Japan casino picture slowly coming into focus

Japan will decide on the applications for integrated resorts in Japan from Osaka or Nagasaki within the next few months, possibly as early as this month. Authorities will then decide on the fate of unissued IR licenses. There is also the possibility of a supplementary round that could include prime locations like Tokyo and Hokkaido.

This is the consensus view of a variety of knowledgeable sources who shared their insights with iGaming Business in the first two months 2023. Some of them requested anonymity. Similar sentiments were expressed in 2022 about a decision on two IR applications by the year’s end.

Japan has been experimenting with legalizing casino gambling for many decades. The current effort was initiated by Shinzo Abe, then Prime Minister. In 2013, the last piece of enabling legislation was passed. Osaka and Nagasaki submitted bids last April .

The Ministry of Land, Infrastructure, Transport and Tourism has not provided any information regarding the status of either bid over the past 10 months. Even though Macau and Singapore took less time than 10 weeks to get their casino licenses, they are not Japan.

Toru Mihara, president of the National Council on Gaming Legislation says that it is important to realize that Japanese IR legal procedures and requirements are very different to what you see in other countries. You cannot compare the experiences of other countries to judge the delay.

“The current delay can be attributed to the legal structure’s structural complexity. This structure is inherently slow because nobody can control the whole process.

This process is split between the local government selecting candidates, MLIT evaluating bids from local governments and Japan Casino Regulatory Commission judging suitability to license casinos.

Chris Wieners, Hogo Digital managing director, is based in Japan. He says that Japan loves to test, just like any other new industry or technology. Test, test, and test again until you reach the pre-trial stage.

“Regarding gaming Japan has and will continue tiptoe through it, in my view.”

He anticipates concrete action in the second half this year.

Tsuyoshi Tanaka, editor at Amusement Press Japan, says that “The fiscal year for the Japanese government runs through March 31, so I expect MLIT will make an announcement sometime in March.”

Rumour mill

Nobuyuki Baba (leader of the Nippon Ishin no Kai Innovation Party) and Diet member representing Osaka asked Tetsuo Saito, MLIT Minister, to approve Osaka’s IR bid before 2022.

Rumours have circulated about imminent IR decisions. They started with rumors of a license for Osaka just before the current Diet session began on 23 January.

A new rumour is created when a deadline has passed. It includes an explanation and a new approval date.

Japan’s political calendar shows that while the fiscal year ends could lead to a decision, the date for local elections is 9 April. The second round of voting will take place on April 23. Next, Fumio Kishida, the Prime Minister of Japan hosts the G7 summit in Hiroshima from 19-21 May.

“We don’t know what the political [inner] circle wants, but it seems that they don’t want any issues that may provoke emotion from the people against current government policies,” Mihara, an IR advisor to Abe’s government says. “Yokohama, Wakayama are good examples of IRs being used as a political weapon against the ruling political parties.

Both areas’ IR efforts were stopped before they applied to the central government. Local leadership that had supported IRs was no longer in control.

Mihara, along with other sources, emphasizes the obligation of the government to implement the IR law.

He said that “No one can stop IR implementation, even if prime minister wants it to happen.” To abandon IRs you would need a new law, which is unlikely. However, the law can be executed at any time.

Mihara points out that the Abe administration saw the prime minister’s Office, Cabinet Office, and the ruling Parties united in promoting IRs.

He said, “But not now.” “Kishida may just abandon those policies and implement measures that won’t make him popular, which is completely understandable.

“Who cares about additional delay elements?” Investors can always leave if they don’t like it. This unfriendly attitude towards the market was present in Nagata-cho [the Tokyo districts hosting Japan’s elected national government] and Kasumigaseki (the central bureaucratic areas].

On shaky ground

Osaka and Nagasaki are competing for three IR licenses. Each jurisdiction faces issues with their applications. The chosen IR site for Osaka, the man-made Yumeshima Island, must address soil liquefaction, and contamination. Osaka’s government has pledged Y=79bn (PS485.2m/EUR545.3m/$574.8m) to mitigate soil issues at the IR site, but that may not resolve matters.

MGM Resorts International, a global casino and hotel operator based in the USA, and Orix, a Japanese financial services conglomerate, estimate that Yumeshima IR will be open in 2029 at a cost of $8.5bn (PS7.2bn/EUR8.1bn).

MGM declined to talk about the project with iGaming Business.

Sources suggest that soil problems are a factor in the delay in licensing, adding uncertainty to a project Japan can’t afford not to approve.

It is also possible that the construction of World Expo 2025 or the Expo itself may delay the beginning of IR work. Tanaka, Amusement Japan, believes that the delay is a silver lining due to the 10-year term for the IR license.

Tanaka states that if the plan is approved, 70% to 80% will be spent on construction work. MGM and Orix should get provisional government approval immediately. This is the best case scenario. They then get their official approval once the Osaka Expo has ended.

“I suspect that the licensing delay has much to do with Osaka’s relationship between the ruling Liberal Democratic Party, and the Osaka Japan Restoration Party,” Michael Zhu, partner at The Innovation Group, says. This is a faction that supports the project which broke from the LDP.

However, it is not unreasonable to doubt Osaka’s commitment to the IR and the support of its ruling party.

They believe having an IR places them on equal ground for international business and international tourist travel with Tokyo. They believe it will be a game-changer,” Ado Machida, president of Hard Rock Japan, who is currently an observer in the IR sweepstakes, says.

Rise from the dead?

Nagasaki’s $3bn proposal for IR, which is headed by Casinos Austria International faces questions about its leadership. Casinos Austria International has never operated an integrated resort in Asia and has never owned it.

Zhu states that even though the Nagasaki market might not be as big as Tokyo or Osaka’s, he believes it would still merit a larger scale IR.

Some observers declared Nagasaki’s bid dead upon arrival. Some others see the unresolved problems as opportunities, considering the IR consortium model. They also reported behind-the scenes efforts to strengthen the proposal.

Wieners believes that this could be a great opportunity. “There seem to be a lot of unknowns at the moment – it remains to be seen how this will play out and what opportunities, if any, could be available for others to get involved with IR development within that region.”

Spectrum Gaming managing director Fredric Gushin says that while there is still a lot of work in Japan on the IRs, Spectrum believes that the two pending IR project are likely to proceed. If governmental approvals or actions are delayed, it is possible that the opening dates (2027 for Nagasaki and 2029 for Osaka) will have to be rearranged.

Sources suggest that MLIT could approve any or all of the proposals with or without rejecting unapproved bids. The multibillion-dollar question of what happens to the remaining IR license(s) is open to any decision on the proposals. Only the IR law states that the government must wait seven year after granting the first tranche, up to three licenses, before issuing any more.

Tanaka, a well-known researcher on Japan’s current gambling industries, stated that “The Japanese government invested human resource into MLIT, the Japan Casino Regulatory Commission, on the premise to approving three IRs.” “I would not be surprised if MLIT announced they would accept additional candidates.”

According to insiders, the government would like to see enthusiasm from localities prior to committing to another round. It has only had two bidders for three licenses. Localities, on the other hand want to see the commitment of the national government before launching an IR procedure that is costly in terms both funding and political capital.

“I want, but not yet”

Japan’s IR potential attracted a lot of gaming companies to Japan, including Wynn Resorts and Caesars, Wynn Resorts and Caesars, Native American operators Hard Rock Gaming and Foxwoods and Mohegan Gaming, Rush Street and Genting Group, Macau’s Galaxy Entertainment and Melco Resorts as well as Japanese gaming machine powerhouse Sega Sammy (a partner in Korea’s Paradise City IR).

Operators will likely seek assurances now that Hokkaido and Yokohama have dropped their bids. The latter two were at advanced stages following political shifts.

Local leaders are skilled at declaring their interest and delaying on when it might become something more tangible. Anyone who has ever dated someone knows this scenario.

It is possible that Hokkaido might join a supplemental round. Governor Naomichi Suzuki resigned in the first round due to the need for an environmental study before an IR bid. According to reports, the study has been completed.

Hokkaido supporters claim that an IR is needed to increase its appeal beyond skiing holidays and unlock the immense potential of the northern island’s all-year tourism. At least four operators expressed interest in Hokkaido before it pulled out.

Tokyo rejected an IR bid. Governor Yuriko Koike cited commitments to the 2020 Summer Olympic Games and 2019 Rugby World Cup. Tokyo could enter a supplementary round, with Yokohama and neighboring Yokohama both out of contention.

Sheldon Adelson, the late founder of LVS, long sought an IR to Tokyo. However, visionaries can see the potential of Japan as a business, political and cultural centre. The Kanto region has 42 million people, accounting for one third of Japan’s total.

iGB reached out to several IR aspirants regarding their interest in a new round. One of them did not respond.

Hard Rock

Machida, Hard Rock Japan’s Japan manager, says that “We are still committed Japan.” “We have maintained an office in Tokyo, and in Hokkaido during Covid-19, even as our competitors fled.

“We believe Japan can be the crown jewel of Asia in the area of a premier resort destination, and that is what we want to do to Japan.

“The government’s vision of 60 million visitors in 2030 is admirable, and even with Covid, it is achievable. You need to provide a place where people can visit, attractions that people enjoy, and a premier resort. It’s a shame to say, but Japan does not have one.

“We have what I believe would be a model integrated hotel down in Hollywood, Florida. It is just outside of Miami, next to Fort Lauderdale. With our signature guitar hotel.

Machida, who joined Hard Rock back in 2018, says that Hard Rock acquired Mirage on Las Vegas Strip in late 2019 when the target destination Hokkaido chose not to take part in IR bidding. Hard Rock also opened a Hard Rock Hotel in Manhattan.

In 1983, Hard Rock Cafe was established in Tokyo’s Roppongi area. “We believe that we have been able successfully to integrate the Hard Rock brand into something that is also uniquely Japanese.” That’s what we would bring to Japan’s Hard Rock integrated resort: the ability make Japan a top-tier destination. Machida states that this is what Japan needs to be able to thrive in the future of tourism and economic growth.

“We have been here for 40 years and are committed to making Japan a top destination resort.”

Hard Rock is likely to be the second IR bidder if Tokyo and/or Hokkaido enter a supplemental round. Any hunt participant should expect a long trek. Hard Rock may say that Pink Floyd’s Shine On You Crazy Diamond takes more than 25 minutes and not the Beach Boys Little Deuce Coupe in under two.