If the spread of the new coronavirus forces the cancelation of the Olympics, it will reduce Japan annual gross domestic product by 1.4 percent, a securities firm estimates.
In a report Friday, SMBC Nikko Securities Inc. projects the sporting extravaganza will create ¥670 billion ($6.4 billion) in consumer demand and that canceling it will sap about ¥7.8 trillion from GDP.
The securities house believes the Olympics will be canceled if the spread of the deadly virus extends to July. Under that scenario, corporate revenues would fall 24.4 percent in 2020 compared with last year.
On the other hand, the report also presented a scenario under which the epidemic ends in April, the Olympics are held as scheduled and the fallout from the virus is limited to a 0.9 percent GDP drop.
Even under this optimistic view, corporate revenues would likely fall 14.9 percent due to the plunge in tourism, dampened domestic consumption and other factors.
The company also said that a potential credit crunch could trigger an economic slump comparable with the one caused by the 2008 global financial crisis.
“To prepare for the worst, the government needs to make available support measures such as debt guarantees for small firms,” SMBC Nikko chief economist Junichi Makino said.
The 2020 Games are scheduled to take place between July 24 and Aug. 9.