Japanese Casinos: The Untapped Gold Mine

In recent months, there’s been a shift in Japanese politics and Prime Minister Shinzo Abe’s Integrated Resorts Implementation Bill is all but finalised. While the process began in 2016, the last two years have seen heated discussions over the legal requirements for an Integrated Resort as regards the casino space, before finally deciding on a maximum of 3% of the total gross floor area and an entry tax for Japanese residents in an effort to address problem gambling concerns.

Japan has a long history with gambling, the legal forms before now being pachinko and betting on events such as horse and boat-racing, but this is the first time that casino betting has seen legalisation. Before the current legislation, even playing casino games apps from Betfair would be in dicey legal territory. But there are some who fear that casinos could lead to an increase in problem gambling. However, the government has taken comprehensive steps to pursue a Singapore-style model that is intended to prevent both this and organised crime from taking a hold of the industry. Despite the potential perils, the projected benefits are so numerous that the government is marching ahead with the goal of boosting Japan’s economy.

Projected revenue

Research from the Daiwa Institute (a Japanese research company and think tank) predicts that the construction of three integrated resorts could see an economic impact of ¥5 trillion for the first year, followed by ¥2 trillion every year afterwards. The foreign investment in constructing the resorts is one of the main elements promising a rosy economic outlook as well as Japan’s growing tourism industry. Last year, Japan drew a record 28.6 million foreign tourists, all of which would be able to gamble at the integrated resorts without an entrance fee.

It’s expected that by 2020 the number of visitors will be 40 million when Japan hosts the Olympics. Although the first resorts won’t be opening until 2023 at the earliest, the plan is to continue the momentum of foreign visitors with the appeal of these resorts helping to reach Japan’s target of 60 million tourists by 2030. If these projections hold, the total profits from the resorts to Japan’s economy could be even greater. However, they will require extensive investment from foreign and local companies to reach this target. Luckily for Prime Minister Abe these are in plentiful supply.

Foreign investors

There are numerous companies all eager to invest in the three potential integrated resort licenses on offer, each offering significant financial incentives to the Japanese government with the goal of entering the crowded operating space. One of the front runners is the Las Vegas Sands Corporation according to the Founder and CEO, Sheldon Adelson, who has been prominently involved in the region for years prior to now. In his own words, “I’ve got a good background and reputation in Japan for being the leading MICE (meetings, incentives, conventions, exhibitions) integrated resort developer” which comes from his previous work with Comdex and Makuhari Messe.

MGM is another prominent company with an eye on Japan, CEO Jim Murren has stated that he appreciated the processes the Japanese Diet went through when approving the legislation and has been keen to see resorts opened outside the established Tokyo area. His prime choice is Osaka, due to its proximity to Kansai international airport and Kobe airport which would make it an ideal choice for tourism. He’s even been quoted as being willing to invest up to $10 billion, a figure that Adelson also thought worth the investment.

Lawrence Ho, the chairman of Melco Resorts and son of the legendary Stanley Ho, was willing to sell his personal stake and resign as the chairman of Summit Assent if it meant he would have an easier time moving into the Japanese casino scene. He’s been quoted as saying “Even though I like the Russian market… nothing is worth jeopardising Japan.”

This rush to invest looks promising, with plenty of companies keen to get in on the action, not just from the international market but domestically as well. One of the most prominent is Sega Sammy Holdings Inc, a slot machine manufacturer that controls 45% of a South Korean resort and is seeking a majority stake in any Japanese developments. With so many interested investors, wherever the new integrated resort is placed, you can expect heavy investment from businesses. Which is probably why so many regions are competing for a license.

Where will these resorts be?

One of the key elements of the Integrated Resorts Bill is the effort being given to expand tourism beyond the traditional areas of Tokyo and Kyoto which has led to bids from Hokkaido, Osaka, Okinawa and other major centres which (until now) have not had the same draw for tourists. Of these, Osaka has been the most enthusiastic about the prospect of integrated resorts with the goal of building such a resort on Yumeshima, an artificial island in Osaka Bay which will enable them to keep the resort separate from the main area of Osaka.

The expected benefits of the integrated resorts plan for Osaka, or any other region that wins a bid is considerable, as the government is taxing casino revenue at 30% with half of the tax going to local governments and municipalities ensuring that wherever they’re constructed the area is likely to receive a significant economic boost.

What do you think about Japan’s casino plan? Do you think the integrated resorts are just what their economy needs? Let us know in the comments below.