Fitch: Japan Stimulus Supports Potential Gaming Liberalization

  Fitch: Japan Stimulus Supports Potential Gaming Liberalization

Business Wire

NEW YORK -- January 16, 2013

The emergency stimulus measures approved by the Japanese government on January
11 do not include specific reference to legalization of casino resorts, but
there is mention of promoting tourism, encouraging business investment, and
creating employment opportunities. Fitch Ratings continues to believe that
Japan gaming liberalization remains a good likelihood within the next several
years.

The potential for Japan casino legalization is important to monitor as it
could result in increased competitive risk to established markets and
operators in the region as well as development risk for potential gaming
license bidders.

The current ruling Liberal Democratic Party (LDP) supported legalization of
casino resorts when it was previously in power. The LDP set up research groups
to study the issue; in June 2006 it recommended a basic policy of developing
two or three casinos and in January 2007 it set up a subcommittee to study
legal structure. However, the LDP lost control of the upper house in the July
2007 election and then lost a majority of the House of Representatives in 2009
before regaining power in last month's election. LDP's coalition partner, New
Komeito Party, also appears to be in support of casinos.

Gaming expansion tends to be contagious, albeit lumpy in its trajectory.
Passage of gaming initiatives is fueled by multiple years of political
backing, competition from nearby markets that result in potential tax dollars
being siphoned to other jurisdictions, and increased social acceptance. Since
the LDP was last in power, the integrated resort model has been proven to be
largely successful in Singapore as a means of stimulating tourism and the
economy. Overall visitation to Singapore increased by 20.2% in 2010, the year
its two integrated resorts opened, and then 13.1% in 2011. Visitors to
Singapore from Japan in 2011 numbered 656,417, accounting for 5.0% of total
visitation, reflecting a 24.1% increase from 2010.

Additionally, we expect the Philippines and Vietnam gaming markets to ramp up
materially over the next few years, and South Korea and Taiwan have also been
considering gaming liberalization measures. As discussed in our 2013
Asia-Pacific gaming outlook, "Rising Regional Prosperity Underpins Growth," we
believe gaming proliferation in southeast Asia over the next decade may be
similar to the contagious growth of various markets in the U.S. over the past
20-25 years.

Companies that would likely be aggressive in pursuit of a Japan gaming license
include the U.S.-based multinational gaming companies, namely Las Vegas Sands
(rated 'BB+' with a Stable Rating Outlook by Fitch), Wynn Resorts (rated 'BB'
with a Stable Rating Outlook by Fitch) and MGM Resorts (rated 'B' with a
Positive Rating Outlook by Fitch). Other more domestic-oriented U.S. operators
such as Caesars Entertainment (rated 'CCC' with a Negative Rating Outlook by
Fitch) may also express interest, but its pursuit would be more financially
constrained and would likely require partners. Notable Asia-Pacific operators
that could be interested include Genting Berhad (rated 'A-' with a Stable
Rating Outlook by Fitch) through one of its subsidiaries.

Japan has long been touted as an attractive gaming market with a large,
relatively rich population base and close proximity to South Korea (which
restricts gaming by nationals) and northern provinces/cities of China,
including Beijing. As a result, the small South Korea gaming market would be
the most negatively affected market in the event of Japanese gaming
liberalization.

Macau, the regional hub for gaming, received over 1 million visitors from
Japan, Korea and Beijing year-to-date through November 2012. However, this
represents only 4% of total visitation, while 57% of Macau visitation comes
from nearby Hong Kong and the province of Guangdong. As a result, the impact
to Macau would be limited since Macau remains largely a day trip, local
market, but it would still be notable because Japanese casinos would likely
target and attract a broad southeast Asian and international visitor base.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article, which may include hyperlinks to
companies and current ratings, can be accessed at www.fitchratings.com. All
opinions expressed are those of Fitch Ratings.

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