The Olympics come to Tokyo

On August 21, Tokyo’s newly-elected governor Yuriko Koike received the Olympic flag from Rio de Janeiro mayor Eduardo Paes at a rainy closing ceremony in Rio’s Maracana Stadium. After months of international press coverage of Rio’s dire fiscal condition, Brazil’s political crisis, and the threat of Zika, raw sewage in the bay, and unfinished stadia, the hosts must have breathed a sigh of relief that the festivities themselves went relatively smoothly. At the end of 16 days, the kimono-clad woman waved the banner in front of a global crowd, carrying the ideals and perils of the modern Olympics to a city that will command the world’s attention four years from now.

Tokyo’s global PR campaign began in earnest with an impressive 12-minute presentation at the closing ceremony, in which Prime Minister Abe emerged from a green pipe at midfield dressed as Nintendo’s iconic character Mario. Although Tokyo is only now appearing on many people’s radar, preparations have been ramping up since 2013 as the government and private developers seek to capitalize on the wave of international attention and real-estate optimism.

As I will discuss below, the interests most deeply involved in luring the games to Tokyo are well-positioned to profit from this short-term boost to economic activity, but the city as a whole is facing a dramatic post-2020 demographic decline. At this stage, Tokyo appears likely to fall victim to overdevelopment that would saddle the city with expensive and unnecessary infrastructure and worsen its glut of empty homes and offices. Whether the games’ legacy is positive or negative will depend largely on if the city can resist the temptation to revert to the model it pioneered in 1964 — repeated by other cities in 1988, 2008, and 2016 — of the Olympics as a catalyst for expansion, acceleration, and growth, and instead develop a model for a post-growth games and urban development focused on quality of life, resilience, and sustainability.

Tokyo’s rough start

After the rocky road to Rio and the breathtaking graft of Putin’s $50 billion Sochi games, it is unsurprising that the International Olympic Committee (IOC) turned to Japan to host 2020. “Tokyo 2020 will offer guaranteed delivery,” Prime Minister Abe promised the IOC in his sales pitch in Buenos Aires in September 2013, implicitly contrasting Tokyo with Istanbul and Madrid, the two other candidate cities that were perceived as more risky.

The Tokyo Olympics will take place when mega events, and the plump international bureaucracies that stage them, face a growing crisis of legitimacy. Many cities have concluded that hosting the Olympics is far more trouble than it is worth. In recent years, Oslo, Boston, Munich and other major cities dropped their bids due to popular opposition, and the only two cities to bid the 2022 Winter Olympics were authoritarian Beijing, China and Almaty, Kazakstan. Two-thirds of Brazilians polled in July believed the Olympics would do more harm than good. It may be years before Rio can fully assess the legacy of the games, but the city will begin immediately the hard work of digging out of the “state of public calamity” declared on June 17, as cost overruns for Olympic construction and security emptied public coffers. Adding to public outrage in Rio is the sense that the event’s benefits overwhelming accrued to the city’s well-connected elites: all five Olympic construction contractors are under investigation for graft, and one private developer stands to see a windfall of as much as $1 billion from land he owns around the Olympic Village (Guardian), while the newly constructed transport infrastructure and housing mostly serves affluent areas.

From the IOC’s perspective, Tokyo could be the ideal city to lend some much needed moral currency to a global enterprise that has in recent years become known for displacing local populations, bankrupting governments, lining the pockets of cronies, and stifling free speech. Tokyo is a fabulously rich and highly efficient city, in a technocratic country known for its organizational prowess and relatively tame citizenry. Moreover, awarded soon after the traumatic disaster of March 11, 2011, the Tokyo Games could also help to revive the Olympics’ image as a icon of national uplift and hope.

So far, Tokyo’s preparations have only served to demonstrate that the Olympics’ problems are seemingly as universal as its ideals. Tokyo’s headaches began with the bold new National Stadium designed by Zaha Hadid. As the bid took shape in 2012, officials scrapped plans to renovate the main stadium from 1964 and instead commission “a new stadium that will look like no other” in an effort to gain an edge with the IOC. Hadid’s design quickly become a target of sharp criticism from architects and citizens due to its astronomical cost that eventually reached $2.1 billion (nearly twice the inflation-adjusted cost of the entire 1984 Los Angeles Olympics) and enormous scale, which would have overshadowed the adjacent Meiji Gaien park, one of central Tokyo’s few public green spaces. In July 2015, with construction imminent and public anger at its highest after the demolition of the old national stadium, the prime minister abruptly cancelled the project and announced a new design competition.

In December, Kuma Kengo beat out his Japanese rival Ito Toyo in the second design competition for the new National Stadium. Kuma’s design, a stack of tree-covered saucers that utilizes his trademark wood construction techniques, shaved 22 meters from the 70-meter height of the old design and is expected to cost roughly $1 billion less. While a substantial improvement, the new design did not completely dispel criticism of the stadium project. Widely reported rumors before the second vote suggested that the competition was stacked in favor of Kuma and his construction partner, Taisei corporation, which had also been the primary contractor on the previous stadium design. The Japan Sports Council, the quasi-government body handling the stadium, has refused requests for transparency after suggestions that Ito’s design may also have been disqualified for its potential to disrupt adjacent private redevelopment plans tied to re-zoning for the stadium — plans that interests behind the Olympics have been pushing for more than a decade.

Tokyo’s embarrassment was compounded just a few weeks after Hadid’s design was cancelled, when the organizing committee unveiled a new Olympic emblem that was soon swept up in controversy after designer Kenjiro Sano was accused of plagiarizing the design from the logo of the Belgian Theatre de Liege. The design was withdrawn several weeks later and the organizing committee announced a new competition to crowd-source the logo.

Most recently, the Guardian reported in May that French prosecutors were investigating whether a $2 million payment by a Switzerland-based firm with ties to Dentsu, the giant advertising conglomerate that is deeply entwined with the Olympic bid, to a Singapore company linked to corrupt former IOC official Lamine Diack was a bribe intended to swing the bidding process in Tokyo’s favor.

Preparations & economic impact

Despite the numerous problems of the past year, the Olympics appear to be having their intended effect of helping to stimulate the economy. Certainly, Olympic buzz has contributed to an atmosphere of optimism surrounding central Tokyo real estate. Low interest rates and brisk international demand, especially from Chinese buyers, has helped push Tokyo condominium prices to a post-bubble high in 2015. The number of foreign tourists in Japan has tripled to 20 million in the last four years, prompting the government to raise its 2020 target to 40 million and its 2030 target to 60 million. This may be overly ambitious: as the yen strengthens, there are signs that this growth is already cooling off.

Chinese shoppers fill Ginza on a Sunday afternoon

In any case, the stimulus of additional international attention is unlikely to outweigh the total cost of hosting the games, which the organizing committee conceded last year would exceed ¥1.8 trillion ($18 billion), roughly six times the sum it promised the IOC and citizens in its bid. Wild cost increases should come as no surprise: Olympics went over budget by an average of 150 percent between 1968 and 2012 (Baade and Matheson 204).

Even for one of world’s largest metropolitan economies, $18 billion is a sizable expenditure and presumably subtracts from the resources available to address pressing social challenges such as the lack of public daycare or the expected shortage in elderly care facilities. Is it worth it? Baade and Matheson review numerous economic impact studies of Olympics and find that “overwhelmingly, the studies show economic impacts that are either near-zero or a fraction of that predicted prior to the event” (207). Tokyo has certainly taken the gold for optimistic predictions: the Bank of Japan produced a report last December that calculated the Games would boost economic activity by $249 billion (most pre-Olympic reports estimate economic effects one or two orders of magnitude lower).

Of course, “economic impact studies are often commissioned by groups who have a vested interest in their outcome” (208). For a government desperate to boost demand and promote economic growth, the Olympics not only serve as a useful tool to expand fiscal expenditures, but fit comfortably into the lofty but unrealistic rhetoric of “Abenomics” that aims to change gloomy consumer psychology and investor expectations in order to escape persistent deflation. Prime Minister Abe emphasized this effect in his press conference after winning the games on September 15, 2013: “We have gained a big goal, and I hope the Olympics will act as a stimulant to rid us of 15 years of deflation and a shrinking mindset.”

The Abenomics/Olympics economic strategy aims to revive the optimism of 1964, when the games were preceded by a wave of consumer demand for televisions, refrigerators, and other durables that the media dubbed “Olympic special demand” (Olympic tokuju). At the beginning of the year Abe pledged to boost GDP to ¥600 trillion by 2020 (this would require sustained economic growth of almost 4%, more than triple the average over the past 25 years). I will discuss later, the fundamentals of Japan’s demographic and economic situation suggest that this strategy will face increasing headwinds as time goes on.

Olympic special interests

If the overall benefits of the games are likely to be fleeting and outweighed by the cost, why is Tokyo hosting the Olympics? As in any host city, the answer can be found in local politics. The effort to lure the games to Tokyo was orchestrated by economic interest groups representing a tiny fraction of the city: construction companies, real estate developers, the Tokyo Metropolitan Government, and the advertising giant Dentsu. Sociologist Harvey Moloch wrote in the 1970s that the essence of local politics in any capitalist city can be distilled to the existence of a “growth machine”: land-based economic interests form coalitions to compete with other jurisdictions to lobby governments and corporations and attract the prerequisites for future growth. Ever since neoliberal globalization emerged as a response to the post-oil shock stagflation of the 1970s, inter-local competition has expanded to a worldwide scale. Among cities vying to be hubs of global flows of capital, people, and commodities, mega-events such as the Olympics are one of the key tools world cities can leverage to try to gain an upper hand in attracting investment over their global peers.

Tokyo has fared rather well in this global competition. Sociologist Saskia Sassen crowned Tokyo one of three preeminent “global cities” (along with New York and London) in 1991, a year that also marked the height of the city’s epic bubble-fueled rise. Ever since, many of Japan’s elite have worried that the city and country are being left behind by globalization as many international financial and business functions decamp to the new continental megacities of Shanghai, Beijing, Hong Kong, and Singapore. The Olympics are a chance to reinforce Japan’s self-image as the region’s leading nation that is dependent on Tokyo’s continued centricity vis a vis its East Asian neighbors.

While asserting Japan’s long-term relevance on the global stage is one motivator for hosting the Olympics, the economic interests that constitute Tokyo’s growth machine are also well-positioned to capture short-term profits thanks to the real estate and media environment created by the games.

The most obvious beneficiaries of the Olympics are the construction companies. In addition to billions of dollars of public infrastructure investment, private developers have also fast-tracked many projects to finish before 2020. Together with ongoing reconstruction projects resulting from the 2011 Tohoku disaster, this demand has caused a shortage of labor and building materials and a spike in construction prices. The four big construction companies (Kajima, Taisei, Shimizu, and Takenaka) reported their biggest profits since the bubble burst in the first quarter of 2016.

The interests of real estate developers are closely aligned with construction firms. The international attention and continued development in pre-Olympic Tokyo have helped fuel a land-price bubble in the city center, particularly in Chuo, Chiyoda, and Minato wards.

Area of concentrated development, with Olympic stadium and village sites shown

Most of the major real-estate investment falls within a circle encompassing the Olympic venues in the southwest of the city center, passing counter-clockwise through the Aoyama area, where the national stadium is located; Shibuya, where Tokyu is redeveloping the entire station area with a half-dozen high-rises; Shinagawa, where a new underground maglev Shinkansen will connect to Nagoya in 2027 and a special economic zone for “global headquarters” will be constructed around a new station on the Yamanote loop line by 2020; Harumi, an artificial island in the bay, where private developers have begun preparations for the 5,600-apartment Olympic village; to the neighborhood around Tokyo Station, where Mitsubishi Real Estate is putting the finishing touches on its Marunouchi redevelopment and recently announced the construction of Japan’s tallest building. Inside this central zone, the luxury department stores of Ginza are being rebuilt to cater to the desires of Chinese consumers, and Mori Building, the developer behind Roppongi Hills and Toranomon Hills, is investing $10 billion in at least ten luxury high-rise properties over the next decade.

Redevelopment in Shibuya and Ginza
The site of the Olympic village in Harumi

Thirdly, the Olympics give the Tokyo Metropolitan Government (TMG) an opportunity to spur development of large swaths of vacant land in the bay. Faced with skyrocketing land prices during the high-growth era, the TMG sought to construct a new city center on artificial land in Tokyo Bay. Infrastructure for project that cost the Tokyo government alone 2.43 trillion yen, or some 25 billion dollars. Efforts to lure global companies fizzled in the early 90s after the burst of the bubble caused land prices in central Tokyo to decline by as much as 90%. The TMG’s backup plan to host a world’s fair on the land was cancelled in 1995 amid strong citizen opposition. The Olympics will finally provide the mega-event stimulus necessary to fill up many of the remaining parcels in the bay with the Olympic village and some venues, as well as finance the infrastructure necessary to attract additional private development. Thanks to the Olympics, direct rail connections to the airport and a new subway line to the area are now under consideration.

The fourth cog in the Olympic growth machine is media industry, specifically the advertising giant Dentsu, which has deep connections in nearly every corner of the Japanese corporate world and government and shaped the city’s 2016 and 2020 Olympic bids. Today’s fractured media landscape has eaten into the profits of advertisers, and hosting the Olympics offers a prime opportunity to reassemble the monolithic television audiences of years past. Dentsu also orchestrated bringing the 2002 World Cup to Japan, when the match between Japan and Russia secured the highest national television audience since the 1964 Olympics (66.1%). The company was also involved in plans to rezone and redevelop the area around the national stadium as early as 2005.

Growth, demographics and the “2020 problem”

The public justification for the Olympics is rooted in a rather simple narrative of national revival that echoes the themes of Tokyo’s previous Olympics in 1964.

The 1964 Games were the seminal moment of period of high economic growth, through which “the Japanese reconstructed a national identity that had been shattered by defeat by embracing the new symbols of technology, economic growth, and democracy, relegating the dreadful memories of the war to the pages of history,” in the words of the cultural scholar Shunya Yoshimi. This experience of the Olympics as a powerful harbinger of national transformation remains embedded in the memory of many Japanese, especially the generation currently in power. Rhetorical parallels can be easily drawn between 1964 and 2020: just as 1964 was about recovery from the war, 2020 could be a symbol of recovery from the economic disaster of the bubble and Japan’s “lost decades,” signaling the return of a reinvigorated and growing Japan to the international stage.

However, Japan’s economic and demographic reality could hardly have changed more between 1964 and 2020. No longer at the center of a rapidly developing and growing country, by 2020 the Olympic core of Tokyo will be the last major island of growth in a deflationary and depopulating landscape.

Tokyo added around 70,000 residents in 2015, but with the lowest birthrate in the country, its growth is fueled entirely by in-migration from Japan’s depopulating regions. This influx, and the surge of visitors from abroad, has sheathed the city in a veneer of growth that masks a deteriorating demographic situation. Outside the central urban core, population and real estate prices are stagnant or falling. Over the next decade the capital is faced by the retirement of millions of baby boomers, the generation that flooded into the capital before Tokyo’s last Olympics. Beginning in 2020, even Tokyo’s population is expected to begin shrinking, as the death of elderly residents exceeds the continued influx of young people from the regions.

The economic consequences of this demographic decline are profound. The media has taken to discussing the “2020 problem.” By the mid-2020s, the national population will be shrinking nearly as fast as it grew at the height of Japan’s 1960s economic miracle, making efforts to curb deflation and boost consumption all but impossible. Tokyo now has nearly a million disused buildings and vacant homes, and the real estate market is beginning to collapse in many suburban areas that were built during the high-growth era. (New York Times, NHK).

Demographic decline means many of the investments that accompany the Olympics are now fighting against the current of a shrinking society. For example, the Tokaido Shinkansen from Tokyo to Osaka, Japan’s first bullet train that opened ten days before the 1964 Olympics, was a fantastically successful investment because the booming population and economy of the 1960s that generated decades of growing demand. In contrast, the $100 billion investment in a new magnetically-levitated Shinkansen line along the same route is unlikely to yield similar benefits: Japan’s population is expected to decline by 45 million between 2015 and 2065, an amount equivalent to the entire population outside the Tokyo, Nagoya, and Osaka areas. By the time the new train is completed around 2040, the travel market will likely be significantly smaller. The danger to Tokyo lies in the distance between the short-term interest of its growth machine and the long-term demographic trajectory of the city.

Staging a sustainable Olympics

Moloch argues that as growth declines, inter-local competition between growth machines will result in “ghost towns and unused capital stocks as the price paid for growth of competing successful units.” Today, the pie of growth is shrinking: Japanese GDP growth declined from an average of 10% during the 1960s to less than 1% since the bubble burst in 1991, while world GDP growth shrunk from 6.6% in 1964, the year of the last Tokyo Olympics, to 2.4% in 2014. Increasing numbers of economists are forewarning that low or no growth is the “new normal,” particularly in the demographically advanced countries of Europe and East Asia. The declining returns on Olympic largesse reflect this global shift, led by Japan, towards a lower-growth world.

Tokyo could still use its Olympics as an opportunity to move beyond the boom-and-bust cycle of development towards a model for post-growth urban sustainability. The Tokyo Cultural Heritage Alliance, a coalition of public, private, and academic organizations, aims to pull the city’s center of gravity and international attention away from the scrap-and-build real estate developments of the southwest to the city’s historic heart in the northeast. TCHA hopes to kickstart a model of post-growth urban development that focuses on renovating aging buildings and recycling cultural knowledge into new industries, while directing investment towards infrastructure that will create long-term improvements in quality of life.

Without a course adjustment, Tokyo is likely headed into an Olympic-sized boom-and-bust cycle. However, encouraging the creative reuse of the city’s existing buildings could lead to the development of sustainable local communities and industries, and demonstrate a new path for a global mega-event that is in urgent need of reform.

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