A few years ago, sales and profits from the casino business in Japan were expected to be very high.
However, that expectation has drastically changed due to the many regulations announced by the Japanese government.
The limit on the frequency of admission to a casino, the setting of entrance fees, the higher than expected Casino tax, the strict foreign exchange controls that will restrict the withdrawal of funds outside of Japan, and the cost of labor and utilities are among the highest in the world.
In the early stages, nearly 25 companies from all over the world wanted to enter Japan, but currently only about six companies are still seriously considering the idea.
The goal of entering the casino business in Japan is no longer to earn a big profit; instead it has come to serve as a way to inform that it is expanding into Japan, an economic powerhouse in Asia.
With regard to the location of Integrated Resort & Casinos in Japan, the government has decided to limit it to three locations initially.
At first, five cities (Yokoyama, Wakayama, Nagasaki, Hokkaido and Chiba) announced their interest, but due to strong opposition by residents and local governments, only two cities (Osaka and Nagasaki) are now in the running.
However, the location of choice for many overseas Casino operators is of course Tokyo.
Tokyo has not publicly announced that it will attract IRs. However, there is already a lot of movement behind the scenes, indicating that they will almost certainly aim for an IR.
It should be noted here that once a casino operator has begun development at another location, it can no longer apply for a Tokyo location.
In other words, a casino operator who really wants to do business in Tokyo should not enter either of the currently nominated cities and should instead wait for Tokyo to confirm its intention.
However, this is risky, because the operator will have to give up their chance to enter another city.
Still, the market size of Tokyo is 10 to 20 times larger than any other city in Japan.
Therefore, if you really want to succeed in Japan, it seems the right choice may be to wait patiently for the Tokyo government to express its intention.
What is an appropriate amount to invest in Integrated Resort & Casinos development in Japan?
Several years ago, when the Japanese parliament legalized casino gambling, major overseas casino operators announced plans to invest more than ten billion dollars. That was their strategy to boost their chances of obtaining a casino operating license.
Since then, many strict regulations have been announced by the Japanese government and even now more than 65% of the Japanese people are opposed to opening casinos, so it is now certain that sales and profits after opening will be far below the amount estimated a year ago.
According to the consulting teams of several major Japanese financial institutions, an appropriate investment amount is now estimated to be less than 5 billion dollars.
It may be time for developers to review their investment by reviewing sales and profits at non-casino facilities.
It seems that the dream of high profits from casino sales is no longer realistic.
Can you guess how much the annual gambling revenue in Japan now? It’s approximately US$260 billion dollars! That is approximately 5 times the annual total casino revenue of Macao. Japan is already the largest gambling nation in the world, with activities such as horse races, bicycle races, speedboat racing, lottery, pachinko (pinball gambling machine), motorcycle racing, football pools, and number lotto.
In December 2016, the Japan Diet passed the Integrated Resort Promotion Bill, and the country is moving towards casino gambling. Yet more than 60% of the population is opposed. Certainly one of the reasons is that they are afraid that the number of pathological gamblers will increase, but more importantly, they feel that Japan has more than enough gambling venues already, and there is no need to add casino gambling. According to the Japan Ministry of Health and Welfare, the number of people with a gambling addiction tops 5,300,000 and is the highest in the world, and this has become a serious social problem.
How to avoid conflict with Article 185 of the Japan criminal code? Currently two ideas on how to permit casino gambling under certain conditions based on justifiable noncompliance with the law are under consideration.
The first idea would treat casino gambling similar to horse races, bicycle races, and speedboat races, etc. where a local government or its equivalent would establish the casino. Casinos would be owned and administered by a public organization but operations will be left to the private sector.
The second idea involves placing it outside the scope of Article 185 by limiting it to specific locations, which would require a special resolution of the National Assembly, which is the supreme decision-making body. However, the Japanese Ministry of Justice has indicated that this would be very difficult to accomplish and would require further study.
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