The connection between Abenomics and the Tokyo Olympics

 

By Xinyu Chu 

student number:40272399

 

1, Abenomic

After Shinzo Abe was elected Prime Minister of Japan in 2012, he began to reform the Japanese economy and implemented a series of measures to reverse the deflation and economic downturn caused by the "lost 20 years". "Abenomic" mainly includes three categories: quantitative monetary easing, increase in government fiscal expenditure and industrial structural reform, commonly known as the "three arrows."

 Japan has long implemented a negative interest rate policy, and domestic financial institutions have also actively invested in overseas financial products to ensure that the use of funds can obtain benefits. Among them, because US interest rates have been on an upward trend until the end of 2019, the "secured loan certificate" (CLO) issued by structured products with floating interest rates has been favored by large Japanese financial institutions.

 Since CLO is essentially similar to the real estate mortgage-backed bonds that triggered the subprime mortgage storm, the Bank of Japan once issued a financial system report warning that as the pace of global recovery slows, CLO may still face challenges. The risk of falling prices and falling 20% to 30%.

2, Japan's economic crisis

Japan's GDP contracted by 6.3% in the fourth quarter of 2018, a decline greater than expert estimates of 3.8%, the largest decline in more than 5 years, mainly due to factors such as increased sales tax, weak global demand and typhoon interference. After adjusting for seasonal factors, the GDP in the fourth quarter of 2019 fell 1.6% quarter-to-quarter, which was also worse than market expectations. 

Nowadays, the persistently weak economic situation has been threatened by the epidemic, and Japan has several crises as a result. For example, the reduction in export trade orders, the impact of the new museum epidemic, the stagnation of consumption caused by the increase in consumption tax, and the sharp decrease in the tourist consumption population. so Japan urgently needs the Tokyo Olympics to stimulate economic recovery.

3, The economic outlook for the Olympics is uncertain

Looking back at the history of the Olympics, in the past, the Olympics were only cancelled when a world war broke out. In 1916, the Summer Olympics were originally scheduled to be held in Berlin, Germany, but they were cancelled because of the outbreak of the First World War. The summer and winter Olympics of 1940 and 1944 were also suspended due to war.

Japan’s hosting of the 2020 Olympics will cost a total of 3 trillion yen. It was originally predicted that the investment of the funds would generate 32.3 trillion yen in subsequent economic benefits and create 1.94 million jobs; for Japan, the successful hosting of the Olympics is of great significance. In March 2011, the Tohoku earthquake triggered the Fukushima nuclear disaster. From 2012 to 2015, Japan experienced economic recession for three consecutive years. Although the economy is now back on track, it has not yet returned to its pre-disaster level. The government hopes to attract tourists through the Olympics and promote Japanese industries.

Especially under the haze of the epidemic, Japan needs a victory to offset the impact of the epidemic. If the Olympics are held smoothly, it means that Japan's prevention and control work has reached the top level and won applause. At the same time, Japan receives about 9.6 million Chinese tourists a year. However, the epidemic has caused China to ban travel agencies from traveling in groups, and the number of tourists has greatly reduced. Other negative economic impacts will soon follow. What Japan needs is the "lifesaver" of the Olympics.

 

                                                       Reference：

Tokyo 2020. 2020. Olympic Stadium. [online] Available at: <https://tokyo2020.org/en/venues/olympic-stadium> [Accessed 18 October 2020].

Kylc.com. 2020. [online] Available at:<https://www.kylc.com/stats/global/yearly_per_country/g_gdp/jpn.html> [Accessed 18 October 2020].

Anue. 2020. [online] Available at: <https://news.cnyes.com/news/id/4400743 [Accessed 18 October 2020].