Will overseas fan ban at Olympics actually help avoid hit to economic gain from games?

(Photo: Many coin-operated lockers are left vacant due to a plunge in tourist numbers amid the coronavirus pandemic, at JR Ueno Station in Tokyo's Taito Ward)

TOKYO March 22, -- While the recent decision for the Japanese capital to forgo overseas spectators at the Olympic and Paralympic Games this summer due to the lingering coronavirus pandemic has raised concerns about a possible economic impact, some experts say it is a "fair compromise" considering potential damage to the economy due to a possible virus resurgence from hosting overseas fans.
Representatives of the five organizing bodies of the Tokyo Games -- the Japanese government, the Tokyo Metropolitan Government, the Tokyo Organising Committee of the Olympic and Paralympic Games, the International Olympic Committee and the International Paralympic Committee -- formally decided on March 20 to give up on a plan to host spectators from abroad in a bid to prevent the spread of COVID-19.
The watershed decision is set to significantly transform the premise of the Tokyo Games, which organizers had pledged to hold in a "perfect form."
During his stint as prime minister, Shinzo Abe underscored the significance of holding the games "in a perfect form as a proof humankind has overcome the coronavirus" as he proposed to postpone the event for one year. What signified the "perfect form" to him was hosting spectators from overseas.
Under the "Abenomics" economic policy mix pushed forward by the Abe administration, the rising number of inbound tourists had partially underpinned its growth strategy. The government set a goal of boosting foreign visitors to Japan to 40 million by 2020 -- the original Olympic year -- and visitor numbers were soaring thanks in part to the relaxation of visa issuance conditions. Last year, however, the number of inbound tourists dropped to 4.11 million, down 87% from 2019.
A government insider stressed back then, "It's our job to provide support so what the prime minister calls a perfect form can be realized." After the resurgence of the coronavirus across Japan last fall, however, there were no more talks of holding the Summer Games "in their entirety."
Another informed source commented, "No one thinks we can host spectators from overseas. It was until last autumn that we had placed our expectations on inbound tourists."
The domestic hotel industry has taken a hard hit from the pandemic, with its occupancy rate being sluggish despite earlier hopes for "Olympic demand."
According to the Japan City Hotel Association, whose membership mainly comprises business hotels, the occupancy rate at hotels in Tokyo used to reach 85 to 90% before, but it plunged to some 20% after the onset of the coronavirus crisis. It has apparently become common for hotels to close temporarily or shutdown. An individual associated with the tourism industry lamented, "Every business is battered. I want the organizers to host at least domestic fans to keep the economy going."
According to an estimate released on March 12 by Katsuhiro Miyamoto, professor emeritus of theoretical economics at Kansai University, the economic loss from barring overseas spectators and limiting the number of domestic fans to 50% of the capacity at Tokyo Games venues would reach some 1.6258 trillion yen (about $15 billion). "There would be a significant impact on Japan as it aspires to be a tourism-oriented nation, and the calculation results make us aware once again how much foreign visitors have contributed to Japan economically."
Meanwhile, another expert believes forgoing overseas fans is "a fair compromise." Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute Inc., estimates the GDP rise in an Olympic year at 1.7 trillion yen (about $15.6 billion) based on the average economic growth rate in host countries since the 1984 Los Angeles Games. Such an economic boost, however, would be set off if Japan hosted overseas spectators and suffered yet another virus resurgence as a result. "If the government declares yet another state of emergency, Japan is expected to incur an approximately 1.5-trillion-yen (about $13.7 billion) loss a month," Nagahama warned. "From an economic perspective, that would ruin the significance of hosting the games itself."