Tokyo 2020: What it Means for Japan's Economy

Japan has had a very successful year so far. It had one of its biggest periods of economic growth in the first half of the year, much bigger than what was originally projected for the country. In addition to this, it was announced on Saturday that Tokyo will host the 2020 Olympic Games. It all presents a positive outlook for Japan as it climbs steadily but surely out of its previous economic slump. According to several central financial officers, this also presents good news for the world economy. Despite this good fortune, there are still many problems that the country must overcome, and it is not certain that the Olympics will be the economic boon to Japan that it appears to be.

Japan's debt, calculated to be twice its GDP, still remains a sizable problem. The cost of hosting the Games promises no help, coming to almost $6 billion. The total investment from the public also threatens to push the government into deficit spending. Lots of pressure rests on the prime minister, Shinzo Abe, and his administration to solve these issues, as they have promised fiscal surpluses for the country by 2020. Abe's proposal of a sales tax increase of 3% has been met with high skepticism, and it is unclear as to how such a measure would impact the still-recovering economy. The decision on this measure is expected to be made in October.

There is also questioning as to how much of an effect the Games will truly have on Japan's economy. The impact of the Olympics will cover the entire country and be divided into several different segments. Because of its broad and scattered influence, it is estimated that the Olympics will only cause the country's GDP to grow by a total of 0.1%, if even. However, this impact may be of great benefit to Japan's biggest industries, especially in the process of preparing for the games. Infrastructure, which Japan has often depended on in the past for getting out of financial trouble, could greatly benefit from spending for the Games. the country's housing, hotel, gambling, and construction industries also have a chance of growing from increased government investment.

As a result of this, it seems the most Japan has to gain from the Olympics is a miniscule increase in its GDP while specific industries have potential for further growth. Meanwhile the Japanese government, despite the great economic year so far, will have to figure out how to solve its current issues in time for the 2020 Olympic Games.