Inside Asian Gaming

inside asian gaming May 2014 36 Japan: Time To Corral the Bulls? A $40 billion market glitters on the horizon, operators and investors are dazzled, but two new reports argue that a reality check is in order A body of persuasive financial opinion has emerged in recent weeks to suggest the industry should take the opportunity of a reported delay in passage of Japan’s casino legalization to take a breather and rethink some of the more outsized forecasts in terms of gaming revenue and return on investment. Morgan Stanley analysts Praveen Choudhary and Alex Poon returned from a recent trip to the country to add a new report to the bank’s “Asia Insights” series soberly titled “Japan — Tempered Enthusiasm” in which they advance a decidedly less optimistic view of the timing of the market’s debut and its ability to draw enough foreign tourists—Chinese high rollers, in particular—to justify the top-line projections that have excited so much interest worldwide among operators, shareholders and the media. They begin by stating, “We believe that consensus may be too bullish on the size of the market, the return profile for global gaming operators, and the speed of execution.” They follow with 23 pages of detailed analysis, co-written with the bank’s Thomas Allen in New York, culled in part from meetings with policymakers, consultants and various stakeholders which they say have left them “incrementally negative on the prospects for the passing of an introduction bill this summer and an implementation bill over the next two years, to get casinos ready by 2020”. The prevailing view is that a bill introduced in the Diet in December to decriminalize the industry will be debated this month and passed before the chamber adjourns on 22nd June, setting the stage for a follow-up bill addressing the thornier issues of regulation, taxation and licensing which will be finalized and passed over the next year or so. It’s a view that stems from Prime Minister Shinzo Abe’s reputed support for legalization as a tool for raising Japan’s profile as a tourist destination in aid of the larger economy, which has been stagnant for decades. Bolstering this is the view that the bill enjoys broad support in the Diet based on its origins as a coalition effort led by top lawmakers within Mr Abe’s Liberal Democratic Party backed by the LDP’s allies among some influential smaller parties, a combination that holds decisive majorities in the Diet and the upper House of Councillors. Then there is Tokyo’s selection to host the 2020 Summer Olympics, which has stoked the political momentum, or so advocates claim, and has supplied a ready-made calendar for dating the first openings. Messrs Choudhary, Poon and Allen rate the authorization bill’s chances at better than 50%. But underscoring recent news reports of Feature