In 2018, Japan gave a green light to casino business in Japan. Before 2018, pro-profit gambling establishments in Japan were illegal and engagement in any related activities are punished by the Penal Code. Now that Japan has allowed to build casinos in so-called integrated resorts, the major players in the gambling industry are trying to win their entrance ticket to the Japanese market that is projected to be about JPY 2 trillion a year (or about USD 18 billion). It will not be easy as Japan gives out only three licenses.
What is an integrated resort and where to find one?
This term describes entertainment complexes that unite casinos, shopping malls, theaters, hotels, and theme parks in one place. The three places where these integrated resorts will be are still unknown. At the earliest, we can expect them to be announced by the next year because the government has not yet even announced the basic cafeterias for selecting the locations.
Nevertheless, one can assume that Osaka, where the 2025 World Expo will take place, is now the number one priority. The total economic benefits from the casino resorts in Osaka would be roughly JPY 1.96 trillion with JPY 250 billion per year in taxes, creating 97,000 workplaces as the prefectural report of 2017 shows.
Japan’s casino gambling market is projected to be about JPY 2 trillion a year (USD 18 billion).
The integrated resort promotion bureau in Osaka Prefecture announced that seven casinos have sent an early request to get the gaming license in Osaka. Among them were Wynn Resort Development (USA), Las Vegas Sands Corp. (USA) which later dropped out of the race, MGM Resort International (USA), Melco Resorts and Entertainment Ltd. (Hong Kong), and Genting Singapore Ltd. (Singapore).
Other big players in the industry like Mohegan Gaming and Entertainment and Hard Rock International stated their interest in Tomakomai area that is south of Sapporo. The idea is to combine gaming with the experience of famous ski resorts that is an escape from megalopolises like Tokyo, Shanghai, and Seoul.
Why would Japan need casino resorts now?
Gambling industry is a massive one, but such famous spots as Las Vegas, Macao, Singapore or Monte Carlo are near the saturation point and expanding the existing businesses might be difficult. Speaking of Macao and Singapore, many US companies have expanded to these territories since the main flow of customers to Las Vegas comes from China. Getting closer to the target audience makes a lot of sense, and Japan offers a great opportunity: geographical proximity, tourism boosting ambitions, and very little competition in the beginning since there will be only three licenses available for property developers.
What about pachinko?
One may ask why there are some many talks about casino resorts when Japan has a long story of pachinko parlors. Isn’t it gambling, too?
Pachinko is a part of Japan’s gray economy. Officially, pachinko machines are in many ways similar to slot machines, except for you do not gamble for money. At least not directly. Pachinko uses metal balls, which can be exchanged for special tokens. And those can be later exchanged for money outside the parlor.
Thus, pachinko does not qualify as gambling under Japanese laws, but in the essence it is gambling. Moreover, the pachinko industry yields 30 times more revenue than Las Vegas per year, even though the industry may be showing some signs of decline as revenues drop 4.7% in 2018.
Public concerns about gambling addiction
Although gambling operators have been nurturing the public relationship with Japan before their potential market entry, public concerns about possible rise in gambling addiction are strong. For example, 40 governments decided not to apply for the casino resort license race fearing that gambling might come with financial problems for he citizens. Moreover, there are also concerns about the possible influence of the new casino industry on gaming in general as well as on money laundering and other criminal activities.
In 2017, the estimate of adults in Japan with gambling addiction at some point in their life was at 3.6%. That is almost twice as much as 1-2% rates in other developed countries. To regulate the issue Japan imposed some rules regarding gambling in casinos. Firstly, there will be entrance fees of JPY 6,000. Secondly, one can visit casinos not more than 10 times per month and not more than 3 times per week. Thirdly, Japan can look into the experience of Singapore that managed to lower the gambling addition below levels that existed before casinos opened there in 2010.
Only time will show if Japan will be able to effectively tackle the complexity of the casino resort industry and what kind of measures and policies it will deploy.
"Otsumami" - a bite size snack:
The first three owners of the casino resort license in Japan will set trends for several years to come.