The £9.6billion bill for the Olympics including huge taxpayer spending on a new national stadium would be regarded as wasted if the Games are cancelled.
In addition, experts say that Japan’s tourism industry could suffer a £1.7billion blow if the expected millions of spectators do not materialise – bringing Japan’s total losses to £11.3billion.
On top of that, private companies have already shelled out billions for sponsorship and media contracts while the global insurance industry would also face a hefty bill.
The combined losses to private firms could be as high as £6.4billion, it is believed.
Organisers insist that the Games will go ahead but doubts have grown in recent weeks, with 271 virus cases confirmed in Japan plus hundreds more on the Diamond Princess cruise ship.
Japan’s Olympics minister said today that Tokyo’s contract to host the Games within 2020 ‘could be interpreted’ as allowing a postponement until the end of the year.
Scroll down for a breakdown of the potential losses if the Games are cancelled.
People work at a construction site with the Olympic rings in the background in Tokyo today
COSTS OF STAGING THE OLYMPICS
Organisers said in December that the bill for staging the Games was expected to reach some 1.35 trillion yen (£9.6billion).
The budget is split between the organising committee, the Japanese government and local authorities, with the International Olympic Committee (IOC) also contributing more than £600million.
The £9.6billion figure did not include an estimated £22million in additional costs for moving the marathon and walking events from Tokyo to Sapporo to avoid the summer heat.
Organisers say the national government will have paid more than £1billion, mainly for funding a new national stadium.
The venue was built specifically for the 2020 Games, with the previous national stadium demolished in 2015, and the spending would be seen as a waste if the Games do not go ahead.
There has already been criticism in some quarters that Japan’s spending on the Games has diverted money from reconstruction efforts following the 2011 earthquake, tsunami and nuclear disaster.
Japan’s Board of Audit put government spending much higher at nearly £7.7billion, using a broader definition of ‘Games-related’ spending.
The £9.6billion bill for the Olympics including huge taxpayer spending on a new national stadium in Tokyo (pictured) would be regarded as wasted if the Games are cancelled
HIT TO JAPAN’S ECONOMY
A cancelled Olympics would be likely to affect tourism, which has been a major contributor to recent Japanese growth.
Last year, Japan hosted 31.9 million foreign visitors, who spent nearly 4.81 trillion yen (£33.7billion).
Nomura Securities had forecast consumption of £1.7billion from event-related tourism in 2020, which would evaporate if the Olympics were cancelled.
Some 7.8million tickets are available for the Olympics and 2.3million for the Paralympics, with many of them already sold.
But if virus fears are strong enough to cancel the Games, many tourists may decide to cancel their trips altogether.
Economist Kiichi Murashima said a loss of events-related tourism alone would chip 0.2 percentage points off GDP growth in the third quarter of this year.
Most of the domestic spending on the Olympics has been done, so a cancellation would have minimal impact in that regard, economists said.
A Bank of Japan study in 2016 estimated that Games-related spending would peak at 0.6 per cent of gross domestic product (GDP) in 2018 and be less than 0.2 per cent of GDP in 2020, research consultancy Capital Economics said.
The impact of the virus on an already struggling Japanese economy meant Japan’s GDP could show zero or even negative growth in the third quarter, he said.
A failure to contain the global spread of the virus would prevent Japan from posting a recovery after two quarters of negative growth through March, said Jesper Koll, a senior adviser at U.S. asset manager WisdomTree.
People pose for photographs in front of the Olympic rings at the Japan Olympic Museum in Tokyo last month, only five months before the Games are due to begin
The 2020 Olympics have already generated record domestic sponsorship revenues of more than £2.3billion.
That does not include partnerships with Japanese companies Toyota, Bridgestone and Panasonic.
Others such as South Korean firm Samsung have separate deals with the IOC worth hundreds of millions of pounds.
The sponsorship deals were expected to provide much of the operating budget for the Games, along with ticket sales for the Olympics and Paralympics.
Sponsors have already paid out billions to be associated with the Games (pictured here, a Visa advert featuring Usain Bolt at the London 2012 Olympics)
Global insurers face a hefty bill if the Games are scrapped, with estimates of the cost of insuring the showpiece running into billions of pounds.
The IOC takes out about £626million of protection for each Summer Games, which covers most of the roughly £780billion investment it makes in each host city.
Insurance sources estimated the IOC would pay a premium of about two or three per cent, giving a bill of up to £19million to insure the Tokyo event.
The summer Games have only ever been cancelled in wartime, although many nations boycotted the Moscow 1980 and Los Angeles 1984 events for Cold War reasons.
There were some concerns over the Rio 2016 Olympics after a Zika virus outbreak, while the 2002 Winter Olympics went ahead in Salt Lake City just months after 9/11.
Analysts at financial services firm Jefferies estimate the insured cost of the Olympics at £1.6billion, including TV rights and sponsorship, plus £470million for hospitality – a total of more than £2billion.
There is also the possibility of further disruption if qualifying events in China and elsewhere are cancelled or postponed.
International Olympic Committee members hold a meeting in Lausanne, Switzerland, today. The IOC has insurance in case of a cancelled Games
NBCUniversal announced in December that it had already sold more than £780million in advertising commitments in its planned U.S. broadcasts of the Games.
Further advertising deals were expected to take the company’s revenue up to £940million, Variety reported.
The company’s parent, Comcast, agreed to pay £3.4billion for U.S. media rights to four Summer and Winter Olympics from 2014 to 2020, an average of £850million per event.
Discovery Communications, the owner of television channel Eurosport, has agreed to pay 1.3 billion euros (£1.1bn) to screen the Olympics from 2018 to 2024, an average of £275,000 per event.
These combined costs would add up to at least £2.1billion in wasted spending if the Games do not go ahead. Added to the insurance and sponsorship losses, that would mean a cost to private firms of around £6.4billion.
However, Discovery’s chief financial officer Gunnar Wiedenfels told investors in a recent call that a cancelled Games was ‘not going to have any adverse impact on our financials’, saying the company had insurance to safeguard its investment.
Media photographers take pictures during the Rio 2016 Olympics four years ago, with broadcasters paying huge sums to cover the Games