From Olympics 2021 to Japan’s General Election 

How Japan’s pandemic and economic situation has evolved since then

Ahead of the Olympics in Tokyo in August we looked at Japan’s position in the global economy and its management of the pandemic so far. We also took a bet on Japan’s medal chances. With Japan’s upcoming general election in mind, we evaluate the developments since then and look at key challenges for Japan’s government after the election.

Political developments prior to the election

On October 31, Japan will hold a general election for the House of Representatives,  the lower chamber of Parliament, with 465 seats to be filled. Prime Minister Fumio Kishida of Japan’s Liberal Democratic Party (LDP) called the election shortly after taking office on October 4.

His two predecessors (Yoshihide Suga and Shinzo Abe) had to step down one after the other within only one year due to their handling of the Corona pandemic.

Polls see the LPD, Japan’s ruling party since 2012, at around 30 percent, far ahead of the biggest opposition party, the Constitutional Democratic Party (CDP), at approximately 12 percent. However, on October 24, the LDP lost one of two Councillor seats in Shizuoka Prefecture in the House of Councillors (Japan’s upper chamber of Parliament) by-election.

Falling just one week ahead of the general election, Japanese media regard this as a “red flag” for PM Kishida and his party. This may also be a reminder that the LPD-led government had incurred the displeasure of the Japanese people when it decided to hold the Olympic Games in Tokyo despite the rampant coronavirus.

The majority of Japan’s population did not want the Games to take place amidst a global pandemic, fearing infection numbers would soar and further damage be done to the already battered economy. So let’s first have a look at whether these fears have become a reality.

Pandemic and economic development in Japan since the Olympics

Considering only the athletes themselves, around 11,300 people from 205 nations participated in the Olympic Games in Tokyo when only 23 percent of the Japanese people were fully vaccinated – a low rate compared with other G7 countries.

This – combined with the quick spread of the Delta Variant and already rising daily cases before the opening ceremony – was why there were worries about holding the Olympics.

The pandemic development in Japan proved worriers right: in the two weeks of the games, the average number of daily cases nearly tripled. Cumulatively, cases were up by one-third and even doubled one month after the Olympics.

The death rate rose by ten percent in the same period. The impact from the Olympics can be seen very clearly from the data, which shows that big sports events still pose a high risk, even with strict health security measures in place.

However, the data also shows that the impact was short-lived: Daily new confirmed cases have plummeted since mid-September, and the cumulative number of cases is stagnating. The incoming government has been given a break to think pandemic management through before numbers go up again – if they do.

As for the Olympics’ impact on Japan’s economic development, it is still hard to say as not many monthly and quarterly data points have yet been published. Monthly GDP data are available from the Japan Center for Economic Research, but only through August.

They show that Japan’s GDP decreased by 0.9 percent in August compared to the previous month – the strongest monthly slump in 2021. This is mainly attributed to a decrease in private investment and consumption – the two sectors were among those official estimates saw as most benefiting from the Games.

If the Games had taken place under non-pandemic circumstances, they would have brought a wave of domestic and international spectators to Tokyo and substantially increased economic activity. Even though monthly GDP data are volatile in times of a health crisis, and we do not yet know the longer-term impact of the Games, they did not deliver the anticipated economic benefits. The picture is entirely different for Japan’s medal count, though. So let’s move to a more positive topic.

Source: jcer_download_log.php

Reality check on our bet: how many medals did Japan get in the end?

In our Olympics’ post, we performed the following very simple, albeit not completely serious, calculation:

• We took the GDP per capita from the table above as an indicator for the material per capita wealth (positive influence on expected medal count)
• We divided this GDP per capita by the old-age dependency ratio (negative impact on the expected medal count)
• To make the final calculation result clearer, we divided the value found by 100.

Our prediction: According to these considerations, the United States had the highest value – 21.2 – and was predicted to win the most Olympic medals in Tokyo. Following were Canada (15.5), Germany (14.0), and the United Kingdom (13.1). Of the G7 countries, the fewest medals were expected for Japan (7.7), Italy (9.8), and France (11.7).

If we compare this to the actual performance at the Tokyo Olympics, we can see that the United States did indeed take the top spot. Japan, however, definitively proved us wrong and ranked third among the G7 with 58 medals, and even outdid itself compared to the five Games before those held in Tokyo. Next time, we should definitely add a variable considering the Games’ host country since countries tend to perform better when they host them!

Policy challenges ahead

Now that the Games lie a few months behind, with Japan’s medal count hitting a new record and the general election looming ahead, Japan’s government will have to tackle a number of pressing challenges after the election:

• Pandemic management: Decreasing case numbers should not hide the fact that the pandemic is continuing. And winter is coming. So the incoming government has to strengthen its pandemic management, provide sufficient budget, get up vaccination rates and push for nationwide testing strategies.
• Economic development: Japan has been struggling with sluggish economic growth for years now. It also continues to have the highest public debt rate among the G7 countries. So these two issues will remain on the new government’s agenda. In this context, it is also necessary to incentivize investment in green and digital sectors to push the dual transformation of the economy and generate new sources of growth.

• Inequality: Japan has one of the higher Gini coefficients – a measure of income inequality – among the G7, which is a likely source for increasing social discontent. Tackling this problem is part of the “new capitalism” concept stipulated by PM Kishida and will probably be on top of the agenda for an LDP-led government, poaching on a core position of the CDP.
• Regional tensions: It will be a major task for Japan to balance its relations with China, its major economic partner, and regional rival while at the same time strengthening its alliances with like-minded countries, especially the United States. Some longstanding issues in the relations with North Korea (abduction of Japanese citizens and the nuclear program) must wait to be resolved, too.