Japan’s gambling sector has evolved into a complex and often contradictory landscape. Following the passage of the Integrated Resort Implementation Law in 2018, the country presented an attractive opportunity for major casino companies. However, interest waned as development slowed, leaving MGM Osaka as the only emerging operator, with plans to launch its resort in 2030.
As Japan prepares to issue two additional Integrated Resort (IR) licenses in 2027, prospective bidders are vying for an edge in a competitive market. Nevertheless, the government has conveyed mixed signals about its commitment to the casino industry.
Despite liberalizing its gambling laws to tap into the potential economic advantages of casinos, Japan’s regulatory environment and ingrained social norms remain skeptical of gambling. The regulations in place are stringent: casino floor space is limited to 3% of the entire IR, while Japanese residents are permitted only three visits per week and a maximum of 10 visits within a 28-day timeframe. Each visit carries a mandatory ¥6,000 entry fee, reflecting the government’s intention to curb excessive gambling even as it embraces the casino industry.
The journey to legalizing IRs has not been straightforward. Japan enacted the IR Promotion Act in December 2016 after contentious debates, followed nearly two years later by the IR Implementation Act, which outlined the necessary regulatory frameworks, addressing entry restrictions and addiction prevention measures. Despite the government promoting IRs as a driver for tourism and economic growth, significant opposition persists.
Prominent figures like Kenji Eda, a lawmaker from Yokohama and a member of the opposition Constitutional Democratic Party of Japan, have raised alarms about gambling addiction, potential economic harm to local businesses, and skepticism regarding the promised advantages of a casino-driven model.
As international players like Wynn Resorts, Las Vegas Sands, Genting Singapore, and Caesars Entertainment withdrew from the competition, disillusioned by the stringent regulations and uncertain returns, appeal for Japan's lucrative IR licenses began to diminish. Sheldon Adelson, the late chairman and CEO of LVS, once labeled the Japanese market as a "holy grail" but ultimately shelved a $10 billion proposal due to these challenges.
Japan has looked to Singapore’s approach to IRs, an intricate blend of economic ambition and tight regulation. However, Andrew Klebanow, a principal at Klebanow Consulting, argues that Japan’s regulations have become overly complicated. As new policies emerged, potential operators adjusted their revenue forecasts downward until the projected returns no longer justified the investment costs.
Japan’s strategy to capture economic gains from casino gaming while keeping gambling socially acceptable mirrors trends seen in other Asian markets like Singapore and Macau. Singapore’s tightly regulated casinos are integrated into large resort complexes that blend various forms of entertainment. For instance, Resorts World Sentosa includes Universal Studios Singapore, creating a broader appeal that draws diverse visitors while maintaining strict entry protocols.
These developments have yielded impressive results; since opening its IRs, Singapore has seen visitor numbers soar from 9.7 million in 2009 to an expected 16.9 million by 2025, with tourism receipts more than doubling to S$32.8 billion. Concurrently, rates of problem gambling have stabilized, underscoring that tourism and social safeguards can coexist.
Looking beyond gaming, Genting Singapore’s forthcoming RWS 2.0 expansion aims to diversify the attractions it offers, enhancing hospitality and lifestyle options to bolster repeat visits.
A Genting spokesperson emphasizes that Japan must develop its unique framework rather than mimic existing models entirely. Each IR market has its characteristics that need consideration to optimize economic benefits while mitigating social risks.
Macau, on the other hand, reported MOP293.3 billion ($36.3 billion) in gross gaming revenue in 2019, which constituted about 65.8% of its GDP. The region has cultivated a robust IR ecosystem embracing a wide array of luxury services that cater to both gaming and leisure.
However, the challenge for Japan lies in crafting resorts that provide reasons for visitors to come beyond just gambling. Klebanow suggests Japan should learn from both Macau and Singapore by establishing a regulatory environment that offers room for innovation while maintaining stringent safeguards.
Potential operators are now assessing whether Japan will reopen the bidding for its IR licenses. The successful interest of developers hinges on how manageable the regulations will be. Should the rules remain overly restrictive, many may not be inclined to invest large sums.
Klebanow points to the Seminole Tribe of Florida, which is actively pursuing a Hard Rock Resort Casino in Tomakomai, Hokkaido, as a leading contender. With ongoing developments in multiple markets, they may present an appealing proposal backed by local support.
Some observers believe that uncertainty surrounding Japan’s licensing regulations may deter operators keen on significant investments. As Leckert suggests, the fluctuating nature of these rules has resulted in declining interest from some potential entrants, particularly after Tokyo and Yokohama were ruled out for IRs.
Tighter license durations also raise concerns; casino licenses can be renewed every three years, while the development plan authorization lasts only a decade. This contrasts sharply with longer renewal terms in places like the Philippines, raising worries about the risks involved in significant long-term investments. Restrictions on resident visits and the requirement for identification cards further diminish the appeal for developers.
While online sports betting remains largely illegal in Japan, there are exceptions, such as horse racing, and gaming via pachinko parlors remains a integral part of Japan’s social fabric. In 2020, the pachinko industry, with an estimated value of around $130 billion, showcased gambling’s complex role in Japanese leisure, representing roughly 2.5% of GDP.
Lessons from the pachinko industry may inform how casinos can better engage with Japanese customers. Leckert posits that introducing more slot machines could resonate with local preferences, given the popularity of these games.
However, Klebanow cautions against solely targeting a narrow demographic. The typical pachinko audience skews towards younger men, while attracting older women, who make up nearly 60% of gaming clientele in other markets, remains a challenge. Japan's IRs should create environments that cater specifically to this demographic to foster a more inclusive gaming experience.
Despite uncertainties, Leckert remains optimistic about the IR opportunity in Japan, believing that stringent regulations can support a thriving industry. As the government prepares to unveil its regulatory framework later this year, Klebanow notes that the interest of top-tier casino operators will depend on the guidelines set forth. Striking a balance that promotes economic growth with adequate risk management will be crucial in determining the future landscape of Japan's gambling industry, especially given the limited number of planned casinos and gaming opportunities.
