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Expectations are high for the 2020 Tokyo Olympics.

Businesses cannot ignore the economic impact of sports. Japan will host “Sports and Culture Davos” in autumn 2016, in response to a proposal by the World Economic Forum, which organizes the Annual Meeting of the New Champions, dubbed “Summer Davos,” where Japanese politicians and business executives are expected to outline the prospects of the economic effects on the country from the 2020 Olympics.

Since Tokyo won the bid to host the 2020 Summer Olympic Games last September, various think tanks have announced their estimates of the economic effects of the Olympics, with figures ranging from ¥3 trillion to ¥150 trillion.

Factors considered in calculating economic effects generally include stadium and venue construction; hotels and other facilities for athletes and tourists before and during the Olympics; consumption by tourists, the number of which has already shown a remarkable increase after the hosting announcement; and infrastructure building to prepare for the influx of foreign visitors. The estimates cover from the time Tokyo won the bid through the 2020 Games.

“Different organizations come up with different figures because of differing assumptions. The Mori Memorial Foundation’s Institute for Urban Strategies based their assumptions heavily on the London Games,” said Hiroo Ichikawa, an executive member of the institute who is also a professor of urban policy and the dean of Professional Graduate Schools and the Graduate School of Governance Studies at Meiji University.

Using London, which hosted the 2012 Olympics, as a model makes sense because London and Tokyo are both extensively developed cities, he said.

The Institute for Urban Strategies said in January it estimates the economic effects to be ¥19.4 trillion.

“I think it’s a somewhat conservative number. The more factors included in the estimate, the bigger the number,” Ichikawa said. While the Tokyo Metropolitan Government announced the economic effects would be ¥3 trillion, Ichikawa’s institute factors in more items than the government, which only considered effects directly related to the Olympics such as construction of the facilities to be used by athletes and others involved in the Olympics and the operating costs of the Games.

The thing that makes the largest contribution to the ¥19.4 trillion estimate is the so-called “dream effect,” accounting for ¥7.5 trillion.

“The dream effect is big,” he said. The dream effect, or an increase in consumption amid a big, uplifting event, has been observed in every city that has won the bid to host the Games, he said.

Japanese are known as money savers and conservative consumers. But the institute estimates they will use some of their savings to make purchases in the seven years leading up to 2020.

Consumption is expected to increase for high-resolution televisions, sporting goods and sports activities. Also, the number of people enrolling in English conversation schools will rise because people will be exposed to various international exchanges.

It may not be entirely realistic to compare with the 1964 Tokyo Olympics, but sales of TVs that year because the Games were the first ever to be broadcast in color. Things may be different now, but this demonstrates the Olympics can stimulate consumerism in people.

Other than the dream effect, the institute estimates the number of foreign visitors will rise.

On top of the Olympics contributing to a tourist increase, the government’s initiative to make Japan one of the biggest tourist destinations in the world will also help boost the tourism industry.

As part of the growth strategies in Prime Minister Shinzo Abe’s “Abenomics,” the government is aiming to increase the number of foreign visitors per year to 20 million by 2020 and 30 million by 2030.

In 2013, the number was 10.36 million, according to Japan National Tourism Association, making the government’s target seem ambitious. But the Olympic effect has already been observed as the number of foreign visitors from January to July is 26 percent higher than the same period in 2013.

The Olympics helps boost tourism as people want to see the city hosting the Games.

“It’s possible the target of 20 million will be achieved around 2017 at this pace,” Ichikawa said. The institute’s official estimate is the same as the government’s and it expects 10 million of the 20 million expected tourists will visit Tokyo, he said.

To accommodate an increase in the number of tourists, Tokyo needs more hotels.

In London, about 1,300 5-star hotel rooms, equivalent to about two Okura or New Otani hotels, and 45,000 standard hotel rooms, equivalent to 300 hotels with about 150 rooms each, were built between the announcement of London’s hosting and the 2012 Games, he said.

Ichikawa’s institute assumes the same will happen to Tokyo.

Hotel operators and real estate developers are expected to build hotels or expand the capacities of existing hotels. Such moves should also help lure international conferences to Tokyo, prompting reinforcements of tourism infrastructure, which will attract tourists, creating a synergetic cycle.

The number of flights at Haneda and Narita airports will also increase. The Ministry of Land, Transport, Infrastructure and Tourism has a plan to increase total arrivals and departures by 39,000 per year at Haneda from the current 447,000 and by 40,000 at Narita from the current 270,000 by 2020.

The ministry is in negotiation with municipalities and airlines to, for example, add routes above Tokyo’s central and residential areas and take other measures to increase air traffic.

The Institute for Urban Strategies also points out the acceleration of infrastructure construction with a view to catching up with the increasing demand caused by the Olympics is another of the Games’ economic effects.

For example, construction on the Tokyo Gaikan Expressway, which now connects Tokyo’s Nerima Ward with Misato, Saitama Prefecture, and is planned to stretch to Tokyo’s Setagaya Ward in the west and Ichikawa, Chiba Prefecture, in the east, will be accelerated, Ichikawa said. Better road conditions will aid the transport of goods and people in an economy energized through preparation for the Games.

Inevitably, more jobs will be needed to support such construction and other various projects as the expectations of benefits from the Games stimulate the economy.

The institute estimates 1.21 million jobs will be created because of the Olympics, or about 170,000 new jobs a year.

As a way of filling the need, the government recently announced plans to loosen regulations on accepting foreign workers.

However, construction is not the only area likely to see a shortage. Many white-collar positions will need to be filled as deregulation and Abenomics’ growth strategies are expected to lure foreign companies, creating new jobs. Thanks to Abenomics, female workers as well as female leaders are expected to increase.

Ichikawa is optimistic the need for workers will be met as he expects the government’s measures will help.

“After all, Japan has 2 million part-time workers. We will have enough people,” he said.

The prospect for the economy look rosy until 2020, but how about after the Olympics?

Athens hosted the 2004 Olympics and Greece went bankrupt. In Japan, the city of Nagano hosted the Winter Games in 1998, but demand shrank rapidly after the Games and the economy slowed, Ichikawa said.

However, London has had a completely different experience. Infrastructure refurbishment, an economy vitalized by reforms and other preparations for the 2012 Games made the city stronger in its economy, culture and many other areas, he said.

In the 2012 Global Power City Index, the ranking of global city “power” published yearly by the Mori Memorial Foundation, London surpassed New York to become the No. 1 city in the world, mainly because the British capital became stronger in the process of preparing for the Olympics. London was ranked first again in 2013. Tokyo was fourth after London, New York and Paris.

“I believe Tokyo will energize itself even more, like London did,” he said.

A reinforced infrastructure will remain in Tokyo, which will continue to attract foreign businesses and tourists, he added.

In the end, Ichikawa hopes the government succeeds with deregulation to stimulate industry and attract foreign companies. For example, the government designated nine areas in Tokyo as Special Zones for Asian Headquarters in 2011 to attract foreign businesses by loosening regulations. The government’s goal was to lure 50 new headquarters of foreign companies and 500 new foreign companies by 2016, but the target is far from met, he said.

In coming up with its estimate of the Olympics’ effects, the Institute for Urban Strategies assumed the special zones are successful and they will keep attracting more foreign companies even after 2017.

Nonetheless, Ichikawa is optimistic about inbound tourism, saying Japanese hospitality will definitely be appreciated. He pointed out a survey of foreign tourists’ impressions of Japan before and after their stay in Japan. “Good service” garners higher responses after their stay than before.

“The Olympics is the trigger for them to come to Japan. They will learn about Japan and keep visiting. That’s our strategy,” Ichikawa said.

Download the PDF of this ‘Summer Davos’ Special 2014

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