Virus’s Spread Puts a Question Mark Over Tokyo Olympics

(Bloomberg) -- The Tokyo 2020 Olympics are less than five months away -- or, in coronavirus time, somewhere between six and 10 incubation periods. Even as organizers at every level insist the games aren’t at risk, the rapid spread of covid-19 cases in Japan is already casting a chill over the event.

Critics of the government’s response to the outbreak question whether Japan is ready to handle an influx of spectators, athletes and coaches from around the world. While the International Olympic Committee and Prime Minister Shinzo Abe have said the games, scheduled to start July 24, will take place as planned, analysts are starting to map out the economic and political repercussions of a cancellation or delay.

Scrapping the games could shave about 0.2 percentage points off Japan’s third-quarter growth and leave a lasting imprint on its political landscape if voters blame the Abe administration’s handling of the outbreak, Citigroup Inc. strategists Kiichi Murashima and Katsuhiko Aiba wrote in research published in response to what they said were “more and more” client inquiries regarding the possibility of cancellation.

The strategists said their conclusion, which assumes all of the 2 million tourists expected to visit Japan during the games scrap their trips, likely understates the economic impact of a worsening outbreak that would be a precursor to the Olympics being cancelled. An international health crisis could be enough to wipe more than $1 trillion from global gross domestic product, according to Oxford Economics Ltd.

In Japan, fears of a recession are already mounting after preliminary data showed the country suffered an annualized 6.3% quarterly slide in GDP during the three months ended December.

At a press conference Wednesday in Washington, U.S. President Donald Trump threw his support behind Japan. “I think they’re going to handle it very well,” he said. “It’s a little tight. They spent billions of dollars building one of the most beautiful venues I’ve ever seen.”

As of now, it’s clear there’s zero interest in big, crowded public gatherings. On Wednesday, Abe called for all major sporting and entertainment events to be cancelled through at least the middle of March, an effort to contain the spread of the virus. Japan has recorded more than 800 infections and seven deaths, mostly from the quarantined Diamond Princess cruise ship.

Already some qualifying tournaments have been moved, while some sponsors like Nomura Holdings Inc. cancelled Olympics-related events.

It’s still highly unlikely that the IOC, based in Lausanne, Switzerland, will elect to cancel the games. A tremendous amount of money has been spent -- according to some estimates, Tokyo has invested more than $26 billion in preparations since it won the bid in 2011 -- with more to come.

“Countermeasures against infectious diseases constitute an important part of Tokyo 2020’s plans to host a safe and secure Games,” the IOC wrote in an e-mailed response to questions. “Tokyo 2020 will continue to collaborate with all relevant organisations which carefully monitor any incidence of infectious diseases and will review any countermeasures that may be necessary with all relevant organisations.”

Dozens of companies, including Toyota Motor Corp. and Alibaba Group Holding Ltd., have spent millions to sponsor these games. They count on using the event to entertain clients and customers, reward employees and drum up enthusiasm for new products and platforms.

The IOC has said it will follow the guidance of the World Health Organization, which has yet to make recommendations for later in the summer. Dick Pound, a longstanding member of the IOC, said earlier this week that the organization has a few more months before it has to make a final decision on the fate of the games or on any remedial measures. Pound’s comments are not the IOC’s official view, according to Japan’s Olympics Minister Seiko Hashimoto.

“As you know you have a number of people in Japan who have been infected -- I hear they’re doing a very professional job,” U.S. President Donald Trump said at a news conference at the White House. “I think they’re going to handle it very well.”

If the outbreak subsides within the next few months, when some experts think the coming summer heat will finish it off, the virus could still cast a pall over the games.

As of now, it’s not clear whether even people who want to go will be able to. Government and corporate restrictions have dramatically curtailed travel in Asia. China has banned tour groups going overseas to contain the virus, while the U.S. raised its travel alerts for Japan and Israel warned its citizens from nonessential travel to the country.

--With assistance from Yoshiaki Nohara and Tracy Alloway.

To contact the reporters on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net;Kurumi Mori in Tokyo at kfukushima12@bloomberg.net

To contact the editors responsible for this story: Kazunori Takada at ktakada17@bloomberg.net, Kana Nishizawa

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