When economists consider the costs of the Tokyo Olympics playing out as we speak, they naturally focus on dollars spent. Though the official figure is in the $15 billion range, private estimates can approach double that amount.
Yet the real one is what economists call “opportunity cost.” Since the moment in 2013 when then-Prime Minister Shinzo Abe scored the 2020 Games, his government had every opportunity to implement his bold-sounding plan to end deflation and recreate a little 1964 magic.
Yes, yes, these are the Tokyo Games. But you’ll notice that Tokyo Governor Yuriko Koike barely has a role in them. It’s all about the ruling Liberal Democratic Party harnessing a few weeks in the global spotlight to increase Japan’s geopolitical clout 1964-style.
That year, Tokyo staged one of modern history’s truly spectacular Olympiads. Japan’s postwar coming-out extravaganza announced its emergence as a technological powerhouse about to upend the world order. Tokyo wowed the world with skyscraper-strewn, neon-lit skylines, avant-garde stadiums and futuristic bullet trains zooming by at 130 miles per hour.
Japan’s big return to the global community was courtesy of Abe’s grandfather, Nobusuke Kishi, the prime minister who scored the 1964 Games. For Abe, Tokyo 2020 was a means of both closing the family-legacy circle and recreating the post-1964 economic boom 56 years later.
Covid-19 flipped the script, of course. Not only did Japan have to pay billions more to delay the 2020 Games by a year. It also lost out on the 40 million tourists Abe’s party expected to attract surrounding the event.
A volunteer follows the action from an empty stand during a water polo match of the Tokyo 2020 … [+] Olympic Games on July 25, 2021.
Photo by David Ramos/Getty Images
But the sprawling gulf between the tech renaissance 1964 proved to be and now is what amazes most. 2020 finds Japan as Asia’s second-biggest economy, behind China, in a technological rut.
Japan Inc., which once changed everything with the Walkman, computers, Trinitron color TVs, new gaming systems now lags South Korea in smartphones and memory chips. One of the biggest complaints from visiting sportswriters: troubles with mobile apps and websites they’re required to use. Not a great look.
The Abe era’s obsession with putting on a great show to rival granddad’s tells you everything you need to know about why Japan’s economy is falling behind.
In December 2012, Abe returned to power five years after a one-year 2006-2007 stint as premier. Abe 2.0 was suddenly a bold reformer—a Japanese amalgam of Margaret Thatcher and Ronald Reagan. He laid out a multi-pronged program to cut red tape, shake up a change-averse bureaucracy, incentivize innovation, empower women and attract foreign talent.
Japan’s former Prime Minister Shinzo Abe (left) and Thomas Bach, President of the International … [+] Olympic Committee (right).
Photo by Kim Kyung-Hoon-Pool/Getty Images
Instead, Abe, between 2012 and 2020, really had a two-pronged plan: aggressive Bank of Japan easing and Tokyo 2020. Abe and his LDP blundered by thinking that rekindling the collective spirit that lifted the nation after 1964 would, somehow, magically, euphorically, restore the innovative energy of years past.
This might sound oversimplistic. But from the moment Japan secured the Olympics in 2013 until Covid-19 hit in early 2020, the vast majority of Abe’s top upgrades went quiet. Either because of distraction or sincere hope that the Olympics would be an economic game-changer, the Abe years were a reform dud.
Even the perceived successes have lost their sheen. Japan’s apparent progress in tightening corporate governance didn’t avoid the Carlos Ghosn fiasco at Nissan Motor. It didn’t head off a recent scandal at Toshiba Corp. concerning board seats. And a decade on, who’s going to jail for the safety failures that resulted in the nuclear crisis at Fukushima?
The deflation that the Abe years had supposedly defeated, meantime, is trying to make an untimely return. As the West frets runaway inflation, the most Japan’s core consumer prices could do was perk up 0.2% in June from a year earlier. The upward price pressures Japan actually is experiencing are the bad kind: importing pricy commodities.
People wearing face masks pose for photographs next to Olympic Rings on March 24, 2020 in Tokyo, … [+] Japan.
Photo by Carl Court/Getty Images
What is Japan doing about it? Nothing obvious. In mid-2020, Japan tossed an additional $2 trillion of stimulus at the economy, or 40% of gross domestic product. The BOJ larded up its balance sheet with additional asset purchases. Yet since Yoshihide Suga replaced Abe last September, he’s spent far more time avoiding cancellation of the Olympics than recalibrating the economy.
Besides, Prime Minister Suga’s team figured, Covid risks would recede soon enough, and Japan would pull in many millions of tourists by July 2021 to add vigor to the economy. That gamble has aged very poorly.
The best-case scenario now is that Tokyo 2020 isn’t a super-spreader event that upends the economy in 2022 and beyond. Or that history doesn’t remember these few weeks as a gold-medal caliber incubation opportunity for a new Tokyo variant.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
