One step forward, two steps back: Japan’s casino waltz By Ken Adams, CDC Gaming Reports August 30, 2020 at 3:30 pm Japan has been the land of possible opportunity for expansion in the casino industry for roughly six years now. The prospect of developing a casino – the nation’s first – in the Land of Rising Sun has attracted and excited virtually all of the leading international gaming companies. Prime Minister Shinzo Abe has been a driving force in setting the stage for potential casino resorts in Japan; if not the choreographer, Abe has at least been the conductor leading the legislative orchestra. Whenever there was a setback – and there have been many – in the efforts, Abe was the one who pushed the reset button. Last Friday, however, the 65-year-old Abe resigned, putting the country’s casino plans in doubt. Abe said he was saddened to not finish his term, but his health – he suffers from colitis – would not allow it. Abe is the longest serving prime minister in the country’s history, known nationally as a conservative with something of a revisionist philosophy. Internationally, however, he is known more for his economic policies, sometimes termed Abenomics. One element in his economic plan for Japan was the introduction of casino resorts, in order to stimulate tourism to Japan. He took a trip to Singapore in 2014 and, while he was there, toured the integrated resorts. Upon his return to Japan, he said, “I think integrated resorts will be a key part of Japan’s economic growth strategy.” Japanese Prime Minister Shinzo Abe Originally, Abe had hoped to have casinos in Japan before the 2020 Olympics. There was a great deal of initial resistance to the idea, with opponents claiming that casinos would bring criminal gangs, money laundering, drugs, corruption, and addiction, and would weaken traditional Japanese cultural values. Opposition parties fought, and continue to fight, against introducing casinos, and public opinion polls have indicated that casinos were not terribly popular with the general population. Getting casino legislation passed would not be an easy or quick process. Early on it became apparent it would not happen before 2020, and maybe not before 2025. Or later. On July 20th, 2018, the Japanese Diet, the country’s parliament, voted to authorize three integrated resorts (IRs), a term borrowed from Singapore, in Japan. The legislation called for local jurisdictions to first approve the resort, and then to form a partnership with a gaming corporation and present plans for the intended resort. If more than three locales opted for a resort, the government would decide which would receive the license. That process alone added years to the timeline. In the final draft of restrictions and limitations, only 3 percent of the total floor space of each IR could be devoted to gambling. Foreign tourists could enter freely, but any large wins would have the applicable Japanese tax taken out at the time of the win, and Japanese customers would be required to pay a $50 entry fee and be restricted to three visits per week, or a total of ten per month. It was not an optimal law. Still, there were interested corporations. At least 15 international gaming companies expressed interest and opened offices in Japan. Each of them courted one or more of the major population centers and tourist destinations. By 2016, estimates of $40 billion in annual gaming revenue from Japan were becoming common. Resort investments numbers were also huge: Wynn and Sands both danced around an approximately $8-$10 billion number. When Osaka sent out an request for proposals last June, Las Vegas Sands, Wynn Resorts, MGM Resorts, Melco Resorts, and Genting Singapore, among others, submitted a proposal. But by the time the final legislation was in place, enthusiasm was waning. And then people in Wuhan, China started to get sick. The eventual pandemic caused Japan to postpone the Olympics, crippled the economy, and put all casino plans on hold. The casino companies started to waver, and so did the locales. Cities in Japan, for the most part, said they were still interested, but thought everything should be delayed. And then Wynn and Sands announced the end of their efforts in Japan. Sands chairman Sheldon Adelson dropped the first bomb in May when he said, “My fondness for the Japanese culture and admiration for the country’s strength as a tourism destination goes back more than 30 years. I’ve always wanted our company to have a development opportunity there. We are grateful for the friendships we have formed and the strong relationships we have in Japan, but it is time for our company to focus our energy on other opportunities.” Others followed suit soon thereafter, although Melco has since reinforced its interest in developing a world class and uniquely Japanese resort in Japan. It was in this context that Abe, the champion of integrated resorts in Japan, resigned. Japan has long had a reputation of being difficult for foreign businesses, but the attempt to introduce IRs into Japan has been more than difficult. For every small step Abe’s government took toward that goal, the legislature took three steps backward. The biggest backward steps were outside of the Diet’s purview, however: the coronavirus and Abe’s resignation. So now we wait. Japan’s economy needs time to recover from the coronavirus, and the country needs to choose a new prime minister. The major gaming corporations are certain to use this time to reassess the potential value and costs of developing a casino in Japan and to come to some sort of definitive conclusion. One step forward and two steps backward is an exhausting dance.