Japan IR Race: All Over for Yokohama?

The election of Takeharu Yamanaka (l.) as Yokohama’s mayor could spell the end of plans to develop an integrated resort in the prefecture. According to local media, the election turned on the controversial issue of gambling, as well as the nation’s Covid-19 response.

Japan IR Race: All Over for Yokohama?

The Japan Times called it “a stunning political setback for Prime Minister Yoshihide Suga on his home turf”—the election of opposition party-backed Takeharu Yamanaka as mayor of Yokohama.

Significantly for gaming giants Genting Singapore and Melco Resorts & Entertainment, Yamanaka’s win is also seen as the end of plans to develop an integrated resort (IR) in the prefecture. On August 22, the anti-casino candidate defeated seven others, including current mayor Fumiko Hayashi, who supported the IR campaign.

According to local media, the election came down to two contentious issues: voters’ displeasure with the Suga administration’s coronavirus response, and the plan to build one of the country’s first three casino resorts in the city’s Yamashita Pier district. Following his victory, Yamanaka reiterated his pledge “to pull out of the casino project.”

The plan already faced powerful opposition, led by the “Don of Yokohama,” former Yokohama Harbor Transportation Association Chairman Yukio Fujiki. In a bit of dramatic oratory earlier this month, the 90-year-old declared he would commit suicide before he allowed a casino resort to be built at the port—though he didn’t rule out casinos in surrounding areas.

“If you want to build a tiny casino in a far-off corner on the very edge of Yokohama, then fine,” said Fujiki. “There are many people who support casinos, betting their lives, but I will not allow a casino in Yokohama. If a casino happens, I will commit seppuku (hara kiri) and die on its opening day.”

The Japan IR plan began in December 2016, when, in spite of widespread public resistance, the Japanese parliament under Prime Minister Shinzo Abe approved a maximum of three IRs in Japan, with the option to build more after seven years. Abe saw it as a way boost international tourism.

But the public at large has never been fully on board due to concerns about gambling addiction. The government responded with safeguards that may have seemed like roadblocks to some gaming operators—like income requirements and entry fees for local players, and a maximum 3 percent of resort space allocated for gaming. Las Vegas Sands Corp., which initially said it would spend $10 billion to break into Japan, ultimately bowed out, saying the math didn’t work in its favor. Wynn Resorts also pulled out, as did Caesars Entertainment. The Covid-19 outbreak further quashed enthusiasm for multibillion-dollar investments.

Samuel Yin Shao Yang, an analyst at Maybank Investment Bank Bhd. Told GGRAsia that, following the mayoral election, Yokohama’s RFP process “will be shelved very soon.”

Wakayama, Nagasaki and Osaka prefectures are still in the running to host IRs; Wakayama’s chosen operating consortium is headed up by the Canadian-based Clairvest Neem Partners, and Nagasaki’s choice is a group led by European operator Casinos Austria. MGM Resorts is the sole bidder for a partnership with Osaka, along with Orix Corp.

Unless another market raises its hand—there’s been speculation that Tokyo could jump in—Genting and Melco are both probably out of luck. At this point, the central government could decide to allot fewer than three licenses or no licenses at all. Industry consultant Joji Kokuryo told GGRAsia there are no guarantees. “There could be zero, one, two or three IR development approvals given. This will depend entirely on the quality and integrity of each local government’s application.”

Brendan Bussmann, partner and director of government affairs at Global Market Advisors, agrees that the process is uncertain, but said he believes the plan is solid. He told the news outlet, “IRs have been discussed for 20-plus years in Japan. The policy goals from the beginning remain true today. It’s time to push forward with this effort to help serve as further catalyst for Japan’s post-pandemic rebound through the initial construction and then on the back half of 2020s when these facilities will open to drive tourism.”

A way forward was suggested by former casino executive and consultant Daniel Cheng. He said the government could push the whole process into 2022, using Covid-19 as a pretext. And that pause could open the door for other candidate cities. “A six- or 12-month delay and an endemic (Covid-19) environment may be conducive for other host candidates to emerge: Hokkaido, Aichi, Fukuoka, Tokyo—each location’s micro-factors permitting,” he said.

Currently, the government expects to review IR submissions from local governments between October 1, 2021 and April 28, 2022. The initial phase of casino resorts could open in the latter half of 2020s, according to previous estimates.

Meanwhile, the Nagasaki government, accused of rigging the RFP process in favor of Casinos Austria, is defending its choice. The other contenders, the NIKI Chyau Fwu (Parkview) Group and Oshidori International Development said they were asked to withdraw from the RFP due to “negative background checks” before Casinos Austria was chosen on August 10.

Nagasaki officials say they adhered to the “highest international standards” in their RFP, adding, “The prefecture will continue working in a fair and compliant manner with the most suitable partner, following the strict regulatory and licensing requirements as required by the national government.”