Often inscrutable Japan has taken the mystery out of the casino question for this year’s legislative session. Last month, the ruling Liberal Democratic Party (LDP) declared the Integrated Resorts Promotion bill will not be introduced during the current sitting of the Diet. That makes the already remote possibility of integrated resorts in Japan in time for the 2020 Olympic Games in Tokyo a near impossibility. Conditions are actually quite favorable for Japan to introduce casinos, except in Japan’s political crucible.
Domestically, Japan is again on the brink of a recession, amid a quarter century of economic stagnation. Regionally, the timing for casinos in Japan may never be better. IR fever appears to have faded in South Korea, which would be a major competitor to Japan for markets in northern China and the rest of Asia. In Taiwan, last month’s victory of the Democratic Progressive Party, an opponent of deepening ties to mainland China that Beijing views suspiciously for its support of the island’s independence, seems to derail another nearby potential Japan rival; Beijing previously declared it wouldn’t allow Chinese citizens to enter Taiwan to gamble and is now less likely to reverse itself. Declining in VIP play in Macau and rising Chinese middle class tourism – with Japan a favored destination – makes Japan’s domestic market and regional destination potential all the more attractive. But within Japan the stalemate remains, despite the boost IRs would bring to an economy that shrank 1.4% in the fourth quarter of last year.
“It would appear that Japan has missed the boat when it comes to casino gaming,” Spectrum Asia CEO Paul Bromberg says. “Other political and economic issues have taken precedence. Legalizing gaming is not a major issue domestically, and there are more pressing matters currently facing the government."
As casinos in Japan have receded from a virtual inevitability toward their longstanding place as a vivid but remote vision of sugar plums dancing the heads of casino operators over the past two years, Japan’s domestic politics and more pressing government priorities have torpedoed Prime Minister Shinzo Abe’s integrated resorts ambitions. LDP’s Buddhist based governing partner Komeito remains opposed to casinos, making legislative passage difficult.
This Diet session also has the shadow of upper house elections in midyear hanging over it. CLSA Japan analyst Jay Defibaugh says the casino issue remains a political “hot potato” that no party wants to touch ahead of voting. LDP says the IR bill could be introduced in an extraordinary session of the Diet likely in the fall, and Defibaugh says it’s unlikely but possible that LDP could win enough seats to pass it without Komeito’s votes. But Japan’s casino tale is full of good things that could happen, but don’t. IR legislation will be a private member bill, and government agencies’ bills always have precedence, Defibaugh explains. For example, in 2014, when IR bill passage seemed inevitable, Japan’s nation security agency’s needs took priority. The resulting delay let the intricate political coalitions favoring the bill unravel, and prospects have dwindled since.
Integrated resorts in Japan are likely to follow the Singapore model, with capital investment of up to US$10 billion, non-gaming attractions such as museums and an entry fee for domestic players. A survey last year by communications giant Dentsu found the more Tokyo residents learn about IRs, their economic benefits and range of facilities, the more accepting they are of them. Earlier surveys have shown similar results, indicating that a public education campaign could make casino legalization less of an electoral hot potato, perhaps even create a constituency for IRs. But casino supporters in and out of government haven’t acted on these findings.
“The developers and operators that were interested are still interested, but losing patience,” The Innovation Group senior vice president David Rittvo says. Innovation helped conduct a study of practices in other jurisdictions last year for Japan’s government. He estimates that the Japan gaming market could be worth US$30 billion to as much as US$60 billion, with a domestic market of 127 million people with per capital GDP five times that of China as its backbone.
A CLSA study in 2014 estimated the Japan market at $40 billion, with a dozen IRs including megaprojects in Tokyo and Osaka and smaller properties in regional centers and vacation destinations. Defibaugh acknowledges, “A sense of disappointment pervades among those with an interest in casino legislation in Japan. But I would not go so far as to say that operators, for example, are throwing in the towel. The market opportunity is too large to abandon, and those that know Japan are unsurprised by occasional setbacks. People are playing the long game.” Even in the longest game, though, the clock does run out.
