ToCasino.net Online Casino

The debate over Japan’s effort to allow casinos is going public as operators including MGM Resorts International and Caesars Entertainment Corp. look for clarity in a potential $25 billion market.

Open hearings began on Thursday over recommended guidelines to govern major resorts in Japan that will feature everything from blackjack tables to entertainment. The government is currently weighing regulations that could impose curbs on the gaming industry as more than half of the country’s residents oppose casinos.

The proposed rules are tempering some of the earlier giddiness of investors and casino operators amid concern whether the guidelines will hamper the potential for growth. The companies are anxiously awaiting how legislators will shape the future for an untapped market with a wealthy population and proximity to China.

“Our common goal is to see the introduction of world-class integrated resorts in Japan that drive economic, tourism and employment growth," said Steven Tight, president of international development at Caesars Entertainment. “The government policy makers should ensure that the legislative framework doesn’t inadvertently hinder these aims."

The companies themselves have the opportunity to weigh in during the month-long public comment period, which began Thursday in Tokyo. The measures will be debated in September, and the resulting bill will be submitted to an extraordinary session of the Japanese parliament in the fall. Casinos aren’t expected to open for business until several years after the 2020 Tokyo Olympics.

The operators will be watching for government decisions on casino floor space, taxes and access for locals. The risk for the companies, some of which initially pledged to invest as much as $10 billion in Japan, is if the restrictions become too onerous, according to Seth Sulkin, the chair of a task force on integrated resorts with the American Chamber of Commerce in Japan.

“There’s just a lot of things the government could get so wrong that gaming companies will decide it’s not a worthy investment," said Sulkin.

To see more on how Japan’s bet on casinos may play out, click here.

One of the biggest challenges facing casino companies is public opinion. Casinos do not have wide public support, as residents associate gambling with organized crime and addiction. About two-thirds of Japanese were against the presence of a casino in their region, according to a survey conducted by news service Jiji in July. Those opposed cited disruption to public order and the negative influence on youth as top reasons.

"I don’t think there’s any need to establish a facility so dangerous that it needs this much regulation," Takeo Shibata, a professor at Seigakuin University in Tokyo, said at the hearing. "We can be a tourist destination without casinos and with a clean image that will be reassuring for visiting families." 

Compulsive gambling is already a problem with pachinko parlors and betting on races, both of which are allowed in Japan. A bill to address addiction is making its way through parliament. While the issue needs to be resolved before casinos can open their doors, ruling and opposition lawmakers have been locked in disagreement over it. 

Japan is considering other proposals that could have a significant impact on key determinants of gaming revenue. Among recommendations in a 130-page document released this month by a government panel:

• limits on the amount of casino space within the resort area
• a possible ban on ATMs in the casino
• tax rates, with a fixed fee and a proportion of gross gaming revenue
• limits on the number of times local residents can visit the casino
• registration system called “My Number" to be used as identification for locals and foreign residents

On top of that, the number of integrated resorts and how operators and localities will be picked for the resort has yet to be decided. Expectations are for two or three sites for the first round, with Osaka, Yokohama and Tokyo cited as likely locations.

Singapore has been cited by analysts as a possible model for Japan. The city state charges its citizens an entrance fee. It has two integrated resorts -- run by Las Vegas Sands and Genting Singapore Plc -- with each having one casino of 15,000 square meters. Some consider that space too small, as Singapore’s population of 5 million pales next to 38 million in a metropolis like Tokyo.

“It does strike me as being out of line with what the local market can take on," said Jay Defibaugh, an analyst at CLSA in Tokyo. “If you have a 15,000-square-meter casino space and a vibrant foreign visitor market and a local market, you could have people falling over themselves in the casino."

For many casino executives, it’s difficult to make decisions on resorts in Japan until the government addresses these issues.

The bureaucrats in Japan “have been evolving this gaming legislation very, very intensely," MGM Resorts Chief Executive James Murren said in an interview. “The opportunity in Japan is unclear at the moment.”

— With assistance by Isabel Reynolds