Japan’s Long and Bumpy Road to a Legalized Casino Industry

Even though Japan is one of the world’s most advanced countries, it has been trying to overcome a number of financial difficulties for quite some time now. Not long ago, it was warned by the International Monetary Fund that its national debt will reach three times the size of its economy by the end of 2030. According to the IMF, the country’s debt currently represents 245% of its annual gross domestic product or ¥1 quadrillion ($11 trillion). This is why it has been looking for ways to cope with its economic situation.

Legalized Gambling Activities in the Country

Japan is probably the only developed country where casino industry is illegal. However, gambling is not completely prohibited there. People can place their bets on activities classified by the government as public sports. Bicycle, motorcycle, motorboat, and horse racing are among those public sports. According to official reports, they generated more than ¥4.3 trillion back in 2010.

Pachinko is yet another gambling activity that has been legalized in Japan. Generally speaking, it is a pinball-like game featured on special machines. It could easily be compared to the slot machines that are particularly popular in the Western part of the world. Gambling officials have found it difficult to say how much precisely pachinko machines generate annually. Yet, they have posted figures of between ¥20 trillion and ¥30 trillion over the past several years.

People with knowledge of the matter have commented that the success that pachinko enjoys might be indicative of the fact that casinos may also prove to be quite profitable and may generate considerable revenue for the country.

First Talks on the Matter

Discussions over the potential launch of casinos in Japan first started in 2002. However, the political environment in the country was not favorable enough for bills authorizing the industry to be considered and eventually passed into law. During the ten-year period from 2002 to 2012, Japan switched a total of 7 governments, which imminently had quite negative effects on the country in general as well as on its economy, residents, etc.

In December 2012, Shinzō Abe was elected Prime Minister of Japan and has been taking this position since then. Soon after his election, he introduced a package of measures known as Abenomics. Prime Minister Abe promised that he would do his best to secure the country with sustained economic growth, increasing public consumption, etc.

And it could be said that it was him who revived the talks about the legalization of casinos in Japan. In March 2013, Prime Minister Abe said he believed that the launch of gambling venues of this kind would be good for the country. In addition, members of the Liberal Democratic Party, headed by Mr. Abe himself, announced that a bill would be submitted to the Diet (the Japanese Parliament). If it was signed into law, it would mark the beginning of a multi-step and multi-year process that would eventually result in the establishment of casinos across the country.

Here it is important to note that in 2013, it was announced that Japan and Tokyo, to be more precise, would host the 2020 Summer Olympic Games. This means that the country is expected to welcome millions of tourists during the Olympics. This is why certain legislators, Prime Minister Abe included, saw in this the perfect opportunity to try to bring the casino matter to consideration. They pointed out that tourism would be further boosted if foreign visitors are able to place their bets at luxury gambling venues that feature a wide selection of gaming options. This, in turn, would bring the long-awaited economic growth.

Promotional Integrated Resorts Bill First Submission

The bill that would start the long process of establishing casinos in Japan was first submitted to the Diet towards the end of November 2013. The proposal was sponsored by the ruling Liberal Democratic Party, the Japan Restoration Party, as well as a number of other influential groups. The Komeito, a junior partner in Prime Minister Abe’s coalition government, said that it supported the submission of the bill. However, back then, party members did not reveal whether they would vote in favor of the construction of large casino complexes or integrated resorts, as they are referred to in the proposed legislation. Later on, it became clear that the Komeito was not particularly keen on the legalization of casinos in Japan. In fact, the group has turned into one of the most vocal opponents of the bill.

Generally speaking, if approved, the proposed legislation would start a long, multi-step process that would eventually lead to the opening of casinos. This first bill was called by locals “a bill to study legalizing casinos” or a Promotional Integrated Resorts Bill. Its passage would require the introduction of another legislation, which would have to contain information about the cities that would host the integrated resorts. The second bill would also have to set the terms and regulations, under which the properties would be run.

When introduced in November 2013, the first bill was expected to be voted on and passed by the end of the Diet’s next session, which started in January 2014 and ran through the end of June. However, this proved to be quite difficult. Members of the Japanese lower legislative house could not put the matter on their agenda, as they had other issues to discuss over that particular legislative session. If not passed by the lower house, the proposal could not advance to the upper house.

Back in 2013, the bill’s proponents announced that Tokyo and Osaka were to be the first Japanese cities to host integrated resorts. However, earlier this year, it became clear that Osaka and Yokohama are the likely candidates for casino hosts. City officials revealed that they have been reviewing both the positive and negative sides of having such developments in their cities.

First discussions over the proposed bill eventually started towards the end of June 2014. However, legislators were to vote on it during the Diet’s special session, which was scheduled to start late in September 2014 and to end in November. Proponents of the bill hoped that the bill would be enacted by the end of the year as they wanted the first casino to open doors for visitors before the beginning of the 2020 Summer Olympics.

Backers also claimed that they would probably gain enough support for their proposal to be passed. After all, it was sponsored by the ruling Liberal Democratic Party and Prime Minister Abe himself, who saw casinos as an opportunity to spur economic growth. A number of other groups also supported the establishment of integrated resorts in the country. In order to be passed, the bill would have to be voted in favor of by the majority of both lower and upper house representatives. In addition, it could not be advanced to the upper house without being approved by the lower one first.

It is important to note that the bill also faced some strong opposition among legislators, analysts, and important institutions such as the country’s police. As mentioned above, the Komeito, a political party, which is part of Prime Minister Abe’s ruling coalition, was and still is one of the most active opponents of the casino industry legalization. Legislators, experts, and even residents of the country feared that the establishment of integrated resorts featuring casinos would result in surging crime rate as well as different other social ills.

Opponents were particularly concerned about the possible increase in the number of people with problem gambling behavior. Critics claimed that gambling addiction has already been serious problem due to the success of pachinko machines. According to them, the opening of fully-fledged gambling venues would make the current situation even worse.

Some proposed residents of the country to be banned from entering the new casinos. However, experts claimed that if the venues eventually open doors, about 80% of their visitors would be Japanese, unlike other Asian gambling countries where casino players are mostly coming from other locations.

Once the 2014 special Diet session kicked off in September, proponents of the bill were determined to have it passed by the end of the year in order to be able to start discussing the next bill – the so-called Implementation Integrated Resorts Bill. As already mentioned, legislators intended to have the first casino resort open before the beginning of the 2020 Summer Olympics.

As one could suggest, the bill did not make it in the special fall session as well. Legislators started discussing the Promotional Bill in November, but then postponed its consideration indefinitely. According to sources involved directly in the process, this turn of events was due to Prime Minister Abe’s administration being hit by a number of scandals as well as the lack of enough political support for the proposal.

Back then, there were even rumors that the bill might not be brought up for discussion in 2015, as new and quite important issues, such as security and defense, were to be discussed during the new Diet session, which was set to start in January 2015. Legislators were expected to re-submit the bill by March 31, when the fiscal year was set to end. Its submission, however, was once again delayed.

Promotional Integrated Resorts Bill Re-submission

Eventually, the proposed legislation was re-submitted towards the end of April. According to local media, this time it was backed by members of Prime Minister Abe’s Liberal Democratic Party, the Party for Future Generations, and the Japan Innovation Party. Although the bill has not been voted on yet, CIMB Securities Ltd. analysts, who met a Japanese lawmaker in May, said that the person in question had revealed that it has a 70% chance to be passed during the extended Diet session. The cabinet was to be adjourned towards the end of June, but it is to consider important matters up until September 27.

Despite the silver lining, analysts reminded that the bill has been delayed too many times and its passage might be postponed once again. And even if the proposed legislation gets the much needed support, casinos might not open doors in Japan before 2022 or at least this is what the CIMB experts predicted. They added that the discussions over the second bill might take even longer. Furthermore, the tender and building processes are expected to take quite some time, as well. In other words, the country will almost certainly not have integrated casino resorts before the start of the 2020 Summer Olympics.

Over the past two and a half years since first talks on the potential opening of full-scale casinos emerged, some of the world’s most popular and profitable gambling operators have expressed interest in running the gaming properties. Las Vegas Sands Corp. and MGM Resorts International have been among the companies that hope for the Japanese casino market to be finally untapped.

If this happens, the country is expected to turn into one of Asia’s highest grossing gambling industries, second only to long-standing leader Macau. Asian brokerage firm CLSA estimated that the potential fully-fledged casinos in Japan could annually generate revenue of more than $40 billion.

Prime Minister Abe has previously pointed out that the Japanese gambling venues would probably not be Las Vegas-styled ones. They would rather resemble Marina Bay Sands and Resorts World Sentosa – Singapore’s two integrated resorts. Mr. Abe himself visited Singapore in May 2014 to meet representatives for Las Vegas Sands, the company that runs Marina Bay Sands. This was yet another proof that the Prime Minister was supportive of the launch of casinos in his country.

Earlier this year, the American Gaming Association (AGA), known to be a major US lobbying body, briefed in Washington D.C. members of the Japanese government on the benefits from untapping the country’s casino market. The meeting coincided with Prime Minister Abe’s visit to the United States.

Representatives for the AGA also held a roundtable discussion in Tokyo, which was attended by local journalists. During the two meetings, the lobbying body paid special attention to three main topics – casinos’ economic benefits, efforts towards the prevention of money laundering practices, and promotion of responsible gaming.

Conclusion

At this point, it is a bit hard to tell whether Japan will manage to launch its first casinos before the 2020 Summer Olympics or a bit later. On the other hand, legislators might eventually leave an industry that could contribute large amounts of money to the country’s coffers, create hundreds of thousands of direct and indirect jobs, and annually draw millions of international tourists untapped. What could be said with a degree of certainty is that the Japanese Diet has a long way to go before announcing its final decision.

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