#Macro Economics
The 17-day 2020 Tokyo Olympics officially ended on August 8, 2021. In order to avoid the spread of the COVID-19, relevant organizations decided the Tokyo Olympic be held behind-closed-doors for the very first time of history, closing from spectators. Current estimation on expenditure reaches 20 billion U.S. dollars, which is nearly twice as much as the original estimation of 7.4 billion U.S. dollars, making it the most expensive Olympics in history. This article will explain the huge economic losses caused by behind-closed-doors games.
The Tokyo Olympics were pushed back one year after COVID-19 swept across the world last year. Five parties including the International Olympic Committee, the International Paralympic Games, the Tokyo Olympic Organizing Committee, the Japanese Government, and the Tokyo Metropolitan Government emphasized that the health of the people is their first priority as they launched a series of high-level pandemic prevention arrangements (in Figure 1). These arrangements were to reduce the risk of imported virus from foreign countries to local area as well as to ensure the smooth hosting of the Tokyo Olympics.
Figure 1: The pandemic prevention arrangements for Tokyo Olympics
| Date | Pandemic prevention arrangement detail |
| 20/3 | The Japanese government suspended new entry of foreigners |
| 6/5 | Sent out vaccines to delegations and encouraged participants and staff to be vaccinated |
| 28/5 | Lot-drawing system implemented to ticket holders in order to reduce the number of spectators |
| 20/6 | The Tokyo Metropolitan Government decided to cancel all public spectating events during the Tokyo Olympics and Paralympics |
| 8/7 | Japanese Prime Minister Yoshihide Suga announced that the Olympic Games will be held in emergency condition; and all parties announced that all three venues will be closed for spectators on the same day |
| 9/7 | The Tokyo Olympic Organizing Committee announced that no spectators could enter the Olympic Games in Hokkaido |
| 10/7 | The Tokyo Olympic Organizing Committee took other region’s pandemic measurements as reference that the softball and baseball games held at the Prefectural Azuma Stadium will not be closed to all spectators |
| 16/7 | The Tokyo Olympic Organizing Committee banned athletes from all countries to handshake or hugs to avoid unnecessary physical contact |
| 21/7 | About 950 people attended the opening ceremony of the Tokyo Olympics, with no other spectators allowed to enter. |
| 8/8 | Simplify related arrangements for the closing ceremony and end the ceremony ahead of schedule |
The opportunity cost of playing behind-closed-doors games is less than canceling
Local scholars and political organizations questioned the International Olympic Committee and the Japanese Olympic Committee on their insistence on holding the Tokyo Olympics even when the pandemic was yet to be subsided. The author believes that the most important consideration is the economic factors.
If the Tokyo Olympics was canceled, the overall loss is estimated to be 41.34 billion U.S. dollars; while if it was held behind-closed-doors, the economic loss will be reduced to 22.09 billion U.S. dollars. Dozens of advertisers and Japanese companies had paid over ten billion U.S. dollars sponsorship fees, and some global enterprises even bought the broadcasting rights, which enabled Tokyo Olympics to bring revenue to the Japanese government. This revenue is Implicit Costs of the Tokyo Olympics on canceling, and the compensation for canceling the above contract is its Explicit Costs. After weighing the Full Cost of each option, the relevant organization decided the Tokyo Olympics be held behind-closed-doors.
Japan might have failed to revitalize the economy by taking advantage of the Tokyo Olympics
According to the Japanese economist Katsuhiro Miyamoto, the local spectators who originally planned to watch the Tokyo Olympics will bring to the economy not only ticket revenues, but also will generate Derived Demand on hotels, restaurants and related goods. Which thus will drive a growth in Private Consumption Expenditures. In addition, travelers’ consumption in Tokyo is included in Japan’s Export Expenditure. However, the behind-closed-doors Olympic games resulted in a huge loss in traveler’s consumption which Japan’s GDP cannot benefit from it.
At the same time, Japan’s balance of payments, which is the sum of the Current Account and the Capital and Financial Account, is unlikely to be improved by the Tokyo Olympics.
This can be seen on Figure 2. Japan’s balance of payments fell from US$208.7 billion in 2017 to US$160.6 billion in 2020, which clearly showed that Japan’s economic transactions with other countries had dropped in the past four years.
Alongside with the Olympic games closed from spectators, items under the balance of payments account (especially the export of goods and services in current account) are very unlikely to record a growth.
Figure 2（2016 – 2020 Japan’s balance of payments）
| Year | In US dollars |
| 2016 | 196 billion |
| 2017 | 208.7 billion |
| 2018 | 178.7 billion |
| 2019 | 176.6 billion |
| 2020 | 160.6 billion |
（Source: Balance of Payments Summary Form issued by the Ministry of Finance of Japan [Heisei 8 or later]）
The potential economic growth upon the Tokyo Olympic is uncertain
The Japanese government will try to make use of the infrastructure and Capital built for the Tokyo Olympics in future for economic activities upon the end of the Tokyo Olympics, hoping to boost Japan’s long-term economic development. According to the economic benefit report released by the Tokyo Metropolitan Government earlier, they originally expected the Tokyo Olympics to bring about US$112.1 billion economic benefits by 2030. Yet as the pandemic still last, this type of Spillover Effect can hardly be seen in the coming 10 years.
Even though the Tokyo Olympics has brought the Japanese government a heavy financial burden, it was very fortunate that all the events were successfully completed. Tokyo has gained international recognition on their profound urban construction, strict pandemic prevention arrangements and crowd control measurements. This can surely help Japan to improve development on sports and tourism in the future on promoting local urban constructions. Long-term development and boost on the Japanese economy can be achieved.
Extra knowledge
Hong Kong has participated in the Olympics for 16 times, from Helsinki in 1952 to Rio Olympics in 2016 and won a total of 3 Olympic medals. In the 2020 Tokyo Olympics, Hong Kong’s elite athletes has achieved a new record of one gold, two silver, and three bronze medals in five sports (Figure 3). They have won six medals and demonstrated extraordinary ability to show that “Hong Kong athletes are not useless”. Their hard work has moved every citizens of Hong Kong. Thank you and salute to all Hong Kong team athletes!
Figure 3（Hong Kong athletes winning record in Tokyo Olympics）
| Sports Event | HK team | Result |
| Men’s Foil Individual | Cheung Ka Long | Gold |
| Women’s 100m Freestyle | Siobhan Haughey | Silver |
| Women’s 200m Freestyle | Silver | |
| Women’s Table Tennis Team | Doo Hoi Kem, Lee Ho Ching, Minnie Soo | Bronze |
| Women’s Karate Figure | Grace Lau | Bronze |
| Women’s Track Cycling Race | Lee Wai Sze | Bronze |
Opportunity Cost：Opportunity cost refers to the highest-valued option forgone.
Gross Domestic Product：Gross Domestic Product refers to the total market value of final output produced by local resident producing units in a specified period.
Balance of Payment：Balance of payment is the record of international trading, borrowing and lending of an economy.
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