Taps Coogan – August 10th, 2021

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A year late and likely to end up costing the Japanese a whopping $28 billion, the latest iteration of the Summer Olympics is finally in the books. It booked the worst ratings on record for a Summer Olympics.

While people debate the reasons why the Olympics’ ratings have cratered, the Japanese taxpayer Bank of Japan will be grappling with the gargantuan $23 billion estimated loss incurred on the event. That’s almost half-a-percent of Japanese GDP for anyone keeping track at home.

Actually, nobody will be ‘grappling’ with the fact that the Olympics are a massive money loser, least of all the Bank of Japan. That’s because, thanks to the magic of negative interest rates, the massive loss could be a revenue source for the Japanese Government.

Imagine the barely hypothetical scenario in which Japan takes a $23 billion loss on the Olympics and puts it on the national ‘credit card’ in the form of 1-Year Japanese government bonds. Those bonds are currently yielding –0.137%.

Practically speaking, that means that those bonds would be an asset for the Japanese government that generates $31.5 million in revenue per year (on $23 billion) and a liability for the people who bought them the Bank of Japan. Given that the Bank of Japan simply ‘prints’ the money needed to buy the bonds, the net-net is that a $23 billion loss actually reduces the Japanese government net interest expense by $31.5 million a year, and that can keep getting rolled over until the debt eventually disappears.

The only problem, of course, is that when the debt eventually disappears, Japan losses that source of revenue, hence they will need ever more financially ‘disastrous’ glamour projects like the Olympics to keep the national debt growing and the interest revenue coming in.

And they say there is no such thing as a free lunch…

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