How Japan's Bet on Asian Casino Boom May Play Out: QuickTake Q&ABy
Japan legalized casino gambling last year, but key questions remain unanswered. Where, how many casinos, and who’ll operate them will be decided after legislation is approved this year on rules for the new industry.
1. When will Japan get its first casinos?
Not before the 2020 Tokyo Olympics. Nomura Securities and CLSA Ltd. expect the casino doors to swing open in 2023. Osaka’s governor hopes to get a gambling resort that will open by 2024, the Japan Times reported.
2. How big of a deal is a casino industry to Japan?
We’re not talking a few blackjack tables and slot machines, but major integrated resorts (think luxury hotels, entertainment, conference venues, shopping). Such resorts can significantly boost jobs and tourism, as Singapore can attest; it opened its two casinos in 2010 and has become the world’s third-biggest gambling center after Macau and Las Vegas. Unlike Macau and Singapore, which rely on foreign bettors to fill their tables (especially Chinese), Japan has a large domestic population with high per-capita income.
3. What will this year’s legislation cover?
The government plans to pass laws that set out rules on operating the resorts, including taxation, entry fees for locals and restrictions aimed at combating gambling addiction. An expert panel will submit recommendations this summer, and is leaning toward banning ATMs from the premises and allowing non-resident foreigners to use credit cards to buy gaming chips. The committee also is considering subjecting anyone holding 5 percent or more of the business’s shares to background checks.
4. So how much gambling revenue can Japan expect?
Forecasts range from $5 billion a year to $25 billion. For perspective, Macau generated about $28 billion last year in gross gambling revenue. At the low end of the forecasts for Japan, Fitch Ratings expects between $5 billion and $10 billion in a scenario with two resorts. Nomura analyst Richard Huang sees about $10 billion if three resorts are approved. And CLSA estimates revenue may eventually reach $25 billion, based on two urban integrated resorts and 10 regional casinos.
5. Who’s angling for a place at the table?
The world’s major casino operators have all stepped forward. Las Vegas Sands Corp., Melco Resorts & Entertainment Ltd., Wynn Resorts Ltd. and MGM Resorts International announced plans to seek Japanese partners, based on their experience in Macau, Singapore, Las Vegas and beyond. Japanese companies including Sega Sammy Holdings Inc., Konami Holdings Corp., and Universal Entertainment Corp. -- makers of pachinko and slot machine equipment that have invested in casinos outside Japan -- stand to benefit as partners or co-operators.
6. How much will the casinos cost?
Whatever it takes, according to Melco’s Chief Executive Officer Lawrence Ho. MGM and Sands say they’re prepared to invest $10 billion each on integrated resorts. CLSA estimates capital expenditure for two urban integrated resorts at $8 billion each, with small regional casinos costing $2 billion apiece.
7. The most likely locations?
Osaka, Yokohama and Tokyo are prime candidates because of their status as mega-cities. CLSA sees a first phase including Tokyo and Osaka plus a regional resort. Some casino supporters point to the benefits of going beyond the biggest cities and bringing tourism and development to areas where it’s most needed. Hokkaido, Sendai, Naha, Nagasaki and Miyazaki have been mentioned as possible venues.
8. Why did it take so long to legalize casinos?
Japan already has well-established legal gambling in the form of horse, bicycle, boat and motorcycle races, along with the hugely popular pachinko that generates about $27 billion a year in revenue. Opponents have long argued that casinos foment gambling addiction (a major problem with pachinko) and stoke money laundering and organized crime.
The Reference Shelf
- A Global Market Advisors paper on Japan’s integrated resorts.
- Law firm White & Case offers an overview of the new casino law.
- Gaming revenues for Nevada and Las Vegas.