Japanese companies caught in predicament over Olympics

In 1964, the world watched the Tokyo Olympics via the first ever worldwide satellite broadcast using a gigantic antenna developed by NEC. In the Tokyo Olympics starting this July, NEC will once again be deploying new technology.

The company’s facial recognition system will be installed at stadiums to identify athletes and staff as the government pushes ahead with what it has promised will be a “safe and secure” Games despite the Covid-19 pandemic.

But there will probably be little promotion by NEC or other Olympic sponsors of technology used in the Games this summer, whether it is related to Toyota’s self-driving vehicles or security robots developed by Secom.

As one sponsor grimly acknowledged, silence is the best marketing strategy to navigate a toxic environment where any association with the event could potentially be damaging for the corporate brand.

Another chief executive quietly retracted a comment he made to the FT a few months ago that he loved sports and wanted the Olympics to go ahead, saying that what would have been a harmless comment in any other context was inappropriate in light of lingering public opposition to the Games.

In a further sign of just how hazardous the current situation is, NEC was unexpectedly drawn into a scandal that reveals how much the Olympics has raised the stakes for both the Japanese government and businesses.

Since Friday Takuya Hirai, the country’s digital minister, has been the talk of Japanese television shows following a leaked recording obtained by the Asahi newspaper. In it he is heard urging his subordinates to use “threats” against the chair of NEC. One comment from the April online conference particularly stands out: “If they grumble too much about this Olympics, we will completely sideline them.”

At the centre of the incident is a $66m contract — that appears to be unrelated to the Olympics sponsorship — signed between the government and a consortium including NEC to develop a smartphone app to track the health of foreign spectators and other staff associated with the Games. With the decision to ban overseas spectators, the government has asked to cancel its contract with NEC.

Hirai has since admitted his comments were inappropriate but denied they were made directly against NEC. He also defended the use of his language as a reflection of his “strong resolve” to cut costs. NEC has declined to comment beyond confirming that it has accepted a change in contract.

The incident may just be a ministerial gaffe, but for NEC and the 46 other Japanese companies that collectively paid more than $3bn to back the Games, there are serious questions to be asked about whether association with the Olympics is actually worth their money.

The Games are set to be the most heavily sponsored sporting event in history, but even before it was postponed due to the pandemic, some chief executives had privately expressed doubts about the returns from their investment.

While the decision to participate in what was considered a national project initially appeared low-risk, companies accepted non-exclusivity contracts, creating a situation where direct rivals such as Japan Airlines and ANA Holdings were both sponsors.

When Tokyo last hosted the Games in 1964, official and exclusive corporate sponsorships were not yet established and companies taking part in Japan’s postwar moment to demonstrate its resurrection from defeat seemed almost the natural thing to do. But that same patriotic spirit will no longer be sufficient to justify their sponsorship this year.

To be sure, public sentiment may well change by the time the Games are held as the vaccination programme gathers speed, and companies may even be able to — albeit belatedly — derive the marketing benefits they had hoped for.

But even if they manage to safely navigate these Games, another minefield lies ahead for worldwide Olympics sponsors such as Toyota and Panasonic. The 2022 Beijing Winter Olympic Games are just around the corner and companies are likely to come under activist pressure to take a stance against China’s human rights abuses in Xinjiang.

For too long, Japanese companies had simply considered sports as something they need to support, but a greater sophistication will be called for as Olympics sponsorship becomes even more political and contentious.

kana.inagaki@ft.com