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Olympics could be ‘straw that broke Japan’s economic back’

TOKYO — Japan is gearing up for the 2020 Tokyo Olympics with gusto, investing in everything from stadiums to electric cars, and expecting an economic bonanza from a construction frenzy and an influx of visitors.

TOKYO — Japan is gearing up for the 2020 Tokyo Olympics with gusto, investing in everything from stadiums to electric cars, and expecting an economic bonanza from a construction frenzy and an influx of visitors.

On the face of it, hosting the Olympics is a big win for Japan at a time when its economy seems besieged by intractable problems.

The Bank of Japan estimates the economic perk at ¥30 trillion (S$360 billion) — many times greater than even the highest estimate of the event’s cost.

But for some, 2020 is another manifestation of what has been going wrong in Japan for decades. Instead of modernising the economy and taking other steps to address an ageing population and shrinking workforce, the government has turned again to its worn playbook of borrow and hope. Discussion and fear about what Japan can turn to for an economic lifeline after the Olympics has become so commonplace it has even been given a name: The 2020 problem.

Japan “will overstretch itself”, Mr William Saito, an entrepreneur and technology expert, said of spending for the Games. “It will quite possibly be the straw that broke the camel’s back.”

Mr Saito is joined by a chorus of doomsayers. The title of one recent book screams: Japanese Land Prices Sink to a Third of Their Value! The Crisis That Comes After the 2020 Tokyo Olympics.

The dire predictions of what is in store for Japan after the Olympics range from a collapse in property prices to a financial crisis sparked by the weight of the government’s debt burden, which is the highest in the industrial world at 234 per cent of gross domestic product.

The time limit for getting that debt under control may be running out, said professor of economics at Hosei University Kazumasa Oguro.

In the current climate of low interest rates, the government can afford its interest payments, but if rates rise significantly in the future, the drain on state finances could become catastrophic. “One day, it will be game over,” said Prof Oguro.

If the premonitions of disaster have a familiar ring to them, it is because a constellation of experts and media pundits have been predicting the demise of Japan ever since its bubble economy burst in the 1980s and ushered in an era of anaemic growth.

But for all its well-known problems, Japan is still the world’s third-largest economy. Many of its top companies are innovative and dominant globally in their respective industries.

Mr Masatsugu Doi, CEO of eWarrant Japan Securities, believes many options are available to bolster Japan, ranging from increasing the number of babysitters to encourage working women, to challenging changes such as raising the pension age to 75. “We still have time as long as the government acts,” he said.

Still, there is little disagreement over the inevitable: Japan needs to increase taxes and cut public expenditure to avoid a future debt crisis. Japan’s resistance to immigration means policymakers are more or less resigned to muddling through the population decline over several decades. A boom in Japan’s tourism industry and the high promise of Japan’s robotics industry are potential positives for the economy, but not likely game changers.

Japan’s challenges, however, are a precursor of what might be awaiting other nations, in Europe as well as countries such as China and South Korea.

Japan is merely ahead of the rest of the world in greying. By 2020, nearly a third of its population is expected to be 65 and older, as the birth rate continues to fall.

Just the idea of an ageing society is enough to deter consumer spending, as the young worry the government will not be able to afford pensions in the future, said a professor at National University of Singapore’s Institute of Real Estate Studies, Chihiro Shimizu, who co-authored a book predicting a collapse in property prices. AP

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