Union Gaming: Delays in store
As Japanese lawmakers plan for the country’s first foray into legal gaming, a defeat at the polls for the ruling Liberal Democratic Party could be a serious setback.
Prime Minister Shinzo Abe, a strong proponent of casinos as a revenue source, was the driving force that helped push integrated-resorts legislation through parliament last December. But he may have lost some of his clout in elections in Tokyo.
Abe’s LDP—once the dominant political party with 60 seats in the 127-member assembly—lost 37 of those seats in the elections as Tomin First, the party of Tokyo Governor Yuriko Koike, won 49 seats. Koike has said she favors a casino in her city, but hasn’t made them a priority, according to Bloomberg News.
But the confusing stance of the governor makes is unlikely that Tokyo will be chosen as an IR site, particularly given the aggressive moves made by Osaka and Yokohama is their efforts to gain IRs.
“We think Tokyo is less likely to receive a license because of an unclear government stance, the (2020 Summer) Olympics, and site location challenges, as well as the city not needing an economic boost relative to Osaka,” said Morningstar analysts Dan Wasiolek, Chelsey Tam and Daniel Ragonese in a report. The reports handicaps Las Vegas Sands and MGM Resorts as the favorites to obtain the licenses.
The Tokyo loss was much more than a local issues, however.
In a post-election note from brokerage Union Gaming Securities Asia Ltd., analyst Grant Govertsen wrote, “We believe the Tokyo defeat for the LDP, and by implication a weaker outlook for the LDP nationally, will make it incrementally tougher for Prime Minister Abe to push through his agenda, including the very contentious IR issue.”
That viewpoint has historical precedent, according to the Japan Times, “The outcome of the Tokyo assembly election often sways the direction of national politics,” the publication reported. “The LDP’s historic fall from power in August 2009, for example, was preceded by the Tokyo chapter’s crushing defeat in the assembly election” less than two months earlier.
In the meantime, casino operators looking to develop one of the first integrated resorts in Japan have begun to question the IR Implementation Bill, which had been expected to be introduced in August or September.
At a meeting of the Japan Tourism Research Association in Tokyo last month, experts suggested that lawmakers who are creating the bill—and the eight-member Experts’ Committee advising them—are hindered by inexperience.
Jane Tsai, CEO of gaming consultant JCT Holdings, told the Asia Gaming Brief, “In order for Japan’s IRs to be successful, it is imperative that the Japanese central government engage experts with tangible IR and gaming operating experience, not just those who have studied integrated resorts from afar. There is a commercially untenable gap developing between the government’s academic theory and practical operational reality.”
That view was echoed by Daniel Cheng, senior vice-president of Asian business development for Hard Rock International. “While the national government has so far come up with an admirable process, there is very little industry consultation,” he said.
Despite built-in drawbacks, Tsai said Japan has a “unique opportunity” to develop “eSports and skill-based gaming technology” and possibly reinvent the gaming model around the world. But for that to happen, she said, there must be a “commercially smart framework” in place.
Global operators lining up for a piece of the action include the Las Vegas Sands Corp.—seen as a frontrunner—Wynn Resorts, Melco International, MGM Resorts, Hard Rock International and Galaxy Entertainment Group, among others. In their sights is a gaming industry that could be second only to Macau, and possibly pull in more than $25 billion per year.
In its planning, the Secretariat is reportedly discussing three forms of tax levy: a tax on gross gaming revenue; fixed dues for casino licenses; and “variable dues to cover costs such as background checks on would-be industry participants,” reported GGRAsia. Money raised from a GGR tax is likely to be split between the central and local governments, the news outlet reported. A percentage also would likely be earmarked to address problem gambling, a pervasive concern among the public.
Now it remains to be seen if the government can push through the implementation legislation this year. Govertsen believes a consensus would be “tough over a short time frame.”
Cities most likely to get an IR include Tokyo, Osaka and Yokohama. AGB reports that the Tomakomai city government on the northern island of Hokkaido also wants in, along with two other local governments: Kushiro city and Rusutsu village.
In the short term, the election upheaval could benefit Japan’s multibillion-dollar pachinko industry, Govertsen observed. “In the now-more-likely event that the IR bill doesn’t come to fruition this year (and possibly next year too) due to the LDP’s political fortunes, we would view this as a positive for the pachinko industry as it could result in a regulatory reprieve,” he said.
In related news, an LDP lawmaker told Bloomberg it’s important to make sure that access to casinos does not become “extremely restricted.”
“These will be leisure and entertainment facilities, so they must be friendly to customers and we mustn’t go too far,” said Takeshi Iwaya, who recommended that passports and driver’s licenses serve as ID for potential customers. Japan’s official identification system, called “MyNumber,” has proven unpopular so far, with just 9 percent of residents using them as of May.
It will be important not to make entry too hard for locals, said Tsai. She noted that up to 80 percent of customers for Japanese IRs could be the Japanese themselves.
