The government of Japan has begun working on Part II of legislation that will bring legal casino gaming to the country. Newswire service Jiji Press reports that the draft statute or implementation bill will lay out details of how casinos are administered, regulated and taxed as well as the number of licenses that will be awarded.
The Japanese parliament approved Part I of the legislation, the enabling bill, in December.
“To realize clean casinos, we will introduce regulations at the world’s highest standards and develop a system to properly enforce them,” Prime Minister Shinzo Abe said at the first meeting of the government’s task force. “Through those measures, we aim to create attractive Japanese-style integrated resorts.”
A number of global casino operators are expected to vie for a license in the country. The list of potential suitors includes the Las Vegas Sands Corp., MGM Resorts International, Genting Singapore Plc, Galaxy Entertainment, Wynn Resorts Ltd., Hard Rock International and Melco Resorts and Entertainment Ltd.; they are attracted by a potential multibillion-dollar market; brokerage CSLA, for one, has predicted Japan’s gaming industry could grow into a $40 billion market, though it recently amended that expectation to about $25 billion per year.
City governments in Japan are also readying themselves for the legislation, which will determine how many licenses will be authorized and where the new casinos will be developed. Osaka is considered a front-runner, as are Tokyo, Yokohama and some smaller markets like Hokkaido. The Osaka city prefecture has already formulated a new bureau to lure prospective developers, reported the Japan Times newspaper.
Meanwhile Konami Holdings Corp., which supplies slot machines to some of the world’s biggest casinos, has said it’s eager to get into the new market—but only if the regulations are as rigorous as those in Las Vegas.
“In Las Vegas, if you have a license they’ll take it away if you start getting involved in strange things,” said Konami Senior Executive Director Satoshi Sakamoto in a March interview. “If Japan is too loose, then we’d have to remove ourselves.”
Operators are taking decisive action to get one of the two to three integrated resort licenses expected to be handed out in the first phase of development. Galaxy Entertainment and Monaco gaming operator SBM have signaled their intention to partner on a Japan project. During Galaxy Entertainment’s 2016 earnings call last month, Chairman Francis Lui said that company already has an office in Tokyo. And in January, Hard Rock International launched Hard Rock Japan.
MGM was quick out of the gate. Last year, the U.S.-based company confirmed it already had a full-time development team in Tokyo working on potential deals, according to the Associated Press. At the time, MGM CEO Jim Murren said, “The reason why everyone’s spending the time on this is that the potential is absolutely enormous.”
Sands Chairman and CEO Sheldon Adelson has said he is willing to promise an investment of up to $10 billion to win one of the first licenses, and has called Japan “the holy grail” for gaming operators.
Currently, gambling in Japan is limited to lotteries, pachinko and wagering on horse, auto, bicycle and power boat racing. When integrated resorts come on the scene, said Union Gaming analyst Grant Govertsen, “It represents the next and perhaps only other large opportunity to develop large-scale integrated resorts in Asia. Some of these companies, their revenues and cash flow are so large today that it would take an opportunity like Japan to move the needle for them.”
But concerns about problem gambling in the country may spur Japanese lawmakers to restrict gambling not only at the new casinos, but at existing gambling establishments, including pachinko parlors and racetracks.
In 2015, Japanese gamblers spent 23.3 trillion yen (US$209 billion) at pachinko parlors, reports Bloomberg, about 4 percent of gross domestic product. Measures to curb gambling could include entry fees, income requirements, and limitations on instant-cash machines. Japan may even restrict certain types of gambling by individuals based on the request of their relatives.
“Companies in any sector prefer to regulate themselves—being bound by legislation is bad for business,” said Kazuaki Sasaki, associate professor in the department of international tourism at Tokyo University. Asked about the potential adverse effect of new legislation on pachinko parlors, he said, “Although the increase in costs will hurt the industry in the short term, they’re necessary to ensure its long-term survival.”
For all the excitement about the world’s next big gaming market, the process from here on out should move at a slow pace. The implementation bill is not expected to be ready for review until December. And Japan’s first casino resorts are not likely to open until 2023 at the earliest.
