- Mar. 23, 2017
- Mar. 22, 2017
- Mar. 17, 2017
January 21, 2016
Research and Statistics Department
Bank of Japan
The Tokyo Olympics, scheduled to be held in 2020, can be expected to have positive effects on the Japanese economy. Such effects will come mainly through the following two demand channels: (i) an increase in foreign tourism, and (ii) an increase in construction investment associated with this event.
The number of foreign visitors to Japan has been growing steadily, mainly due to the easing of visa requirements and the depreciation of the yen. The government's target of reaching 20 million foreign visitors by 2020 will likely be achieved. Nevertheless, taking other countries as a yardstick, there is still ample room for an increase in the number of foreign visitors, and it is certainly possible to further promote tourism in Japan, for example by reinforcing measures to attract foreign tourists in the run-up to the Tokyo Olympics. The experience of past host countries shows that the key is to achieve a lasting increase in tourism by promoting touristic resources nationwide. For Japan, this means, for example, establishing routes that allow tourists coming to Japan for the Olympic Games to make excursions to regional areas in addition to visiting the Tokyo metropolitan area.
Construction investment associated with the Tokyo Olympics includes not only that directly related to the building of facilities for the Olympic Games, but also various types of indirectly related construction investment, such as the construction of new hotels and the refurbishment of existing hotels in the private sector, urban redevelopment, the construction of commercial facilities, and the enhancement of transportation infrastructures. Based on the experience of previous host countries, construction investment associated with the Tokyo Olympics is projected to increase substantially during 2017 and 2018 and then peak out toward around 2020.
To avoid large business cycle fluctuations due to the boom-and-bust in construction investment, it is necessary to create new demand through various measures to help strengthen economic growth such as deregulation in addition to the measures to attract tourists mentioned above. At the same time, in order to meet such new demand, supply-side efforts should be taken to tackle the structural labor shortage facing Japan today by increasing labor productivity and further raising labor participation of women and the elderly.
We would like to thank Eiji Maeda, Toshitaka Sekine, Shigenori Shiratsuka, Koji Nakamura, Naoya Kato, and Ryota Maeno as well as the staff of the Economic Research Division, Research and Statistics Department, Bank of Japan for their helpful comments. The opinions expressed here, as well as any remaining errors, are those of the authors and should not be ascribed to the Bank of Japan.
This paper is an English translation of the Japanese original released on December 28, 2015, and the translation was mostly prepared by Chikako Wakasa.
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