Cancelling or postponing the Tokyo Olympics Games probably will not hurt Japan’s economy much but may require the government to offer tailored support for hard-hit small firms, a senior International Monetary Fund (IMF) official has said.
While the government plans to proceed as scheduled, a renewed spike in coronavirus infections and slow vaccine distribution schemes have added to worries about the fate of the Olympics, set to start in July after being postponed last year.
“A change to the plans for the Olympics would have a limited impact on overall near-term growth prospects, given that Japan is a large and diversified economy,” said Odd Per Brekk, the deputy director of the IMF’s Asia and Pacific department on Tuesday.
Most of the infrastructure needed for the Games is already in place and the hit to growth from an evaporation of inbound tourism would be small, he added.
“That said … we should be mindful that cancelling the Olympic Games would have disproportionate impact on the service sector in Tokyo, especially among small- and mid-sized firms.”
The government may need to offer support to such firms, as survey-based analysis suggests that cancelling the Olympics could lower their sales growth by more than 5 percent, he added.
Japan’s economy has emerged from last year’s slump caused by the pandemic, though analysts expect any recovery to be modest as a renewed spike in infections weighs on consumption.
The IMF upgraded Japan’s economic forecast to 3.3 percent for this year, as robust exports and the effect of enormous fiscal stimulus underpin growth.
“Like in all countries, the growth outlook in Japan is subject to significant downside risks stemming from uncertainty about the evolution of the virus and the vaccine rollout, both domestically and globally,” Brekk said.
The western Japanese region of Osaka reported record infections on Tuesday as a mutant strain of the virus fuelled a rebound in cases.