) and Japan have agreed to postpone the Summer 2020 Olympic Games previously scheduled to begin in late July. The IOC announced the world’s largest sporting event would, instead, take place in Summer 2021[1].

“The change will wreak havoc with sports schedules but should bring great relief to athletes, organizers, and health officials who had increasingly pressed that the coronavirus pandemic made it unsafe to go forward with the event,” observed New York Times reporters Motoko Rich, Matt Futterman, and Tariq Panja.

Although Japan and the IOC had previously said the ramifications of canceling the Olympics were too dire to bear, when the national Olympic Committee in Canada withdrew from the games, the Australian committee told its athletes they would not be able to train for the games, and the U.S. Olympic and Paralympic Committee officially urged the IOC to postpone, the ramifications of a largely empty Olympics seemed like a worse option.

Yoshiro Mori, chairman of the Tokyo organizing committee, said he would not, at present, say whether the Olympics would be the same scale in 2021, but “the name of the games will be Tokyo 2020.” He added, “Maybe we will reduce the scale. We are going to discuss that going forward.” Prior to this year’s Summer Games, the Olympics had never been postponed and canceled just three times because of war in 1916, 1940, and 1944.

Olympic-Sized Economic Fallout

Fans of the Olympics fear that postponing the event could ultimately doom the games, particularly given the trend in recent years for cities and even countries to opt out of competing to win the honor of hosting them. The IOC’s unwillingness to postpone or cancel until now could discourage cities from offering to host future games, and a lack of host cities could ultimately cause the Olympics to cease to exist. At present, the Summer Games are scheduled out through 2028, with Paris hosting in 2024 and Los Angeles in 2028.

Of course, fans of the Japanese economy are probably far more worried than even the most fervent Olympic fans. At the end of 2019, Japan and Tokyo had spent an estimated $12.6 billion on hosting expenses and, by some reports, pouring closer to $1.06 trillion into the project since landing the bid in 2013[2]. Japanese businesses have also done their part, paying out about $3.3 billion in sponsorships.

Capital Economics analysts say that while the capital that was spent on the economy has been essentially in play for years now and, as a result, will likely have already factored into the GDP, the hit that the cancellation and coronavirus could have on tourism could drag down future metrics and general consumption in Japan. Chinese and South Korean tourists account for about 20 million of the roughly 40 million foreign visitors to the country in “normal” years, but in 2020, tourism was down nearly 60 percent in February. With the coronavirus still spreading, it seems unlikely that number will begin to climb again in the near future.

Japan’s economy is not solely reliant (or even largely reliant) on tourism, so the postponement might ultimately create less than a 1 percentage point loss to the national GDP. That loss would “badly affect Japanese consumer confidence,” Takashhi Miwa, a Nomura economist, warned, but other analysts say that any losses experienced in 2020 will be made up for when the Olympics are held in 2021.

Do you think postponing the Olympics was a good call?

Thank you for reading the Bryan Ellis Investing Letter!

Your comments and questions are welcomed below.

 

 

 

[1] https://www.nytimes.com/2020/03/24/sports/olympics/coronavirus-summer-olympics-postponed.html

[2] https://www.rte.ie/news/business/2020/0324/1126085-what-could-an-olympics-postponement-cost-japan/

Leave a Reply