Olympic flame inspires faith in rebirth of nation

Hosting the 2020 Games will help to revitalise the Japanese economy, writes William Pesek.

Shinzo Abe's joy at winning the 2020 Summer Olympics for Japan must have been deeply personal.

His grandfather, then prime minister Nobusuke Kishi, brought the 1964 Olympics to Tokyo.

That event confirmed Japan's phoenix-like rise from defeat in World War II. Its bullet trains, avant-garde stadiums and neon-lit skyline advertised a country and an economy prepared to take the lead in Asia and indeed the world.

Pundits are predicting a similar rebirth for Abe's Japan after two decades of deflationary malaise. Economist Robert Feldman, of Morgan Stanley MUFG Securities, said the Games could provide Japan with a boost similar to that enjoyed by Britain, which hosted last year's Summer Games in London - roughly 0.7 per cent to 0.8 per cent of gross domestic product over seven years, or about 3 trillion to 4 trillion yen ($30 billion to $40 billion) on a value-added basis.

With the first of the prime minister's reform "arrows" - monetary easing from the Bank of Japan - showing results, an Olympic spending spree could juice the fiscal stimulus that represents the second arrow.

What about the third arrow, though? So far, despite a lot of talk about deregulation and structural reform, that projectile remains in the quiver. The really tantalising question about Tokyo 2020 will be whether the Games can help push through the politically challenging reforms that will determine whether Abenomics works or not, and whether Japan rises from the ashes again.

The most obvious test will be how Abe's government handles the disaster in Fukushima. The 2 years after a giant earthquake precipitated the worst nuclear crisis since Chernobyl have been lonely ones for the prefecture's almost 2 million people. They have been summarily neglected, condescended to and left in harm's way by officials in Tokyo with other things on their minds.

Abe staked his Olympics bid on his pledge to clean up Fukushima. "Given the cascade of revelations about the Fukushima fiasco, it is surprising that Tokyo won," says Jeff Kingston, head of Asian studies at the Tokyo campus of Temple University. "Delegates bought Abe's reassurances that the situation will be resolved before then. Now he has to deliver and under greater international scrutiny."

Abe certainly does not want his Olympics mocked as the only ones to issue commemorative Geiger counters. Japan now has no choice but to come clean about the severity of the contamination, look overseas for expertise and solutions, and devise an ambitious clean-up plan. Indeed, the 2020 deadline gives Abe the excuse he needs to nationalise Tokyo Electric Power Co, which owns the plant.

The most influential Olympics have always been those that provide a catalyst at an ideal moment: think about the 1988 Summer Games in Seoul, which fuelled South Korea's transition from autocracy to democracy, and Sydney 2000, which, pre-Group of 20, highlighted Australia's place as a global power.

The 2020 Games happen to coincide with Abe's push to open up Japan, both through lowering trade barriers and getting Japanese themselves to engage with the outside world after decades of looking inward. Robert Whiting, the Tokyo-based author of several books about sports and politics, thinks the Games will complement Abe's efforts.

"It will further help to globalise Japanese, in line with Abe's goal or vision of making Japanese more international-minded and active," Whiting says. "People will be focusing more on learning English to prepare for the Olympics, and parents will be more oriented toward having their children learn the language as well."

The Olympic boost could also give Abe the political cover he needs to deregulate an economy badly in need of some supply-side shock therapy. A groundswell of public support would help him steamroll the vested interests in the way of freer trade, increased immigration, upgrades to corporate governance, and tax tweaks that promote entrepreneurship.

It worked for Kishi in 1964, when he used the proud inauguration of the bullet train to launch a major infrastructure spending drive. It might just work for Abe in 2020.

Bloomberg