July 25 (Bloomberg) -- Japan's ruling party is holding talks with global gaming companies including Las Vegas Sands Corp. and Harrah's Entertainment Inc. to operate the nation's first casinos after 2010.

The government may initially issue two or three casino licenses for gaming resorts that would each cost ``slightly less'' than Las Vegas Sands' $3 billion investment in Singapore, said Toru Mihara, adviser to the governing Liberal Democratic Party's casino study group.

``They are definitely interested and serious about coming to Japan,'' Mihara said in an interview in Singapore yesterday. ``They all agree that Japan will be one of the most lucrative casino locations in the world, with so many ordinary people spending lots of money.''

The nation of 128 million is looking to lift its ban on casinos to increase tourist arrivals and revive its gaming industry as the more traditional horse-racing and lotteries are suffering declines in revenue, and its pachinko industry is stagnating, he said. Japan drew 6.7 million visitors in 2005, lower than Singapore's 8.3 million, Macau's 18.7 million and less than a third of the 23.4 million to Hong Kong last year.

Revenue from Japan's pachinko parlors, which run a form of gaming where players win trinkets that can be exchanged at a window next door for cash, has fallen to 29.5 trillion yen ($253 billion) last year from 30.9 trillion in 1995, according to Japan's Productivity Center for Socio-Economic Development.

Next Target

Japan's gross domestic product per capita of $39,195 is the highest in Asia and exceeds the $36,790 in the U.S, according to Bloomberg data. This may make it the next target of global casino operators after Macau and Singapore as they increase their bets on Asia's growing gaming market, fueled by low-cost airlines and rising incomes.

Macau's gaming revenue increased 11 percent to $5.6 billion last year, compared with a 44 percent jump in 2004 that was largely due to the opening of the Sands Macao, the city's first Las Vegas-style casino. This came after billionaire Stanley Ho lost his 40-year gaming monopoly in 2002. The former Portuguese colony, the only place in China where casinos are legal, is forecast to overtake Las Vegas as the world's biggest gambling market this year.

Harrah's and Las Vegas Sands, among the world's three biggest casino companies, said Japan is a market they're interested in, without commenting specifically on whether they have been in talks with officials in the country.

`Terrific Market'

Las Vegas Sands, which was awarded Singapore's first casino license two months ago, ``will continue to evaluate and pursue any opportunity, including Japan, which is in line with our business objectives,'' spokesman Ron Reese said in an e-mail.

``We believe that if and when legalized, casino gaming in Japan would be very successful,'' Michael Chen, president of Asia Pacific for Harrah's, said in an e-mailed statement. ``It has all the characteristics necessary for a terrific market -- responsible government, large population, and broad wealth.''

Potential operators had Tokyo as their first choice, Mihara said. Possible locations include harbor areas in Tokyo, and vacant land near Osaka's Universal Studios. Resort areas such as Hokkaido and Okinawa may be considered as well, he said.

Tokyo Governor Shintaro Ishihara has been a proponent of casinos, calling for one to be built as part of an entertainment revitalization project in the Odaiba waterfront district. Other legalized forms of gambling in Japan include betting on motorboat and motorcycle racing.

`Level of Consensus'

Japan's legislative process may be an obstacle as detailed debates take at least a year, and the country has to come up with ways to cope with possible increases in crime linked to the casinos, Mihara said.

``We have achieved a certain level of consensus,'' said Mihara, who will present a draft to lawmakers in 2008 after ironing out the legal framework. ``By end-2007, the market will move, including potential investors.''

The Singapore government had asked for concept proposals from casino operators at the end of 2004 before lifting its ban in April last year. Two months ago, it awarded the first of its two casino licenses to Las Vegas Sands, the world's biggest gaming operator by market value. The second concession will be given later this year.

Mihara said tie-ups with local companies are possible, although he does not rule out 100 percent foreign operators. He expects tourists from within Japan to make up 80 percent of visitors to the casinos.

``Forget about the competition with Singapore and Macau. With Japan alone, it is a big market,'' he said. ``Add some VIPs from Asia, that alone makes sense.''

The ruling LDP in January created a subcommittee to study a legal structure and policy for casino entertainment. Six prefectures, including Tokyo and Osaka, petitioned the central government to lift a ban on casino gambling, said the Asahi newspaper in February.

To contact the reporter on this story: Huiwen Yang in Singapore Hyang10@bloomberg.net

Last Updated: July 25, 2006 02:09 EDT