GGRAsia – What room for new IRs on Japan’s path to a casino market?

What room for new IRs on Japan’s path to a casino market?

Dec 29, 2023 Newsdesk Japan, Latest News, Top of the deck

With the Japan Casino Regulatory Commission already in place, the authorities in that nation “will for sure look to open up to applications again for the remaining two spots” available for Japanese communities seeking to have an integrated resort (IR) with casino.

That is according to Joji Kokuryo, managing director of Japan-based industry consultancy Bay City Ventures Ltd, in response to an enquiry from GGRAsia about what might happen on Japan’s casino-liberalisation path, now that only Osaka stands as an approved project, currently due to be completed in 2030.

The only other applicant so far, Nagasaki prefecture, learned on Wednesday that its IR District Development Plan had not been approved by the national authorities. The news came via a statement from the Japan Tourism Agency, a body under the country’s Ministry of Land, Infrastructure, Transport and Tourism.

According to information collated by GGRAsia’s Japan correspondent, at a Wednesday press conference, the tourism agency had said Nagasaki prefecture would be able to submit a fresh plan for the next application window if it wished.

But the agency had nothing definite to say about the timing of a new application window, mentioning that it can only be determined by an order of the national-government cabinet, based on any proposal the tourism agency might make.

Japan’s current liberalisation framework allows for up to three IRs within the country. Capital cost of entry, and robust terms and conditions, have been mentioned by industry commentators as possible barriers for investors. A number of big casino brands, including Las Vegas Sands Corp, stepped away from contention, citing terms and conditions. Others – namely Genting Singapore Ltd and Melco Resorts and Entertainment Ltd – saw their preferred partner metropolis Yokohama drop out of contention for the first-round tendering process.

In September, the Osaka authorities said the initial investment cost of JPY1.08 trillion (US$7.64 billion currently) for MGM Osaka would rise by JPY190 billion. Nagasaki, a smaller city than Osaka, had mentioned a fundraising target of JPY438.3 billion for its scheme.

Hokkaido, Wakayama

Daniel Cheng is a former senior executive with the Hard Rock casino brand, which looked at Hokkaido as a possible IR bid partner for the first round, until that prefecture ruled itself out of contention. He is also author of the book “Japan Casino Uprising”, about that country’s complicated path to casino liberalisation.

He told GGRAsia, referring secondly to another prefecture that had its own idea for a first-round IR project voted down by its own local lawmakers: “There is certainly continuing interest at the grassroots level in Hokkaido and even some renewed hope in Wakayama after this [Nagasaki] verdict.”

But he added: “I doubt there’s any resurrection for Nagasaki.”

Mr Kokuryo noted the Hokkaido authorities had merely held a study session on the casino topic, and still had not “started anything at local council levels yet.” But earlier this month, members of Hokkaido’s prefectural assembly linked to the Liberal Democratic Party (LDP) created an IR policy study work group. Prior to that, in September, the Hokkaido government pledged to consider the establishment of an integrated resort to expand inbound tourism.

He added: “Wakayama seems more motivated than anywhere else in Japan, however it will be a challenge for them to bring on an operating partner after internal politics mainly caused their original IR development plan to be voted down at the last stage.”

Japanese scholar Toru Mihara told GGRAsia in a May interview that some foreign investors were “still interested” in some regional markets for a Japanese IR scheme.

Mr Mihara, chairman of a Japan body called the National Council on Gaming Legislation, added in comments to GGRAsia this week regarding Nagasaki: “The key question was nobody” among the public “could understand who the real investors were.”

He added: “It’s not a matter of whether investors had got money or not: the question was whether the investors were really credible enough to keep investments” maintained “for decades”.

Wednesday’s tourism agency statement has mentioned among factors for not approving Nagasaki’s plan the lack of “sufficient evidence to support the certainty of financing”.

Licensing rules, ambivalence on a Tokyo IR

Japan’s Act on Development of Specified Integrated Resort Districts states that the validity period for a certified IR District Development Plan is 10 years from the day it was approved by the national authorities, according to information reviewed by GGRAsia’s Japan correspondent. A renewal period of five years is possible, running from the initial expiry date.

The actual casino business licence runs for three years from the date of initial issuance. In the event of a successful renewal request, the casino business licence would run for a further three years, starting “from the day following the day on which the validity period of the licence then in force expires,” according to the information reviewed by GGRAsia’s correspondent.

In terms of fresh candidate locations, Tokyo has several times been mentioned by industry pundits, though the capital was already attracting during pre-pandemic trading a major portion of the country’s inbound tourism. Japan’s government had identified economic regeneration of communities as an important factor for selecting IR sites.

Yuriko Koike, governor of Tokyo, has so far been ambivalent in public statements on the matter, although the local government has previously assigned modest amounts of money for research on the IR topic.

Mr Cheng told GGRAsia: “I surmise the odd chance of rekindling developments during the remainder of [Fumio] Kishida’s premiership is if an IR licence can be useful as a political quid pro quo with Governor Koike for a Tokyo IR. Otherwise, I wouldn’t expect anything new to happen until way after September 2024.” The latter is the election period for the presidency position within the prime minister’s party, the LDP.

Mr Cheng suggested a decision on whether or when to entertain further tenders for tilts at hosting IRs was “solely in the hands of the prime minister, and the IR agenda will lie somewhere near the bottom of his in-tray with all his current travails”.

The former casino executive observed the IR legislation had “essentially” been sponsored by a “much-maligned LDP faction at the heart of a political donations kickback scandal,” and that faction was, in his view, “at its lowest ebb”.