Tokyo’s bid for the 2020 summer Olympics is not just a matter of pride for the Japanese capital. It’s a high-stakes gamble for Prime Minister Shinzo Abe, who has put his prestige on the line.
The right to host the games, to be decided on Saturday in Argentina, would likely boost Abe’s popularity, and could potentially spur his signature pro-growth policies for the world’s third-biggest economy.
A successful Tokyo bid would boost confidence – a key ingredient of Abe’s economic success so far – and bring real gains in terms of construction and tourism. Failure could dent Japan’s stock markets in the near term, analysts say, causing complications for Abe.
The premier made the Tokyo bid personal on Thursday, breaking away early from a Group of 20 summit in Russia – a highly unusual move for a Japanese leader – to make a last-ditch plea to the International Olympic Committee (IOC) in Buenos Aires to choose Tokyo over rivals Madrid and Istanbul.
Tokyo had been seen as a safe choice ahead of Istanbul, which was rocked by violent anti-government protests this year and doping bans on dozens of its athletes, while Madrid was plagued with high unemployment, deep recession and the resulting social unrest.
But in recent weeks, Japan has returned to the global headlines with a series of damaging disclosures about the crippled Fukushima nuclear plant 230 km (140 miles) from Tokyo. The plant’s operator has been forced to reverse denials and admit that hundreds of tons of radioactive water are pouring into the Pacific Ocean each day, and radiation levels have spiked.
Abe’s government said this week it will spend almost half a billion dollars to try to fix the water crisis. Critics said the government’s sudden embrace of the issue was aimed largely at winning the Olympic bid.
“The world is watching to see if we can carry out the decommissioning of the Fukushima nuclear power plant, including addressing the contaminated water issues,” Abe told cabinet ministers on Tuesday as they decided on the emergency measures.
Online betting site Paddy Power rates Tokyo the strong favorite ahead of Saturday’s IOC decision at odds of 8-to-15, versus 2-to-1 against Madrid and 9-to-2 against Istanbul. But many commentators and people close to the selection process say the Spanish bid is gathering pace fast.
People close to Abe are privately expressing confidence in Tokyo’s bid, despite the growing global concerns over Fukushima, where conditions appear to be worsening two and a half years after the nuclear plant was crippled by an earthquake and tsunami.
A Tokyo win could push up the Nikkei stock average by more than 10 percent in the short term to around 15,600, near this year’s high, said Eiji Kinouchi at Daiwa Securities.
Japanese shares saw a 1-month fillip after Nagano won the rights to the 1998 winter Olympics, while shares in Athens and London rallied for 1-3 months after they were chosen to host their summer Games.
A Tokyo Olympics stock index of 79 companies that would benefit from a local Games, compiled by Okasan Securities, has gained 47 percent this year, outpacing the broader market’s 35 percent gain.
Tourism shares on that index, such as Tokyo Disney Resort operator Oriental Land Co and Tokyo Dome Corp, have outperformed other Olympic shares, said Takashi Kusaki, Okasan’s deputy general manager, suggesting there may be a pullback after the decision. But he said success for Tokyo could spur more gains for developers, such as construction firms Taisei Corp, Obayashi Corp and Shimizu Corp .
That’s because a win could mean a noticeable bump for the economy as it gears up for the Games. The Tokyo bid committee reckons hosting the Olympics would boost the economy – from construction and higher prices – by 3 trillion yen ($30.14 billion) over the coming seven years.
That amounts to just 0.3 percentage point of Japan’s GDP growth a year, but Nomura equity strategist Masaaki Yamaguchi said there would be a multiplier effect, such as aiding the government’s “Cool Japan” initiative to promote “anime” cartoons and other aspects of Japanese pop culture.
The link between stocks, confidence and Abenomics means the Olympic decision could even affect one of Abe’s most pressing policy decisions: whether to go ahead with a planned doubling of the national sales tax, Japan’s biggest attempt in years to get its runaway public debt under control.
Abe is to decide early next month whether to proceed with the first step of the tax hike in April.
Some people close to the premier say that winning the Olympic hosting rights would boost confidence, share prices and the broader economy enough to offset much of the economic dent from the tax hike, making it more likely he will approve the increase.
“In his heart of hearts, Abe probably wants to delay the tax hike,” said a person close to him. “But if we get the Olympics and there’s only minimal economic turmoil from (any U.S.) air strike on Syria, he’ll probably have to swallow the tax hike.”
Winning the bid could boost Abe’s support ratings, which are high by Japanese standards at 56 percent, according to the latest Kyodo News survey, but are down from a June high of 68 percent. That could embolden him to press on with economic structural reforms needed to elevate Japan’s growth longer-term.
On the other hand, if Tokyo loses on Saturday, Abe’s popularity and potentially even his political aims could suffer.
“The ladder would be pulled out from under the market and the Nikkei could drop 500 points on Monday,” said Daiwa’s Kinouchi.