Japan could generate $40bn gross gaming revenue

It isn’t surprising when new studies predict that Japan could quickly surpass Singapore to become the world’s second largest gambling destination, behind Macau. The Pachinko industry alone already generates approximately $30bn in annual revenues.
A hot topic in the industry, a number of Japanese stakeholders descended on ICE London last month to discuss how a legalised sector should materialise. Regulators have been observing Singapore’s stringent model as a basis to rollout casino gaming in a controlled environment. Passage of a bill is slowly working its way through parliament, which proponents hope will pass by 2016, enabling the first resorts to be open and ready in time for the 2020 Tokyo Olympics.
“Japan has been looking at the example of Singapore very closely,” remarked Andy Hurfurt, head of Tokyo-based investment consultants CBRE, “where the experiment of casinos seems to have been positive to date, and these plans dovetail very neatly with measures the ruling Liberal Democratic Party has implemented for growth. This would be additional stimulus without large spending and would mesh with the aim of increasing inbound tourist numbers.”
Japan has set a target of 20 million visitors a year by 2020 and integrated casino resorts would provide another tourist attraction. The Tokyo Olympics has sped up the process, with the aim that new casinos, hotels, entertainment destinations and infrastructure are ready in time for the games. A new source of tax revenue would certainty help fund the games too; while the London Olympics cost approximately US$ 14.6bn, the Beijing Olympics cost almost US$ 45bn and the recent 2014 Sochi Winter Olympics ran up costs of more than US$ 50bn.
Major casino operators keen to invest in Japan, including Singapore’s two operators Las Vegas Sands and Genting, have indicated that Tokyo and Osaka are their primary targets. “We are interested in both locations. They are ideal settings for what we do,” commented George Tanasijevich, Marina Bay Sands (Las Vegas Sands) President. “These are the locations you can drive that kind of business tourism into and are known as commercial and financial hubs.”
Independent brokerage CLSA Asia-Pacific Markets projects that two casinos in Tokyo and Osaka, and ten casinos in smaller Japanese cities, could generate $40 billion gaming revenues annually. It would propel the nation to become the world’s second-largest gambling destination in terms of revenue after Macau, which analysts forecast to produce in the region of $50 billion this year.

Second bill
A group of lawmakers from three significant political parties submitted a promotional bill to the Diet, Japan’s bicameral legislature, in December. The influential consortium expects the bill will be debated in the coming months and if it passes, concrete measures would be developed into a second bill. Proponents hope this two-tier legislation process would legalise casinos in 2016.
The bill itself contains a plethora of proposals with recommendations to lift the outright casino ban and issue a limited number of licenses. Two types of licenses are being advised, one for large integrated resorts run by global operators in major cities such as Tokyo and Osaka, and the other, for more compact gaming venues in regional cities.
While there have been similar moves to lift the casino ban in the past, none have ever gained so much traction since the new political stability grounded by Prime Minister Shinzo Abe. The huge public debt figure running at 214 percent of GDP is the highest in the world and something casino tax revenue could help alleviate. Various analysts suggest the initial proposal merely scratches the surface of the potential gaming revenue in Japan, with a huge market sitting next door in China.
Largely backed by political and business leaders, casino legislation is all but signed – however, not everyone is on board. Concerns revolve around the young and vulnerable gaining access to casinos in such a gambling-rich culture, as well as potential competitive impact on existing operations, such as pachinko halls and the national lottery. Fears also speculate a large revenue stream would create a new target for the Yakuza and organised crime to besmirch the industry.
As the casino debate advances in the nation, which holds the world’s tenth-largest population, surrounding markets are fighting for the rising middle-class tourist market in neighbouring China. Gaming liberalisation and developments in South Korea may occur sooner than in Japan; the Philippines gaming market will continue to ramp up materially over the next few years; Australia and Russia are planning major developments; not to mention Macau, with the next phase development of the Cotai Strip set to open over the next few years