Asia Economy

Japan plays down possibility of postponing Tokyo Olympics due to coronavirus outbreak

Key Points
  • On Wednesday, Japan's Chief Cabinet Secretary Yoshihide Suga said that the country is still preparing to hold the Tokyo Summer Olympics as planned, Reuters reported.
  • That comes after Olympic Minister Seiko Hashimoto sparked concerns by saying Tokyo's contract with the International Olympic Committee "could be interpreted as allowing a postponement" until the end of the year, Reuters reported.
  • If the Tokyo Olympics are postponed till later this year, they would overlap with major American sports seasons such as football and basketball, which would impacting broadcasting, said Sayuri Shirai, a professor at Keio University.
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Postponing the Tokyo Olympics is 'a very contentious issue,' says professor

The Japanese government played down speculation over whether the Tokyo Summer Olympics will take place from July 24 to August 9 this year, as the number of coronavirus cases in the country topped 1,000.

On Wednesday, Japan's Chief Cabinet Secretary Yoshihide Suga said that the country is still preparing to hold the Tokyo Summer Olympics as planned, Reuters reported.

Suga's comments came a day after Olympic Minister Seiko Hashimoto sparked concerns after she said that Tokyo's contract with the International Olympic Committee "could be interpreted as allowing a postponement" until the end of the year, Reuters reported.

Japan is one of the countries outside China registering a rise in the spread of the coronavirus formally known as COVID-19. On Wednesday, confirmed cases in Japan hit the 1,000 mark. Of these 706 were from the Diamond Princess cruise ship.

Last month, a senior member of the International Olympic Committee said that organizers are more likely to cancel the summer games rather than to postpone or move it elsewhere due to the many moving parts involved in the major sports event.

But if required, Japan would rather postpone it — and will likely get the nod from the International Olympic Committee, said Marcel Thieliant, senior economist at Capital Economics.

"They want to reap the benefits. They've invested a lot of money in the facilities, so clearly, Japan would like to postpone it," Thieliant told CNBC.

But, even if the Olympics were to be postponed, there would be little impact on Japan's economy with the amount of spending required to run the games around 0.1% of GDP, said Thieliant.

"Spending during the Games themselves is small, perhaps just 0.2% of GDP, and much of this is diverted from spending in other areas of tourism and recreation," Thieliant wrote in a recent report. "Most of the spending associated with the Games has already happened," he added.

 A 2016 study by the Bank of Japan estimated that Games-related construction spending would peak at around 0.6% of GDP in 2018 and would be less than 0.2% of GDP this year in 2020, he noted. "Any construction projects still ongoing would surely be finished even if the Games were cancelled."

And history shows that tourism arrivals surge when a country is elected to host the games — only for them to taper off in the year of the event, Thieliant told CNBC.

TV broadcasting will be hit by a postponement

Postponing the games would probably lead to a major commercial impact for broadcasting, said Thieliant.

"A lot of the TV stations wouldn't be happy because it would clash with a busy U.S. sports calendar that time of the year," he said.

"Some other events might also have to be rescheduled — but it's the Olympics. It's a big event and I think everybody would agree to it being postponed if necessary" reasoned Thieliant.

But postponing the summer Olympics is a "very contentious issue," said Sayuri Shirai, a professor at Keio University and a former Bank of Japan board member. "This issue is all about broadcasting rights," she said.

NBCUniversal has U.S. broadcast rights with the International Olympic Committee through 2032 and has NBCUniversal has received more than $1 billion in national advertising commitments for the 2020 games in Tokyo, the company said in December.

NBCUniversal is the parent company of CNBC.

So, if the Tokyo Olympics are postponed till later this year, they would overlap with major American sports seasons such as football and basketball, said Shirai.

American broadcasters carry NFL, NBA and NHL games from September.

Brian L. Roberts, chairman and CEO of Comcast, said he was optimistic that the Tokyo Olympics are going to happen.

Comcast is the parent company of NBCUniversal.

"The Olympics are obviously on everybody's mind. What I know is it's full steam ahead. We're getting ready and excited. We think Japan will kind of hopefully follow what we saw in China," Roberts said at a Morgan Stanley conference on Tuesday.

The company has insurance in any case, "so there should be no losses should there not be an Olympics, just wouldn't be a profit this year," said Roberts, according to a transcript.

While there is the other option of postponing the games until summer next year to avoid the clash in major sporting events, that would have a "tremendous" impact on athletes who are preparing for the competition as well, Shirai added.

Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the U.S. broadcast rights holder to all Summer and Winter Games through the year 2032.