Japan IR restrictions could deter operators: MS
Banking group Morgan Stanley says that gaming operators could refrain from “investing too much” in future casino resorts in Japan given the long list of restrictions likely to be introduced in the Integrated Resorts (IR) Implementation Bill.
The institution’s note follows a meeting on February 14 between government officials, members of Japan’s governing coalition, the Liberal Democratic Party (LDP) and its partner Komeito, and governors of four prefectures, namely Osaka, Nagasaki, Hokkaido and Wakayama.
During the meeting, government officials proposed a plan to limit the visits to casinos by Japanese nationals and foreign residents in the country at three times a week and 10 times in 28 consecutive days, according to local media reports.
The government-proposed plan also suggested to cap the size of a casino to only 3 percent of the gross floor area of the entire resort, with a limit of 15,000 square metres (161,458 sq feet).
Although a few key items are still to be decided – including the tax rate and an eventual statutory entry levy for casino access – Morgan Stanley cited Bloomberg as saying that the Japanese government will apply a “progressive tax on gaming revenue starting with 30 percent… which can go up to 40 percent between revenue of JPY300 billion [US$2.81 billion] to JPY400 billion, and 50 percent for income above JPY400 billion”.
“This could discourage potential casino operators from investing too much on capital expenditure due to lower return on invested capital,” said the institution in its Tuesday note.
Legislation making casino gambling legal in Japan came officially into effect in December 2016. The IR Implementation Bill now needs to be approved detailing the specifics: how casinos are administered and regulated; the taxation regime to be applied to them; their location; and the number of licences to be issued.
The Morgan Stanley analysts said the IR Implementation Bill was expected to be submitted to the ongoing ordinary Japanese parliament session that would end in June.
A range of commentators has said it is likely that before the IR Implementation Bill can be passed, an anti-gambling addiction measure known as the “Basic Bill on Gambling Addiction Countermeasures” will need to be steered through parliament. In Tuesday’s memo, Morgan Stanley suggested that the gambling addiction bill “may be tabled simultaneously”.
Assuming that the IR Implementation Bill is passed by June this year, the Morgan Stanley team said that Japan could see the opening of its first casino resort in 2023 or 2024.
In late January, when the current session of Japan’s parliament started, GGRAsia reported it might be April at the earliest, before the IR Implementation Bill was put to all the country’s lawmakers.
According to GGRAsia’s correspondent, the January to March part of the ordinary session of parliament is usually taken up with approving the nation’s annual budget. The period from April to June is spent discussing other parliamentary bills; including in likelihood the gambling addiction bill and the IR Implementation Bill.
Ed Bowers, executive vice president for global development at MGM Resorts International, said in comments made earlier this month that too much focus on protecting players in Japan’s nascent casino industry could have a negative effect on that country’s economic growth objectives regarding gaming liberalisation.
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