Not a Sporting Chance: COVID-19 Dashes Japan’s Olympic Economic Hopes

By Asialink, The University of Melbourne

Japan started 2020 with the prospect of being at the centre of global attention as host of the Olympic Games, only to see its hopes of a sports-led economic injection dashed by the COVID-19 pandemic.

Prime Minister Shinzo Abe got into gear more seriously after this turn of events, acknowledging Japan’s strategy could reach breaking point and declaring a state of emergency short of a full lockdown, which has been extended to cover all prefectures.

So how has Japan fared? The main criticism is that early on it didn’t conduct enough testing.  This is linked to concerns Japan might have put its economy and the Olympic Games first, and that Abe’s administration was too slow and inefficient.  With fears the world’s third-biggest economy might enter recession, the government is now taking unprecedented measures. Japan might have stolen the show for the wrong reasons.  Its reputation has been shaken, and Abe has taken a personal hit.  Neither the domestic nor international reactions are supportive of how the Japanese government has responded, and unlike many of its neighbours it has been unable to flatten the virus transmission curve.

‘Barely Holding Up’: Battling the Outbreak

The global pandemic hit Japan in late-January. With 15747 cases as of 10 May, it officially has the third highest number of infections in the Western Pacific. More than 700 cases were passengers and crew aboard the Diamond Princess harboured in Yokohama. There were 613 deaths to 10 May. Japan’s ageing population and the high death rate among the elderly from the virus is a worrying mix.

Japan seemingly had the situation under control in mid-March before registering a sudden spike in cases.  This came just after the announcement of the postponement of the Tokyo Olympic Games, an apparent coincidence that provoked a backlash. Japan was widely criticised for slow bureaucracy and insufficient testing, which some suspected was aimed at keeping the Olympics on track. By the end of March, Japan had conducted just 32,000 polymerase chain reaction (PCR) tests.

As the virus spread rapidly, senior medical authorities and officials like the governor of Osaka called for a state of emergency to be declared. But Prime Minister Shinzo Abe and Japan’s Economic Revitalization Minister Yasutoshi Nishimura initially resisted. This was despite Abe admitting Japan was “barely holding up” and that “once infections overshoot, our strategy … will instantly fall apart”.

The Slow Road to Crisis: Containing COVID-19

Japan has been widely criticised for not doing enough and acting too slowly, although there has been a sustained effort within the limits of the government’s powers to act alone. Abe was quick to designate COVID-19 an infectious disease and compel suspected patients to undergo testing, quarantine and hospitalisation. Early on, he also established the Novel Coronavirus Response Headquarters comprising bureaucrats from several ministries, repatriated many Japanese nationals from China, and implemented some border control measures. Containing the spread through airports and seaports were priorities.

The government’s error was to place the National Institute of Infectious Diseases, working with 83 municipal and prefectural health institutions, in charge of regulating COVID-19 testing. This contributed to an excessively bureaucratic response.

However, Abe did promise to allocate 15.3 billion yen ($223 million) from contingency funds to give virus samples to research institutions around the world. Further, he said Japan intends to encourage research with other countries on the anti-flu medicine Favipiravir, developed by a Japanese company as a possible treatment.

In mid-February, Abe held the first Novel Coronavirus Expert Meeting to draft national guidelines for COVID-19 testing and treatment. Around this time, he also asked for the closure of schools and cancellation of large-scale sporting and cultural events among others, but these measures were  voluntary.

Japan also focussed on restricting travel by banning the entry of foreigners from select countries and advising Japanese nationals not to travel to over 70 countries and regions. Japan is legally unable, however, to restrict the movement of Japanese citizens other than through the quarantine measures.

Abe eventually declared a state of emergency on 7 April for one month to apply to Tokyo and six other prefectures. This wasn’t a lockdown; while the prefectural governments could ask some businesses to close, and for people to stay home except to shop for food or to receive medical care, there are no penalties. The government was urged by prefectural governments and others to make it a stricter lockdown, but that would have required legislation. Under pressure, Abe extended the state of emergency to cover all 47 prefectures until 6 May. He then renewed this to 31 May.

Although daily new infections have fallen to around 120, Japan still struggles to bring the spread under control. Japan will continue to battle COVID-19 for several months.

Pandemonics: Abe’s Virus Economy

Japan’s economy is feeling the weight of COVID-19. While the government and the Bank of Japan, the central bank, initially were not too ruffled, there are now heightened fears the world’s third-biggest economy might enter recession.

Japan was already trying to recover from one of the strongest typhoons in decades, the effects of an increase sales tax and a reduction in global demand. Economy Minister Nishimura has foreshadowed that the coronavirus economic impact might supersede the global financial crisis in 2008. It’s estimated GDP would reduce by 0.4 percent. Japan has experienced its biggest contraction in its gross domestic product in over five years.

Japan’s exports have continued to decline, and so have imports. This is inextricably linked to its relationship with China, which comprises about half Japan’s Asian exports and imports. Moreover, Japan’s largest trading partner as a block, Europe, is suffering huge economic losses due to the coronavirus.

The most affected industry is manufacturing. Japanese automobile companies Toyota and Mazda temporarily closed their Chinese operations during the initial coronavirus outbreak there and in February alone, car production fell by about 86 percent. Big businesses and a huge number of small-to-medium-sized businesses also have reported a decline in sales revenue and net profit.

In February, international tourism plummeted by 58 percent. This is largely linked to the decline in Chinese visitors, about 40 percent of the total. Japanese airlines anticipate profits will have dropped $2.8 billion between February to April.

Corporate valuations have taken a hit. Some speculate that the poor handling by the Japanese government contributed to losses in the stock market similar to those seen during the global financial crisis.

The delay in the Olympics has further repercussions. It is estimated that its cancellation will reduce Japan’s GDP by 7.8 trillion yen.

In response, Japan has implemented many measures to help the economy. Abe formed a panel of ministers and the governor of the Bank of Japan to lay the foundation for an extraordinary set of spending, monetary and tax measures to protect employment and business continuity. From 1 April, Abe announced a stimulus package worth around $1 trillion dollars – about 20 percent of GDP.

Even so, it appears Japan might creep closer to a recession that was already looking likely before COVID-19.

An Olympian Feat: The Political Balancing Act

According to a survey in April conducted by NHK, the public broadcaster, three quarters of respondents thought Abe took too long to declare a state of emergency, and 50 percent did not approve of the government’s management of COIVD-19. This approval rate has dropped by almost 20 percent within two months. We can expect to see dissatisfaction rise, especially while the number of new cases mounts.

Abe’s administration also has come under heavy political scrutiny. First, there is suspicion the rate of infection was being downplayed to avoid jeopardising the Olympics, further evidenced by a spike in cases just after the announcement the Olympics had been postponed and calls by governors for Tokyo and Kanagawa residents to stay home. Economic imperatives and saving face are considered primary drivers.

Second, insufficient testing has been linked to this motivation. Japan conducted a small number of tests compared to many states, and had very high testing standards meaning cases likely went undetected.

Third, Japan required stronger and speedier leadership and bureaucratic coordination to tackle the coronavirus.  While there have been many experts’ meetings, there has been a lack of transparency on decision-making. Health experts called on the government to declare a state of emergency. The government eventually did so, but could have acted faster.

Fourth, where Abe exercised leadership, he was often attacked for how he went about it. He was heavily criticised for deciding to close schools without consulting even his own party, let alone the opposition parties, governors and education committees.

Abe has not filled the Japanese public with confidence that he is willing to act swiftly, decisively and effectively in times of domestic and global need. In an Asahi poll in April, almost 60 percent considered Abe had not provided good leadership during this pandemic. Abe also is losing support from senior members of his own party, and his party’s junior coalition partner threatening to depart. He has been accused of being out-of-touch and ambivalent. Reactions to his Tweeted video in which he was sipping tea, patting his dog and encouraging people to stay home, have gone viral.

Abe’s third and assumedly last term as LDP president expires in September 2021, and this pandemic has cast doubt on the timing of the next general election and his successor. It is unclear if campaigning for the 2021 LDP leadership election will happen at the usual time given the uncertainties around COVID-19. It seems Abe will not come out of this chapter unscathed as he is engulfed in widespread criticism.

In the international realm, the picture of Japan as a strong and able partner is diminishing. The Japanese government is perceived as failing to live up to its image of efficiency. The international community would have expected Japan to have learnt from its past crisis management. But it’s hard to see how it used its lessons from the tsunami in 2011 and the Fukushima nuclear disaster.

South Korea has been particularly vocal, raising suspicions about Japan taking the back seat in dealing with the virus to avert not holding the Olympic Games. It also took offence at its approved visas being invalidated, calling it unscientific and unfriendly. While South Korea has received international acclaim for its handling of the virus, Japan’s credibility and standing have suffered. Abe is certainly aware of this, evidenced by the announcement of $22 million for the foreign ministry “to dispel negative perceptions of Japan related to infectious diseases”.

Japan didn’t win the gold medal this time, and is still running the global race to manage COVID-19.  The impacts for Japan, Abe and his party may cast doubt on the country’s ability to play its part in future in the face of global imperative.

Banner image by KOHUKU via Shutterstock.