Japanese Prime Minister Shinzo Abe said his ruling party will seek to pass a law in the next session of parliament to legalize casinos as part of a plan to boost tourism before the Tokyo Olympics in 2020.
“Integrated resorts are expected to provide a great contribution to tourism, regional economies and industry, I think, and can be one of the key elements of Japan’s growth strategy,” Abe, 59, said in an interview yesterday at his official residence in Tokyo.
Now 18 months into his term in office, Abe has fired two of what he calls the three arrows of Abenomics -- fiscal stimulus and unprecedented monetary easing -- in a bid to banish deflation from the world’s third-largest economy. The early euphoria that saw stocks surge 51 percent as the yen plummeted last year has been tempered by a sales-tax increase in April that is forecast to result in an economic contraction this quarter.
Allowing casinos to operate in Japan within integrated resorts is a key part of Abe’s updated growth strategy -- the third arrow -- approved yesterday by the cabinet. The plan includes starting to cut the corporate tax rate in the fiscal year beginning in April. Las Vegas Sands Corp. (LVS) and MGM Resorts International are among those considering investing billions of dollars in what could become Asia’s second-largest casino market after Macau.
Tokyo’s selection to host the Olympic Games has boosted expectations that gambling resorts, under discussion for a decade, will be allowed. Japan’s parliament started debate last week on a bill to legalize casinos, paving the way for its passage before the end of the year.
“The likelihood of passing the bill in the next session is extremely high,” Eiji Kinouchi, a senior strategist at Daiwa Securities Co., said by phone. Casinos “will have a great impact on tourism and Japan’s economy as a whole.”
Debate will resume in the next parliamentary session in the autumn on the bill that was submitted last December by a cross-party group of lawmakers that included members of the ruling Liberal Democratic Party.
“I hope in my capacity as leader of the LDP that we can aim to pass it in the next extraordinary session of the Diet,” Abe said in the interview.
The casino initiative is designed to bolster momentum for a tourism industry that’s already an increasing source of growth for Japan. Japan is poised for a record number of foreign visitors in 2014, attracted by a weaker yen and the easing of visa rules. Spending by incoming tourists exceeded outlays by Japanese going abroad in April, the first time in 44 years.
While the casino measure may aid the nation’s tourist receipts, economists have refrained from boosting growth estimates on the basis of the step. The International Monetary Fund projects less than 1 percent GDP gains each year from 2015 through 2017, with an estimate of 1.125 percent for 2019 -- an expansion less than the pace it recorded in the half-decade before the 2008 global credit meltdown.
Casino-related stocks such as Sega Sammy Holdings Inc. (6460), Konami Corp., and Japan Cash Machine Co. (6418) stand to benefit from the potential legalization. Sega Sammy and Konami have expressed interest in operating casinos in Japan while Japan Cash Machine Co. manufactures coin-counting terminals used in casinos and arcades.
Sega Sammy, a maker of gaming machines, jumped 2.6 percent on June 17 when lawmakers said they’d begin discussing the bill. The Tokyo-based company fell 1.3 percent today as of the close in Tokyo trading. The shares have rebounded about 14 percent since falling to its lowest level in nearly 15 months on May 19 amid concern the legislation had stalled.
Konami Corp. (9766) rose 0.7 percent, while Japan Cash Machine, which surged 8.4 percent on June 17, fell 0.2 percent. The benchmark Topix index dropped 0.6 percent.
Abe’s coalition has a majority in both houses of the Diet, although its junior partner New Komeito is divided on the issue. Economy Minister Akira Amari said last week that allaying concerns about the potential effects of casinos on society would be an important part of the debate.
Abe visited Singapore’s gambling venues last month, where he saw that gaming has achieved great success, he said. Japan would have to consider policies to prevent crime and gambling dependency, as Singapore has done, he said.
Lotteries and pachinko, which is similar to pinball, are legal in Japan, as is betting on horse, boat and bicycle races.
Japan’s gambling resort market could be worth as much as $40 billion a year as early as 2025, making it Asia’s largest after Macau, according to estimates from CLSA Ltd, a Hong Kong-based brokerage.
International casino operators including MGM Resorts and Wynn Resorts Ltd. (WYNN) have said they would spend billions of dollars to build casinos in Japan.