Focus on Asia: Japan, we have a problem By Ben Blaschke, Managing Editor, Inside Asian Gaming September 1, 2020 at 2:10 pm Two years ago, when Japan’s upper house passed the long-awaited IR Implementation Bill into law, the global gaming industry celebrated a milestone almost 20 years in the making. Shutterstock.com At that time, it seemed that development of the country’s casino and integrated resort industry was finally certain after so many false starts along the way. Fast forward two years and no longer can we look forward to walking into a Japanese casino with such certainty. It has long been noted, behind the scenes at least, that the growing number of rules and regulations being applied to Japan’s yet-to-materialize IRs might detract from the obvious attractiveness of the Japanese gaming market. That may seem surprising given analysts had forecast annual casino revenues of US$15 billion by 2025, and the sheer enthusiasm with which operators had pledged investments pushing past US$10 billion. Yet even at the last Japan Gaming Congress in Tokyo in May 2019, it was clear from the tone of many key executives speaking at the conference that concerns were growing. One worry for those looking to develop an integrated resort in Japan has been their ability to access debt – a problem largely driven by the short five-year license terms legislators have said they will implement. At a time when industry liquidity is at an all-time low due to the pressures of COVID-19, the prospect of having to fund the majority of a large-scale Japanese IR via equity is not overly appealing these days. This, of course, on top of a variety of other limitations previously unveiled, including a maximum 3% of total IR gross floor area allowed for gaming space, 30% tax on GGR, JPY6,000 (US$56) entry fee for Japanese citizens and residents, minimum 100,000 square meters of floor space for hotels within an IR and MICE space of at least 120,000 square meters – even for regional jurisdictions. By comparison, the biggest MICE venue in all of Japan right now, Tokyo Big Sight, has floor space of just over 100,000 square meters. What is perhaps most worrying for Japan is that what was once considered the new jewel in the Asian gaming crown has now seen three of the big four Las Vegas operators – Caesars, LVS and Wynn – all walk away, while even MGM Resorts, which at the moment looks to be a lock to develop an IR in Osaka, is demonstrating some hesitation. “We like that we are not fully ‘all-in’ on this investment and we like the fact that there is probably going to be a delay and a reopening of some of the conversations that will hopefully make this a better investment for anyone that is interested in it, most notably us,” said MGM President and CEO Bill Hornbuckle on an analyst call in July. With COVID-19 putting the world into a short-term holding pattern, it seems almost certain that the central government’s timeline for choosing its three IR locations will be delayed – possibly by up to two years although more likely for one. That’s probably a good thing given the global economic climate, but if we’re not careful it could also be the catalyst for Japan’s IR dream to be consigned to back of mind just like it has so many times before.