Regulations could limit locals play
As Japan plans to launch a legal gaming industry, estimates of the market’s value range from as little as $5 billion per year to as much as $40 billion, with the world’s biggest gaming operators all looking to win one of the licenses. By contrast, Macau, the world’s leading gaming jurisdiction, generated more than $25 billion in revenues in 2016, down from a high of $45.2 billion in 2013.
But is Japan really the final frontier or as it’s been called, the “Holy Grail” of global gaming?
According to US News & World Report, despite reported widespread public disapproval of casinos, the Japanese are actually enthusiastic gamblers. They are currently limited to pachinko and some forms of sports betting, but there were roughly 2.8 million pachinko machines in the country as of 2013. And according to Bloomberg News, Japanese gamblers place an average of $187 billion on pachinko bets each year.
YH&C Investments analyst Yale Bock told US News the existing Japanese gaming market is full of promise for potential casino operators. “Legislators and potential licensees can be certain of existing demand,” Bock said. “The politicians in Japan have visited Singapore as they are thought to favor large integrated resorts offering non-gaming amenities, convention and meeting spaces, hotels, shopping and entertainment venues.”
Union Gaming analyst Grant Govertsen has called the market “massive” and “the last major green field opportunity for major international developers for the foreseeable future.”
But Govertsen added, “Given that we don’t know the rules of the game yet—the number and location of licenses, the tax rate on gaming revenues, or if locals will have to pay entry fees—it’s premature to try and peg a countrywide revenue estimate.”
CLSA analyst Jay Defibaugh said casino executives are lining up to invest from $6 billion to $10 billion each for a piece of Japan. “Among the operators, we believe that Las Vegas Sands, MGM Resorts, Genting Singapore, Wynn Resorts and Melco Crown are best-positioned for Japan.”
But it may take a while for the bets to pay off. Legislation could take another year to finalize, after which lawmakers must entertain bids and proposals and choose the operators. While Japan once hoped to open its first casinos in time for the 2020 Tokyo Summer Olympics, gaming consultancy firm Gaming Capital Management predicts that the first integrated resorts will not open until 2024.
According to Modern Tokyo News, the government may also establish measures to limit gaming by locals, which could quench the ardor of some potential investors.For example,Japanese casinos may require entry fees like those in Singapore, said Alex Bumazhny, senior gaming analyst for Fitch Ratings. “All these things may constraint the actual amount of revenue that could be generated in Japan.”
Even so, Bumazhny and other analysts say Japan’s potential casino revenue could reach approximately $10 billion per year, in line with both Singapore and Las Vegas.
“I don’t think Japan is going to catch up with Macau for the simple reason that I think Japanese lawmakers, when they’re making the bills, will limit the amount of gaming that could take place,” said Bumazhny. “What we’re talking about is two to three large integrated resorts, maybe a couple more regional type of small casinos, so limited amount of positions.”
