Japan’s IR industry has been left reeling from a scandal involving an ambitious Chinese company pursuing IR development and their efforts to bribe Japanese officials.
On Christmas Day, Japan’s IR industry was struck a heavy blow when the Tokyo District Public Prosecutors Office arrested member of the House of Representatives, Tsukasa Akimoto, on suspicion of bribery in relation to integrated resorts. This was the first arrest of an incumbent diet member in 10 years.
Akimoto has been accused of accepting compensation in the form of money and goods from Masahiko Konno, former advisor to 500.com – a Chinese corporation aiming to enter the Japanese IR market.
The scandal goes back several years. In December 2016, the House of Representatives cabinet committee, chaired by Akimoto, passed the IR Promotion Act bill, and it was established in the diet. This was about 20 years after the Odaiba Casino Concept was first proposed by Shintaro Ishihara in 1999, who was governor of Tokyo at the time. The first steps on the yellow brick road to Japan’s IR industry had finally been taken. On 3 August 2017, Akimoto was appointed to the position of Senior Vice Minister of the Cabinet, in charge of IRs. The day after the appointment, an IR Symposium was held in Naha City, hosted by 500.com. Akimoto was paid a speaking fee of JPY 2 million (US$18,000) for this event. On 28 September of the same year, the House of Representatives was dissolved and Akimoto was reelected in the general election held in October. During that time, he was given JPY 3 million (US$27,000) by 500.com under the guise of “jinchu mimai”, which is a Japanese term for a gift for persons hard at work as a sign of support. Besides Akimoto, JPY 1 million (US$9,000) each was also given to five others, including Mikio Shimoji (Japan Innovation Party, part of Kyushu), Masahisa Miyazaki (Liberal Democratic Party, part of Kyushu), Takeshi Iwaya (Liberal Democrat Party, Oita District 3), Toshimitsu Funahashi (Liberal Democrat Party, part of Hokkaido) and Hiroyuki Nakamura (Liberal Democrat Party, Hokkaido District 4). All five were members of the non-partisan IR caucus that Akimoto belonged to, and all but Iwaya have footholds in either Okinawa or Hokkaido.
It has been reported that Okinawa and Hokkaido were the areas that 500.com had its eye on for potential IR development and from which they subsequently approached legislators who were actively promoting IRs.
In December of the same year, three legislators, including Akimoto, visited Shenzhen, China, where 500. com’s headquarters is located. These travel expenses were also covered by the company.
In January 2018, Kamori Kanko’s Rusutsu Resort announced plans for an IR bid at Rusutsu Village, Hokkaido, in which 500.com had invested. In February, Akimoto and his family visited Rusutsu Village, for which the JPY 760,000 in expenses is thought to have been covered by 500.com.
Kamori Kanko has also been accused of covering some of the travel expenses for this trip and defendant Kimihito Kamori, chairman of Kamori Kanko, is currently under house arrest for bribery. Rusutsu Village’s IR bid prospects disappeared when Hokkaido narrowed down the candidate location for the prefecture to Tomakomai City, and 500.com withdrew from Japan in September 2019. As of January 2020, the investigation is ongoing and everyone except for Shimoji has denied directly receiving funds from 500.com.
So what affect may this series of events have on the future IR development? There is no avoiding the fact that this has damaged the impression of IRs in Japan and further reduced the confidence of the public. It is an unwanted headwind to those involved in trying to make Japan’s IR industry a reality, including the government and local municipalities.
Ichiro Matsui, Mayor of Osaka city, indicated, “It is the local municipalities making bids who have the authority to select IR operators, not the Senior Vice Minister.”
Matsui went on to criticize the legislator, saying, “He was leading the operators on, telling them he had certain authority that he didn’t even have. It’s like those phone scams where people call up pretending to be relatives. I wonder where he thought he would get by mixing policy with his personal scam? I wish the media wouldn’t be so quick to be biased and negative against IRs.”
One major operator told IAG, “What did the company with no experience or know-how in running IRs plan to do by giving money to someone with absolutely no authority [in deciding IR operators]?
“It’s unfathomable to us. However, we are happy to bleed out the poison.”
Brendan D. Bussmann, Partner and Director of government affairs for Global Market Advisors, told IAG, “It is unfortunate that you have one company that has minimal if any shot of landing an IR license casting such a shadow on an industry that has good operators that want a strong regulatory environment to operate, similar to those in Singapore and Nevada.
“What will be telling is how far the pendulum potentially swings to negate the actions of a few as to not over-regulate an industry that would turn away quality operators from investing tens of billions in Japan, its people, and driving tourism.
“Now that the Regulatory Commission is in place, it will be incumbent upon them to finalize the regulatory structure and IR selection process. In that effort, they will have to glean from other similar jurisdictions like Nevada and Singapore but make sure that their reach isn’t overly burdensome or reduces investment and market potential. There are ways to keep bad actors out of the marketplace and the most recent incidents help further that effort along.
“For IRs, it is still about education as there has never been a large or solid push to the general public on the positives that this can bring in tens of billions of dollars in investment, job creation and economic development. Those operators that partner with the government in showing not only the positives but also starting to turn public opinion into a positive will likely have a leg up over those that just simply rely on their merits.”
An official of a local municipality aiming for a bid said, “At this point it hasn’t affected us. We will continue the procedure as we have been, steady and under strict regulation.”