Inside Asian Gaming

inside asian gaming February 2015 10 NOT-SO-FAST TRACK Certain circumstances that derailed IR legalization last year—during the regular Diet session, a gaming opponent chaired a crucial upper house committee, and, during the extraordinary session, two cabinet ministers resigned amid campaign scandals—were unique events unlikely to be repeated. But other key issues haven’t been resolved, and IR legislation remains hostage to national politics and current events. “The recent election did consolidate some further support for pro-casino interests in Japan,” contends Global Market Advisors partner Jonathan Galaviz. But, he adds, “There are certainly more pressing economic and public policy issues presenting themselves in Japan than the issue of casino gaming.” Mr Abe, the leader of Japan’s Liberal Democratic Party, called the December election after the country’s economy fell into recession in the third quarter of last year, following a rise in its consumption tax— the equivalent of other nations’ sales tax or value-added tax—from 5% to 8% in April. His major campaign platform in 2012 had been a recovery plan known as Abenomics, prescribing the “three arrows” of monetary easing, fiscal stimulus and structural reform to pull Japan out of a quarter-century of economic stagnation. The election was called to refresh Abenomics’ mandate, within which IR legalization could provide a boost to tourism and help reorient the economy. However, the recession means more immediate stimulation of the economy will take precedence during the current Diet session. “The recession is just one more factor adding to the growing list of issues that are of greater immediate priority than passing IR legislation,” Spectrum Asia CEO Paul Bromberg says. Mr Abehas alsoprioritizednational defense for the legislative session amid simmering disputes with China over islands in the seas between the two countries. Mr Abe is considered a keen nationalist who aims to upgrade Japan’s armed forces and amend its pacifist Constitution. OPTIMISM REMAINS Despite these competing priorities, gaming observers in Japan feel the initial legislative step toward casino legalization could happen this year “The landslide victory of the LDP [in December] could allow the IR Promotion bill to be passed in the [current] parliamentary session, hopefully in June,” suggests Satoshi Okabe, consulting director for integrated resorts and tourism at Dentsu Consulting, Japan’s leading advertising and PR firm. Local elections due in April complicate legislative timing. LDP’s coalition partner, Komeito, a Buddhist-based party that has expressed reservations about casinos, reportedly won’t allow internal discussion of legalization until nationwide local elections conclude on 26th April. Apart from many party supporters’ religious objections, Komeito raises concerns over the potential negative impacts, including money laundering and problem gambling. Nihon University gaming expert Kazuaki Sasaki believes submission of the IR bill will be delayed until May or June. He doesn’t expect passage until the Diet’s extraordinary session late in the year. Approval would be just the first part of the legislative process, with an IR-implementation bill to follow. The first bill would authorize the government to create the national legal, taxation and regulatory framework for integrated resorts, perhaps including a Singapore-style entry levy for Japanese citizens and a requirement for IRs to include at least partial Japanese ownership. The second bill would enact that framework, enabling issuance of IR licenses under whatever plan the government devises, likely with local authorities doing the licensing and adding their own taxes and perhaps other conditions. Creating an IR regulatory structure faces many challenges. “Too many local and regional interests are creating headwinds to legalization at the national level,” Mr Galaviz points out. “Japan will not legalize any form of casino gaming until the local prefectures agree on a national framework.” The national bureaucracy is also thought to be reluctant to take on the responsibility of casino regulation, and the National Police are wary of the impact on crime. To overcome these obstacles Mr Abe formed an IR task force with about two dozen members drawn from relevant government agencies. It has been working since September to craft provisions of a Proponents in Japan still believe IRs will be legalized in time to open by the 2020 Summer Olympic Games in Tokyo. However, for the international gaming community, which has long seen Japan as Asia’s most promising untapped market outside mainland China, the fever has decidedly cooled in the face of Japanese realities. Feature SPECIAL REPORT