The Japan News by The Yomiuri Shimbun
Postponement casts financial shadow over Tokyo Games
The additional expenses for holding the Tokyo Olympic and Paralympic Games next summer are estimated to reach up to around ¥300 billion. As it is highly unlikely for corporate sponsorships and earnings of the Tokyo organizing committee to increase due to the impact of the novel coronavirus, the issue of how expenditures can be held down is becoming crucial.
During the Games, the top executives of the International Olympic Committee (IOC) will stay at luxury hotels in central Tokyo. The IOC has requested certain floors to be closed on security grounds. If the Tokyo Games organizing committee goes along with the request, it would become necessary to pay hundreds of millions of yen in compensation to the hotels.
“Is security as tight as for a U.S. president really necessary?” a Games official asked.
Whether the organizing committee can get to the heart of these “sacred cows” of the IOC will depend on upcoming negotiations.
After about a month of talks between the Tokyo organizing committee and the IOC, they reached an accord on June 10 to simplify the Tokyo Games. Initially, the organizing committee entered negotiations with the IOC on about approximately 200 items, but the topics up for examination have been narrowed down to about 50 items.
Besides the Opening Ceremony, the events that will be taken up for discussion for simplification also include the Olympic Torch Relay.
The decision to postpone the Games to next year was made just two days before the start of the relay in Japan.
While maintaining the number of torchbearers at about 10,000, the organizing committee will consider shortening the relevant schedule and reexamining ceremonial events slated to be held at various locations. In doing so, however, the organizing committee has to take into consideration the wishes of sponsoring entities and local governments, making any alteration not so easy.
The 43 venues for the Tokyo Games scattered around Tokyo and eight other prefectures that were supposed to be used this summer will be used next summer instead. Before the postponement, the organizing committee had estimated the facility rental fees at ¥53 billion. But it is likely for additional money to become necessary to compensate the operators of those venues that had already been booked for use next summer.
At Aomi Urban Sports Park in Koto Ward, Tokyo, where such events as sport climbing will be held, an outdoor spectator stand was removed in mid-June because it might have become damaged if it had been kept in place through next summer.
Additional expenses will also be needed for the installation of temporary facilities.
According to a tentative calculation made late last year, the expenses to be borne by the organizing committee, the Tokyo metropolitan government and the central government combined totaled about ¥1.35 trillion. As a hefty amount of additional expenses will be added, the organizing committee has embarked on negotiations with domestic sponsors, asking them for additional payment. It remains uncertain whether corporations, which have already incurred declines in their revenue amid the coronavirus pandemic, would go along with such a request.
The metropolitan government is also financially in bad shape as it has also disbursed more than ¥1 trillion on measures to deal with the infections.
A senior official of the metropolitan government said, “We have to make the Tokyo Games into ones with all extravagances eliminated and expenses held down as much as possible.”
The postponement of the Tokyo Games has also cast a shadow over the finances of the nation’s sports federations.
FEDERATIONS FLOUNDER
The federations have had to cancel major competitions in the wake of the pandemic, and have seen a reduction in the registration fees paid by athletes, funds from sponsorships and other sources of income.
On top of that, the Japanese Olympic Committee (JOC) has vastly reduced the subsidies it allocates from its own revenues to the individual federations.
The highest priority for the national federations is to secure sponsors. Many corporations have been hit hard themselves by the effects of the new coronavirus.
The Japan Swimming Federation, which derives about one-third, or ¥700 million, of its revenue from sponsors in a normal year, is facing the prospect of the airline industry and other large corporate sponsors being unable to continue their support.
Meanwhile, the Japan Table Tennis Association, which earned ¥270 million from such fees in the last fiscal year, said that it could see that number cut in half. The association has started providing up to ¥1 million each to prefectural federations and other member organizations by whittling away at a fund reserved for commemorative projects.
The Japan Sailing Federation has decided to exempt all university students from registration fees. To make up for the expected loss of about ¥14 million, the federation plans to launch an appeal for donations.
The JOC budget has also been making waves. Against anticipated revenue for this fiscal year of ¥14.1 billion, down ¥2.1 billion from the previous year, it will hold ordinary expenditures down to ¥12.8 billion, or ¥2.7 billion less than a year earlier. The sum total of grants to national sports federations has been reduced from ¥2 billion to ¥800 million. Holding down expenditures is a desperate measure to assure there is something left in the coffers for the next fiscal year,
“The financial situation of the JOC is extremely severe,” Yasuhiro Yamashita, president of the JOC, said at a press conference on July 14.
If the Tokyo Games are canceled, hotels and other entities are highly likely to demand large amounts of cancellation fees because their preparations — some of which began in 2013 when Tokyo was chosen to host the Games — will have been for naught. As it has not been decided who will shoulder such fees, confusion will be inevitable.
Preparations have already been made for the Games in terms of many items and facilities, such as Olympic torches for about 10,000 people, about 5,000 medals, makeshift seats at venues and the Olympic Village. The Olympic opening ceremony had also been progressing.
The organizing committee is currently negotiating moving reservations for more than 40,000 hotel rooms, which were intended to be used by officials and others, to next summer. Some hotels have agreed to the delay without asking for extra charges on the condition their rooms be occupied a year later. If the Games are canceled, however, some are likely to seek compensation. The same would go for security companies.
Yoshiro Mori, 83, president of the organizing committee, indicated huge amounts of money would be required if the Games were canceled.
“If there are calls for compensation or reimbursement, the costs could double or triple,” Mori said at a press conference on July 17.
The organizing committee has already sold about 5.44 million tickets for the Games. If the tickets are refunded, that will cost an enormous amount of time and money, and expected revenues of about ¥90 billion will also be lost.
The cost of hosting the Games has been covered by the committee, the Tokyo metropolitan government and the central government, but they do not have cost-sharing plans in case the Games are canceled. It is uncertain how much the IOC would shoulder.
In 2017, the metropolitan government estimated the Tokyo Games would generate economic benefits of about ¥32 trillion, in total, by 2030.
“Many companies, hotels and shops have made capital investments in anticipation of the Games,” a source said. “Economic losses would be immeasurable. I can’t say the word ‘cancellation’ casually.”