Japan Special March 2020

Japan

Japan: Olympics postponed as government eyes urgent fiscal stimulus

March 25, 2020

On 24 March, Prime Minister Shinzo Abe announced the postponement of the Tokyo 2020 Olympic Games until the summer of next year at the latest. The move was increasingly expected in the run-up to the announcement, in light of the worsening global coronavirus pandemic; nevertheless, the confirmation still sent shockwaves through the economy, given that Japan has spent tens of billions of dollars preparing for the games and was expected to benefit from an influx of tourists this year. The postponement has also made the passing of fiscal stimulus measures even more pressing, and reports suggest the government is preparing a package worth as much as JPY 56 trillion (USD 503 billion), or roughly 10% of GDP, to be approved by early April. This would come on top of monetary policy stimulus announced by the Bank of Japan in March.

Commenting on the economic impact of the postponement of the Olympic Games, Hiromichi Shirakawa, chief Japan economist at Credit Suisse, and Takashi Shiono, Japan economist at Credit Suisse, jointly noted: “First, any chances for rebounds in the inbound tourism into late summer have virtually disappeared and we now expect the year 2020 to see the number of inbound tourists to decline to around 20 million or by some 40% from 32 million of last year. Second, services expenditure of households will remain weaker for longer as the postponement decision tends to simply imply that control or regulatory policies by the government on social events, gatherings, school operation and so forth will take longer than previously expected until they get normalized.”

Newspaper sources suggest a supplementary budget to fund the new package will be approved by the government in early April and then sent to Parliament, to be passed in the same month. A key component of the package is said to be cash payouts for eligible households starting from May. Combined with the monetary policy stimulus announced in March, fiscal stimulus of this size should help somewhat mitigate the fallout from the coronavirus pandemic; nonetheless, they are still unlikely to kick-start growth due to stringent Covid-19 containment measures in Japan and abroad.

Our Consensus Forecast panelists are currently revising their economic growth projections following recent developments. New Consensus Forecasts will be available from 31 March.


Author:, Economist

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