Tokyo Olympics cost twice as much as predicted

Both the central and Tokyo metropolitan governments have amassed Olympics-related costs. Photo / Mike Blake/Reuters

The official ¥1.45tn (US$12.7 billion) bill for hosting the Tokyo 2020 Olympics and Paralympics — an event postponed by the pandemic and held without spectators — cost almost twice as much as envisaged by the Japanese capital when it bid to host the games.

The estimate of the total cost, which was revealed by the Tokyo Organising Committee (Tocog) on Wednesday, means that the event appears to have been staged slightly less lavishly than the 2012 London Olympics, whose final bill of US$14.95b still holds the record for most expensive summer games.

But controversy continues to dog the way in which Olympic costs are calculated: certain hefty — and arguably unavoidable — games-related expenses such as road renovation are not included in the official budget.

Both the central and Tokyo metropolitan governments have amassed Olympics-related costs, though these continue to be treated as sitting outside the official expense of holding the games.

When Japan's national auditor looked into the accounting in the years preceding the event, it highlighted how the government had folded a large number of costs into non-Olympic budgets footed by the taxpayer. The true cost of the Tokyo 2020 games, the national auditor said at the time, could be more than US$20b.

Despite the size of the bill, organisers pointed to cost-cutting measures and other savings made by holding the games without spectators, which shaved US$1.7b from the higher costs forecast in the budget presented in December 2020.

But academics at the University of Oxford who have studied the history of Olympic cost overruns said the huge expansion of Tokyo 2020's original budget confirmed their warning that cities considering hosting an Olympics should compare the financial risk of doing so using models applied to natural disasters and war.

Tokyo's official cost overrun is still lower than average. In their September 2020 paper, Oxford researchers calculated that the overrun for the Rio summer games in 2016 was 352 per cent, while London 2012's was 76 per cent. The average cost overrun for both summer and winter games since 1960, according to the paper, was 172 per cent.

Unless the International Olympic Committee (IOC) addresses the issue, said Bent Flyvbjerg, the lead researcher on the report, fewer and fewer cities will decide that the risk is worth the prestige.

The fact that the games consistently cost more than envisaged is something the IOC is now very concerned about.

"The more cities that refuse to bid, the more the IOC is forced to deal with the issue. If anything eventually drives down the cost of these events, it will be that," said Flyvbjerg.

When Tokyo presented its Olympic bid in 2013, it predicted that the whole event would cost ¥734b.

As those expenses rapidly mounted once construction and other preparations began, public opposition to the games grew. By the time organisers took the decision to postpone them because of the Covid-19 pandemic, a significant proportion of Japanese believed the whole enterprise should be abandoned altogether.

The estimate of the cost of the last Olympics comes as many of its largest Japanese sponsors — a group that collectively invested US$3b and made Tokyo 2020 the most heavily sponsored sporting event in history — continue to complain that their expenditure was largely wasted.

The chief executive of one sponsor told the Financial Times last week that they had received "effectively zero" benefit from the US$100 million they had spent.