Tokyo Dealer Likes Odds as Abe Embraces Plan for Casinos

For trainee dealer Taichi Yahagi, the odds of making a better living turning cards at a baccarat table in Tokyo are looking up.

The 41-year-old tutor paid about $5,000 for a three-month course at the Japan Casino School, betting Prime Minister Shinzo Abe will succeed in his push to allow gaming houses to be built in time for the 2020 Tokyo Olympic Games. Discussions on the bill to legalize casinos started last week, with debate to resume in the parliament’s next session this year.

“I probably wouldn’t have enrolled in the casino school unless the Olympics were coming,” said Yahagi, whose work teaching kids has dwindled given Japan’s low birth rate. “We need foreigners to visit for the Games and spend money at casinos. Otherwise, Japan’s economy won’t pick up at all.”

Foreign investors view the debate as a litmus test for Abe’s ability to revitalize the economy, and successful passage of the bill would boost the equity market, according to Mizuho Securities Co. Japanese gaming stocks have rebounded after pricing in the measure’s failure to progress to a vote in the session ended on June 22. Anti-gambling groups say Japan’s obsession with pachinko parlors and horse races causes enough trouble already.

Just getting to the floor of the parliament is a breakthrough in the decade-long effort to legalize table gaming, with the bill on course for passage by year-end, says Takeshi Iwaya, a lawmaker from the Liberal Democratic Party. The measure would set the legal framework for casino resorts. A subsequent law detailing rules of operation would also need approval.

Gaming Stocks

Sega Sammy Holdings Inc., 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 has rebounded 16 percent after falling to a 15-month low on May 19 amid concern the legislation had stalled.

Konami Corp. rose 2.1 percent on June 17, while Japan Cash Machine Co. surged 8.4 percent. The benchmark Topix index, the worst performer this year among the 24 developed markets tracked by Bloomberg, added 0.3 percent that day.

The jobs, revenue and taxes generated by betting houses elsewhere in Asia show what’s at stake for Abe. Macau casinos generated $45 billion in revenue last year, seven times that of the Las Vegas Strip, according to data compiled by Bloomberg. Singapore’s Marina Bay Sands, operated by Las Vegas Sands Corp., and Genting Singapore Plc’s Resorts World Sentosa directly employ 22,000 people, trade ministry figures show.

“Integrated resorts will be a key feature in our growth strategy and consideration should proceed from the standpoint of how to best draw visitors from across the world,” said Abe, 59, after visiting Singapore’s gaming venues on May 30, according to a Kyodo News report.

Japan IPOs

Abe is seeking to triple the number of tourists visiting Japan each year to more than 30 million by 2030. Foreign arrivals reached a record 10.4 million in 2013 as a weaker yen made visits cheaper, according to Japan National Tourism Organization.

Japan’s casino market could be worth as much as $40 billion, according to CLSA Ltd., a Hong Kong-based brokerage. MGM Resorts International and Las Vegas Sands Corp. said in February they would invest as much as $10 billion each. MGM and Wynn Resorts Ltd. said last month they may even list shares in Japan to raise their profile.

Casinos could be ready before the Olympics if the momentum is maintained, according to Eiji Kinouchi, a senior strategist at Daiwa Securities Co. in Tokyo.

“We have six more years,” Koichi Hagiuda, a lawmaker from the ruling Liberal Democratic Party, said in parliament on June 18. “We should make efforts to make it happen in time.”

Hidden Costs

Previous efforts to build casinos failed because the industry is commonly associated with social ills, said Kazuaki Sasaki, assistant professor at Nihon University College of Economics in Tokyo.

“Many studies on casinos’ ties with organized crime and gambling addiction will now be conducted,” Sasaki said. “Only research can quell the opposition.”

About one in 10 adult males is addicted to gambling in Japan, where betting on horses, cycling and boating is legal, according to a 2008 study funded by the health ministry.

Pachinko, Japan’s version of pinball, pushes the addiction rate higher than other nations, the study said. The industry had 19 trillion yen ($186 billion) in revenue in 2012, according to the most recent data from the Japan Productivity Center.

The consequences of legalization will cost taxpayers, said Kiyohito Wada, an attorney and member of the Japan Federation of Bar Associations that issued a statement against the bill last month.

Company Plans

“Supporters tend to separate the social costs, but when you take them into account, they will be huge,” Wada said.

Japanese companies are cheering Abe on. Sega Sammy is trying to build a casino in South Korea and said it’s interested in doing so in Japan. Konami, a maker of pachinko machines, has plans to set up a casino subsidiary. Also poised to benefit is Japan Cash Machine, a company that manufactures coin-counting terminals used in casinos and arcades.

Besides lifting gaming stocks, legalization will have a broader market impact by boosting sentiment among foreign investors, said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.

Yahagi is learning English phrases such as “banker wins” and getting to grips with baccarat, the game favored by superspy James Bond. Now he just needs Abe’s bet to pay off.

“We’ve got to start building casinos soon, or we won’t make it in time for the Olympics,” he said.

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