Tokyo has defeated Madrid and Istanbul to be elected host of the 2020 Olympic Games, the International Olympic Committee has announced.

Meanwhile, thousands of hopeful, recession-hit Spaniards packed around giant screens in Madrid on Saturday to watch Olympic chiefs in Buenos Aires decide the fate of their city's bid to host the 2020 Games.

Revellers of all ages sang, danced or simply stood transfixed by the action in Buenos Aires relayed on huge screens erected by the granite arches of the city gate, Puerta de Alcala.

Thousands of people, many clutching red balloons, filled the Plaza de la Independencia square where the gate stands and poured into a nearby avenue.

Musical groups played on a large stage erected in the square, which adjoins central Madrid's leafy Retiro park. Flags fluttered nearby reading: "United for a Dream".

Rocio Jimenez, a 19-year-old history student from Madrid, prayed for relief for the hard-hit economy if the capital wins.

"If we get the games it will create jobs. We will have to invest but we will get that money back, too," Jimenez said of Madrid's bid -- its third consecutive attempt to secure the right to host the Games.

"I did not agree with the previous candidacy. But now we have got many things already built. A lot of the work has been done," she said.

Madrid says it can put on a memorable Games despite a two-year recession that has sent the Spanish jobless rate spiralling above 26 percent. With 80 percent of the venues already built, it says costs can be curbed.

"This time I think we have got a chance," said 52-year-old Pedro Pablo Munoz, a lawyer and volunteer for the Madrid 2020 bid. He also helped out on the previous two bids.

"More people are joining in. Getting the Games would give more sporting life to the city," he added. "It would be a good thing for amateur sport."

With 28 of the 35 venues have already in place, Madrid 2020 says it will spend just $3.1 billion (2.35 billion euros) to host the event and another $1.9 billion in construction investment.

A survey released this week by market research group Opinea said 77 percent of Spaniards questioned were in favour of Madrid's bid.