Inside Asian Gaming

inside asian gaming May 2014 38 a possible delay in scheduling the debate they caution that the back- room wrangling that naturally accompanies legislation this significant (consensus-building, as it’s politely known in Japan) could take longer to resolve than the above timetable suggests, especially given a long history in Japanese society of ambivalence toward casinos. “If there is not enough time to debate, then the vote could be postponed to the fall or next year—and by then, the momentum could be lost,” they write. The ensuing process of structuring the market will be even more complicated, with many moving parts to be aligned that must take into consideration the primacy of the prefecture system in Japan’s highly federalized political system and the need to satisfy a plethora of special interests, national and local. In all, they say, the consensus belief in a 12-month window for implementation “may be too optimistic”. “We see several steps to be taken, many new agencies to be created, and consensus to be built on the size of the tax, use of junkets, tax deductibility of incentives, number of casinos, locations, participation by local companies, and safeguards for the local people. We see no real pressure for casinos to be ready before the 2020 Olympics, as consensus has highlighted.” What’s riveted the industry’s attention, though, is the US$40 billion in projected gross gaming revenue, which if it pans out will see Japan grow over the next decade into the second-largest casino market in the world. It’s based on a forecast of $8 billion each for “We see several steps to be taken, many new agencies to be created, and consensus to be built on the size of the tax, use of junkets, tax deductibility of incentives, number of casinos, locations, participation by local companies, and safeguards for the local people. We see no real pressure for casinos to be ready before the 2020 Olympics, as consensus has highlighted.” Telsey Advisory Group’s Chris Jones questions the prospects for significant growth from an underserved domestic market, while Morgan Stanley points to the limited impact of Japanese players worldwide, declining trends in pachinko revenue and challenges the industry is likely to encounter in converting the country’s massive market of pachinko players into slot machine players. Note: Size of Pachinko/Pachislot market is measured based on gross pay-ins Source: Company Data, Morgan Stanley Research Leisure and Pachinko/Pachislot Markets Are Declining in Size Source: Ministry of Health, Labor and Welfare, CEIC, Morgan Stanley Research Spending Power of Japanese Citizens Has Been Falling Source: National Police Agency, White Paper on Leisure, Morgan Stanley Research Number of Players Drooped by 50% Between 2002 and 2012 Feature