What happens if Japan cancels the Olympics?

The biggest reason, IMO, would be what Cervaise stated in this thread:

Another reason, as I mentioned in that thread above, is that it would mess up the schedules of the 2022 world championships for all of the Olympics’ constituent sports.

Lastly, the condos in the Olympic Village were sold to an assorted group of buyers who were supposed to move in after the Olympics were finished, but due to the postponement, they haven’t been able to move in as planned for almost a year now. I don’t know how much political pull they have, but I can’t imagine they’d be too happy if the government postponed it once more.

https://www.reuters.com/article/us-olympics-2020-condo/buyers-of-olympic-village-condos-left-out-in-the-cold-after-delayed-games-idUSKBN2B203O