Which key sectors would be most impacted by cancellation?

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Cancellation of the Tokyo Olympics Would Impact Tourism and General Consumption Sectors

A cancellation of the Tokyo Olympic Games would most significantly affect Japan's tourism industry and general consumption. While most of the infrastructure spending for the Games has already been absorbed into the Gross Domestic Product (GDP), the absence of the event would remove a key driver for foreign visitor expenditure and could further depress already weak domestic spending, impacting consumer confidence.
Tourism and Hospitality Industries Face Significant Downturn

The tourism sector, which includes hospitality, transportation, and retail services catering to visitors, would experience a considerable setback. Japan's tourism had already faced challenges prior to the new coronavirus outbreak, including a diplomatic dispute with South Korea that led to boycott calls and a subsequent reduction in South Korean visitors. The ongoing virus situation has further diminished tourist numbers from South Korea and caused a sharp decline in travellers from China, two of the largest source markets for Japan's inbound tourism.
General Consumption and Retail Spending Could Plummet

Beyond tourism, the broader category of general consumption would also be negatively impacted. This encompasses various retail and entertainment sectors that benefit from increased economic activity. With domestic spending already under pressure following a tax hike last year, the cancellation of the Games could lead to a ripple effect, further dampening local purchasing power due to diminished consumer confidence.
Economic Output and GDP Growth at Risk

Economists project that a cancellation could lead to a contraction in Japan's GDP. For instance, research firm Nomura forecasts a potential 0.7 per cent contraction in GDP for the 2020 calendar year, with this figure potentially rising to 1.5 per cent if the Games are cancelled. This impact is attributed, in part, to the loss of spending from foreign spectators, estimated to be around ¥240 billion (US$2.28 billion), and the broader effect on Japanese consumer confidence.
Limited Reliance on Tourism Does Not Erase Impact

Despite Japan's economy being industrialised and diversified, with foreign visitor expenditures accounting for only 0.9 per cent of GDP in 2018, the cancellation's effects would still be felt. While the overall reliance on tourism might seem low, the combined impact of reduced foreign spending and a further hit to domestic consumption, exacerbated by low consumer confidence, presents a notable risk to the national economy.

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Which key sectors would be most impacted by cancellation?

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