Japan’s economy will take a further hit of $6 billion dollars which is the cost of having to postpone the Tokyo 2020 Olympic Games, according global sovereign analyst Rohini Malkani.
That will be another blow to Japan’s government who offered its bleakest assessment on the country’s economy in nearly seven years on Thursday (March 26), saying conditions in March were “severe” as the coronavirus pandemic shut down factories and cooled consumption.
The coronavirus pandemic has affected several sectors in Japan over the last few months and the Olympic Games postponement will only add more troubles for the country’s hotels, airlines and tourism industry in the second half of the year.
Malkani told Reuters on Wednesday (March 25) that the costs of maintaining stadiums and other infrastructures could cost as much as $6 billion dollars and there will be 2 million fewer people visiting Japan without the Games being held this year.
The DBRS analyst added that a lot of the investment into the Games from stakeholders such as sponsors and tourists would be deferred until 2021 that was not going to help the tourism industry and hotels in the second half of 2020.
Furthermore, in a monthly report released on Thursday, the Japanese government cut its economic assessment and removed language describing the economy as “recovering” for the first time since July 2013.
The downgrade lays the groundwork for Japan to compile a stimulus package next month, which, sources say, will involve spending of at least $137 billion dollars to cushion the blow from the pandemic.
Malkani agreed with that assessment saying Japan will need to take timely, temporary as well as targeted measures to contain the impact.
In February, the government said the economy was recovering moderately, albeit with some weakness among manufacturers.
The government also cut its assessment on consumption, capital expenditure and business sentiment – which all took a hit from worldwide travel bans, event cancellations and supply chain disruptions caused by the pandemic.
Passengers of bullet trains, usually packed with business users and tourists, halved from year-before levels in the first half of March, as companies urged employees to work from home, the report said.
Some department stores saw sales in the first half of March tumble nearly 40% from year-before levels due to a plunge in the number of overseas visitors, it said.
The labour market remains tight and wages are steady, though there is a growing chance jobs and household income could be hit if the outbreak persists.
(Production: Tim Hart)