Possible Cancellation of Tokyo Olympic Games: Inflict Inevitable Chaos on Japan’s Financial Market

Tokyo Olympic Games, delayed for a year, will open on July 23rd, 2021 if there is no accident. However, COVID is rampantly sweeping Japan, the host country, and numerous South Asian states, especially India, the pandemic situation of which is out of control. As such, 60% of Japanese citizens have strongly called for the cancellation of this Olympic Games even conducted the demonstration recently on this ground. Yoshihide Suga, Japanese Chief Cabinet Secretary, also noted that it is peoples health that should be prioritized.

Given the increasingly severe pandemic situation, it is estimated that the Japanese government will be stressed to cancel the Tokyo Olympic Games. On one hand, other countries may quit participation following the Democratic Peoples Republic of Korea (DPRK) against the backdrop of the Games under the raging pandemic as they are afraid of possible imported cases caused by athletes and staff after the Olympics. If the above-mentioned withdrawal comes true, the Japanese government is believed to announce the cancellation in low spirits.

On the other hand, the general election of members of the House of Representatives is scheduled for October 2021. The governing Liberal Democratic Party will be hit by the mounting unpopularity and lose the election if it insists on holding the Tokyo Olympics this time. In my opinion, owing to the pressure of public will and the intention of obtaining a victory, it is still possible for Yoshihide Suga to cancel the Games because it is his instinct for attaching importance to votes as a politician.

Economic issues will emerge if the decision is ultimately made on canceling the Olympics by the Japanese government. According to Kyodo News, this cancellation will cause Japan a loss of JPY 4.5151 million once it happens. It is believed that breaches of contracts will envelop Japan because of enormous bad debts as a result of the cancellation, thereby rocking the financial market in the country, as numerous private and commercial institutions even the government itself have borrowed money to fund the Games. The situation cannot be ignored where the Japanese stock market is estimated to encounter the huge pressure of selling off. Will JPY become a safe haven currency when this plummet happens？ It depends on the policy adopted by the Bank of Japan (BOJ). If it increases the quantitative easing (QE) to save the Japanese stock market, there will be a chance for JPY to drop. On the contrary, JPY will play the role as a safe haven currency and see a rise in the case of BOJs indifference to the plunge of the market. From my personal view, the Japanese government will eventually announce the cancellation of the Tokyo Olympic Games with an aim of winning the general election, and BOJ is believed to increase QE further, in a bid to stabilize the market, which will finally lead to the plummet of JPY