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Vaccine Fiasco May Doom Tokyo Olympics—And $5 Trillion Economy

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As Japan navigates a dangerous 2021, its government is breaking the economic equivalent of the Hippocratic Oath. 

The first-do-no-harm imperative is nowhere to be found as Prime Minister Yoshihide Suga, like his predecessor, prioritizes gross domestic product and staging the Tokyo Olympics over defeating Covid-19. Now, prospects for both are in harm’s way as Suga slow-walks a vaccination program that’s barely begun.

Among the Group of Seven nations, Japan isn’t just dead last in putting vaccination arms—it’s lagging epically. As of April 9, Bloomberg data show that 0.8% of Japan’s 126 million people received at least one injection. That compares with 48% in the U.K., 34% in the U.S., 16% in Canada, 14% in German and 13% in Italy. This is indeed “staggering,” to use the words of Takahide Kiuchi at Nomura Research Institute.

There’s no shortage of explanations for why Japan is lagging: an overly stringent drug approval process; supply and procurement bottlenecks; deep public skepticism of new vaccines. What there is in abundance, though, is discontent not just about the glacial rollout, but a poor communications strategy.

As confusion reigns, Japan’s longest economic expansion since the 1980s looks about as healthy as Suga’s political prospects. Since taking office last September, Suga bet re-election later this year on a euphoric Tokyo Olympics that would lift spirits and pump new life into the economy.

Hardly. As a fourth Covid-19 wave hits Tokyo, Osaka, Okinawa and major cities around the nation, at least 72% of Japanese think holding the Games in July amid a pandemic is a mistake. On Thursday, Toshihiro Nikai became the most senior official to admit the event may be doomed. “What would be the point of an Olympics that spread the infection?” said Nikai, secretary-general of the ruling Liberal Democratic Party and a top Suga ally.

Not surprisingly, Suga’s own numbers are oscillating between the high 30s and low 40s. That’s the political graveyard by Japanese standards—not where Suga wanted to be ahead of an election expected to be held around October. Or as he sits down with U.S. President Joe Biden on Friday, the first world leader to do so.

The fallout these last few months looks plenty grave for the economy, too.

Relatively speaking, Japan could credibly be listed among coronavirus success cases. The No. 3 economy has fewer than 9,500 Covid deaths. That’s fewer than in my native Queens, New York. Yet the slow vaccine rollout means already struggling businesses and worried consumers must hold out longer, putting Japan even further behind peers in the economic recovery cycle.

Household spending accounts for more than half of GDP. The more tens of millions of Japanese in their prime-earning years shelter-in-place, avoid shopping districts, restaurants, bars and don’t travel or buy cars, the longer it will take to return to 2019 growth levels.

All this means that as the U.S. returns to growth this year and the U.K. and eurozone do so next year, Japan’s revival will likely be more of a 2023 phenomenon. Again, not where Suga hoped to be at a moment when China’s economy is racing ahead. And just as Suga is in Washington joining forces with Biden.

Granted, Suga is ecstatic not to be dealing with Donald Trump, whose trade war helped push Japan back toward recession even before Covid-19 arrived.

Much was made of the supposed bromance between Trump and Suga’s predecessor, Shinzo Abe. Yet Trump’s trade war, reneging on the Trans-Pacific Partnership and his administration’s Covid-19 failures wrecked any hope Abenomics might end deflation. Trump even got Abe to nominate him for a Nobel Peace Prize, of all things. Then, Trump humiliated Tokyo by disclosing it.

One of Abe’s last acts as prime minister was cobbling together a giant $2.2 trillion Covid rescue package, worth about 40% of GDP. Since then, consumer prices have only fallen. The 0.4% drop in February from a year earlier was the seventh straight monthly decline (prices fell 0.6% in January). This is putting the Bank of Japan further and further away from its 2% target.

Losing the Olympics would make things worse. Along with the roughly $25 billion Tokyo spent to host an Olympics scheduled for July 2020, the private sector invested aggressively on giant new hotels, entertainment facilities and transportation routes. 2020 was to be the year when Japan planned to pull in a record 40 million tourists. And set the stage for a tourism boom to follow.

Instead, Japan is fending off new waves of infection—and new variants wafting its way. And defending a weak political response that’s harming the long-term health of a $5 trillion economy.

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