Japan firms see economy contracting if Olympics were to be canceled

By Daniel Leussink

TOKYO (Reuters) – Most Japanese firms trust the Tokyo Olympic Games will go ahead as planned, a Reuters poll found, but two-thirds are already bracing for the domestic economy to contract by at least 1% if the global coronavirus epidemic triggers a cancellation.

The epidemic has already paralyzed global travel and forced governments around the world into lockdowns banning large-scale public events, stoking fears for the Olympics despite Tokyo’s insistence they will go ahead as scheduled.

The Reuters Corporate survey found 77% of firms do expect the Olympics to go ahead as planned. But most warned of contraction if the event is put off – a gloomy prospect for the world’s third-largest economy, which shrank at the fastest pace in almost six years in the latest quarter, before the coronavirus crisis.

“Growth will be negative because there is no other economic policy besides the Tokyo Olympics,” one paper and pulp manager wrote in the survey.

A total of 39% of firms saw the economy shrinking by 2% or more in 2020 if the Olympics were to be canceled, and 28% of companies expected the economy to contract by 1% to 2%.

The Reuters Corporate Survey, conducted from March 2-12 for Reuters by Research, covered 501 big and mid-size non-financial companies. Roughly half of them answered questions on the growth outlook for the economy if the Olympics were to be canceled on condition of anonymity to express opinions freely.

One manager at a food producer likened the economic impact of a cancellation or a delay to the 2011 earthquake and tsunami that ravaged Japan. “The temporary impact will be just as large as or larger than that of the Great East Japan Earthquake,” the manager wrote.

The Olympics really need to go ahead, a machine parts maker wrote, adding: “Even if it will be held without spectators.”

A manager at a metal producer wrote: “The growth rate won’t be high even if (the Olympics) go ahead as planned, but if they are not held, it will be such a huge blow that it is hard to imagine.”

But some managers said they saw mostly a psychological impact from a possible cancellation or delay, rather than an economic one.

“Rather than economic damage, we’re worried about the mental impact,” a food product manager wrote.