Casino operators ready to stake money on Japan as ban is lifted
Global casino operators are vying to move into Japan’s potentially lucrative market after a ban was lifted by lawmakers in Tokyo, despite warnings over gambling addiction and the involvement of organised crime.
Japan’s parliament approved legislation in the early hours of Thursday allowing the construction of “integrated resorts” that will include casinos alongside hotels and entertainment facilities.
Despite withdrawing from Macao and moving to concentrate on his casino interests in Australia, James Packer’s Crown Resorts is reportedly one of several casino operators that see huge potential in establishing a presence in Japan, regarded as the industry’s “final frontier”.
Packer’s company, Crown Resorts, could find the prospect of operating in the world’s third-biggest economy more attractive following a crackdown on gambling in China and the arrests there of 18 Crown employees there for alleged “gambling crimes”.
But first Crown, which is 48% owned by Packer, and other foreign operators would have to convince Japanese authorities they are able to promote responsible gaming and integrate their casinos with the resorts’ hospitality business.
“Japanese authorities will be telling foreign operators what they need to do,” an industry source told the Guardian. “That means that to have a presence in Japan, they will have to play by Japanese rules.”
Melbourne-based Crown said on Thursday it had ditched a proposed spinoff of its international assets. It also agreed to sell half its stake in the joint-venture Melco Crown Entertainment for $1.6bn and use the proceeds to reduce debt, fund a special distribution and enable a share buyback.
Japan’s prime minister, Shinzo Abe, has long pushed for a lifting of the casino ban, arguing it will boost the economy with the arrival of wealthy tourists from mainland China – where gambling is banned – and other parts of Asia.
MPs passed the bill despite warnings from opposition politicians and mental health experts that casino construction could lead to a rise in gambling addiction and prove fertile ground for money laundering by the yakuza, Japan’s organised crime syndicates.
Tokyo, Yokohama and Osaka are among the cities jostling to be chosen as casino venues, while foreign operators have spent years lobbying Japanese authorities for access to a market that could generate huge profits.
Just three casinos could generate nearly US$10bn in net profit annually – equivalent to 0.2% of Japan’s GDP – according to the Daiwa Research Institute. The investment bank CLSA recently estimated the Japanese market could bring in gross revenues of US$30bn a year.
Billionaire casino operators such as Sheldon Adelson, head of Las Vegas Sands, and Steve Wynn of Wynn Resorts have visited or sent representatives to Japan to lobby for legalisation.
Crown is understood to have been in contact with Japanese local authorities in a bid to become part of the country’s first integrated resort consortiums. Crown’s Hong Kong-based chairman, Robert Rankin, has also shown a keen interest in Japanese moves to legalise casinos after more than a decade of public debate.
The first casinos will not be ready in time for the 2020 Olympics in Tokyo, however, as new legislation will be needed to decide the number and location of casino resorts, admission regulations and rates of taxation on gambling profits. They are expected to open in around 2022 at the earliest.
Despite its ban on casinos, Japan is a nation of keen gamblers: horse, speedboat and keirin bicycle racing together bring in the equivalent of tens of billions of dollars a year. Pachinko, a pinball-like game, occupies a legal grey area and has been in decline in recent years but still produced more than US$200bn in revenue last year, according to the Japan Productivity Centre.