CEO DailyCFO DailyBroadsheetData SheetTerm Sheet

Japan is plowing ahead with the Olympics—pandemic and public opinion be damned

May 27, 2021, 10:45 AM UTC

This is the web version of Eastworld, Fortune’s newsletter focused on business and technology in Asia. Subscribe here to get future editions in your inbox.

The 2020 Olympics were supposed to be a national celebration for Japan.

Bringing the Summer Games to Tokyo would demonstrate to the world Japan’s “rejuvenation” from the earthquake, tsunami and nuclear disaster that devastated its northern Pacific coastline in 2011, and highlight the nation’s recovery from nearly three decades of economic stagnation. At least that was the grand vision proffered back in 2013 by the government of then-prime minister Shinzo Abe when it submitted Japan’s winning bid to host the games.

Eight years later, with the Games just 57 days away, that optimism has given way to recrimination and fear. Yoshihide Suga, Abe’s successor, vows that the Tokyo Olympics, which have already been postponed for a year because of the pandemic, will open as scheduled on July 23, regardless of Japan’s struggle to contain COVID-19 and mounting public opposition to the Games.

Japanese officials and the International Olympic Committee have sought to reassure the public that they’ve taken precautions to ensure the Olympics will be safe. The number of media and support staff allowed to enter Japan for the event has been scaled back. Visitors will be tested for three days after arrival and their movements restricted. No spectators from overseas will be allowed.

But voters aren’t having it. In recent weeks, public hostility to the Olympics has soared to new highs; a poll conducted earlier this month found that 83% of Japanese voters feel the games should be scrapped or postponed.

Critics argue that, in plowing ahead with the Olympics, Suga and his allies in the nation’s ruling Liberal Democratic Party risk creating a health crisis as deadly as the 2011 tragedies. Instead of showcasing Japan’s renewal, they charge, Japan’s political leaders, with the eyes of the world upon them, are only demonstrating that they remain as rigid, myopic, and inept as ever when it comes to coping with crisis.

Japan’s taxpayers were suspicious of the Olympics even before the pandemic. When the IOC awarded the Summer Games to Tokyo in 2013, organizers said staging the event would cost $7.5 billion. By 2019, the official estimate had ballooned to $12.6 billion. Japanese government auditors estimated the actual cost to be twice that—making Tokyo the most expensive summer games ever. Postponing the Games to 2021 has added billions more to the tab.

But in recent months, public wariness of the Olympics has galvanized into nationwide hostility. Driving the negative sentiment: the limited effectiveness of government efforts to combat the coronavirus. Japan had early success in containing the virus. But since early March the nation has grappled with a deadly “fourth wave” in which the daily tally of new cases recently spiked above a record 7,000. That’s low compared to countries like the U.S., Britain, or India, but it’s high for nations from East Asia and Oceania. Adding to the public anxiety is the fact that, for reasons my Fortune colleague Grady McGregor explained last month, Japan’s vaccination rollout has been the slowest and clumsiest of any developed country; as of today, just over 2% of Japan’s population has been fully vaccinated.

Suga’s government is preparing to extend until just weeks before the Games a state of emergency that restricts travel and socializing in Tokyo and eight prefectures, covering about 40% of the population, where infections remain high. At a press briefing last Friday, IOC vice president John Coates asserted that the Olympics could be held safely even if the Japanese government leaves state of emergency rules in place during the Games.

On Monday, the U.S. State Department issued an advisory urging Americans to “avoid all travel to Japan” because of COVID-19 concerns.

A parade of prominent business leaders have declared their opposition to the games. “Does the IOC have the power to decide that the Games would go ahead?” Softbank founder Masayoshi Son tweeted on Sunday. “There’s talk about a huge penalty (if the Games are cancelled) but if 100,000 people from 200 countries descend on vaccine-laggard Japan and the mutant variant spreads, I think we could lose a lot more: lives, the burden of subsidies if a state of emergency is called, a fall in gross domestic product, and the public’s patience.”

Hiroshi Mikitani, CEO of Rakuten, Japan’s leading e-commerce company, said it would be a “suicide mission” for Japan to host the games. A chorus of doctors, nurses, medical staff and public health experts expressed similar sentiments.

On Wednesday, the Asahi Shimbun, one of Japan’s leading dailies and a sponsor of the Tokyo Olympics, published an editorial calling for the Summer Games to cancelled. “The foremost priority must lie with maintaining a basic structure that protects the lives, health and livelihoods of citizens,” the editorial argued. “The Olympics must never be allowed to invite a situation that threatens this structure.”

For Suga, who must face a general election this fall, the political stakes couldn’t be higher. The prime minister and his allies appear to have hoped that the Games would stir feelings of national pride among voters and burnish his credentials as a leader just as Japan goes to the polls. Instead, he finds himself on the defensive, insisting that he “would never put the Olympics first,” ahead of the safety of Japan’s people. A recent NHK poll found that approval for Suga’s cabinet has plunged to 35%, the lowest since he took office last September.

So why doesn’t Suga call the Games off? He insists it’s not his decision, and technically that’s true. The contract signed back in 2013 grants that power exclusively to the IOC. And cancelling the Olympics would be expensive. Insurance payouts would probably cover only a few billion dollars. The broadcast revenue for the event goes to the IOC, which is loathe to forgo the billions of dollars it would lose. As Yahoo Sports writer Henry Bushnell explains here, if Japan cancels, the IOC could, theoretically, take Tokyo to the Court of Arbitration for Sport in Switzerland seeking damages that run into tens of billions of dollars.

Bushnell argues the IOC is unlikely to do that because a lawsuit against a host city would be a public relations disaster. But for Japan’s beleaguered prime minister, the Games threaten to turn out that way in any scenario.

More Eastworld news below.

Clay Chandler
clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Grady McGregor. Reach him at grady.mcgregor@fortune.com

Eastworld news

Lab leaking

U.S. President Joe Biden ordered a U.S. intelligence inquiry into the origins of COVID-19, just as discussion about a long-dismissed lab-leak theory has entered the mainstream. Biden says that U.S intelligence will submit a report in 90 days that will explore whether COVID-19 came from human contact with an animal or from a laboratory accident. In March, the U.S. described the COVID-19 origins investigation conducted by Beijing and the World Health Organization as “incomplete” and criticized Beijing for limiting the WHO’s access to Chinese data during the study. Fortune

Disengaged

The U.S. has declared engagement with China dead. “The period that was broadly described as engagement has come to an end,” Kurt Campbell, the U.S. coordinator for Indo-Pacific affairs on the National Security Council, said Wednesday at Stanford University. Campbell was referring to the idea that promoting economic engagement with China could help spur more political openness, a notion that helped guide Washington’s relations with Beijing since the 1970s. Now, Campbell says, “the dominant paradigm is going to be competition.” Bloomberg

The YOLO fund

Masayoshi Son, CEO of Japanese conglomerate Softbank, has long drawn critics for aggressive gambles on cash-burning startups. Some of his bets, like pumping $9 billion into co-working startup WeWork, have also turned into high-profile disasters. But for all of Son’s mistakes, Softbank’s $100 billion Vision Fund may produce more winners than losers. Softbank-funded companies like South Korean e-commerce firm Coupang and Indonesian shopping site Tokopedia are starting to bear fruit, while other companies it invested in like Singapore’s Grab and China’s Didi are slated for 2021 IPOs. "There were many investment failures… But what I regret more is the missed opportunities to invest,” Son tells the Nikkei Asian Review.

Extra help

In India, the rate of daily COVID-19 infections has halved from a peak of more than 400,000 two weeks ago to roughly 200,000 today. But deaths remain high; India reported that 4,157 died of COVID-19 on Wednesday. Now, Indian companies are helping their workers confront the rising death toll. On Tuesday, India’s Tata Steel, a company that employs some 750,000 workers globally, said it will pay the salaries of employees who have died from COVID-19 and cover education costs through university for the children of deceased employees. Fortune

Markets and movers

HSBC – The London-based bank is exiting its U.S. retail banking business as part of a larger pivot to Asia. HSBC’s U.S. banks lost $547 million in 2020 compared to its $5 billion profit in Asia, according to HSBC’s financial statements. Reuters

Jimmy Lai – Hong Kong’s security chief sent letters to bank executives at HSBC and Citibank threatening seven years of jail if they dealt with any assets related to Jimmy Lai. Lai, the Hong Kong pro-democracy activist and media mogul, was recently sentenced to 14 months in jail after being found guilty of unauthorized assembly for participating in a protest last summer. Reuters

Sinovac – The World Health Organization (WHO) is requesting more data on the COVID-19 vaccine from private Chinese firm Sinovac before it makes a decision on its approval. The WHO approved its first Chinese COVID-19 vaccine earlier this month, green-lighting a COVID-19 vaccine from state-owned owned firm Sinopharm. Wall Street Journal

Sinopharm – Weeks after its WHO approval, the vaccine maker published phase III trial data on two of its COVID-19 vaccines in a peer-reviewed medical journal for the first time. The study shows that Sinopharm’s two vaccines are 72% and 78% effective in preventing COVID-19 infections, and Sinopharm says it has the capacity to produce 5 billion vaccine doses per year. Bloomberg

Tesla – The U.S. electric vehicle maker said this week that it established a data center in China to store information generated by local customers. Chinese authorities have scrutinized Tesla over concerns that Chinese user data is being shared outside the country. Tesla also announced plans to build more data centers in China to keep in line with government regulations. Fortune

Big Tech vs. India – India’s Ministry of Electronics and Information Technology asked social media firms including Twitter, Facebook, and WhatsApp to share details of how they will comply with new social media guidelines that may give the government more power to take down posts. Twitter lashed out at the new rules for “inhibiting free, open public conversation” on Thursday, even as it and the other social media firms face a ban in the country if they don’t comply. Bloomberg

Pinduoduo – On Wednesday, the Chinese e-commerce giant reported first quarter revenue of $3.47 billion, up 239% from last year but not enough to make the firm profitable. Pinduoduo reported a net loss of $454 million in the first quarter, and the company has not been profitable since it first listed on Nasdaq in 2018. Financial Times

Tencent – Chinese regulators have told the Chinese tech giant to put its finance-related business into a new financial holding company so it can be more closely supervised, a measure similar to the one that Beijing imposed on Tencent rival Ant Group earlier this year. Tencent's mobile payment platform WeChat Pay accounts for 40% of China's mobile payments market. Caixin Global

Final figure

15.8 million

China is now vaccinating its population from COVID-19 at a rate of 15.8 million people per day, accounting for over half of global injections. China has also now distributed 547 million COVID-19 jabs to its citizens, more than double that of the U.S. In per capita terms, China has provided enough doses to vaccinate 19.5% of its population, trailing places like the U.S. and the European Union, which have given out enough doses to cover 45.1% and 25.8% of their citizens, respectively. But China's revamped campaign may quickly catch up, and it's delivering over three times more doses per day to its citizens now than it was a month ago after improving its production capacity and deploying a mix of incentives like shopping coupons and freebies. Fortune

Our mission to make business better is fueled by readers like you. To enjoy unlimited access to our journalism, subscribe today.