Yesterday it was announced that the Tokyo 2020 Olympic Games will be postponed until next year, due to the COVID-19 pandemic. As a result of this, Japan is set to suffer severe economic blows which are almost certain to push the world’s third largest economy into a recession.

The Tokyo Olympics were set to mark a triumphant year for Japan, as Prime Minister Shinzo Abe planned to invigorate economic growth through tourism, reforms and monetary easing. However, due to the coronavirus outbreak, at least $137 billion is set to be spent combating the disease, whilst the country will suffer further economic loss from the delay of the Olympic games and decline in tourism during the pandemic. 

It is inevitable that this, along with a change in consumer behavior will put a lot of pressure on small and medium businesses in Japan, which in turn will rise cases of bankruptcy. 

With the Japanese economy already being persistently weakened by the coronavirus outbreak, JP Morgan says it will only get worse. The investment banking company estimates that postponing the games on top of the current grievances will knock 1.1 trillion yen ($10 billion), or 0.2%, off the economy this year.

“We’re now facing a very severe situation,” Hiroshi Ugai, chief economist at JPMorgan Securities Japan, said.