Inside Asian Gaming

inside asian gaming February 2015 14 lack of education/awareness of IR development and the positive effects it can and does have on tourism and economies.” He believes more outreach would help build public support. “It is important to use places like Singapore as an example of the positive effects of IRs when done right,” he says. Dentsu’s Mr Okabe agrees: “Few Japanese are aware of this industry’s potentiality. More public awareness of IRs is needed, and more precise information on the gaming business should be publicized.” Japan’s major corporations have largely stayed on the sidelines of the debate, though Mr Govertsen expects passage of IR legislation would prompt “a large number of mainstream Japanese companies to put their hat in the ring.” “More explicit information on the coffer fill for government and pet causes” could help move public opinion, suggests Geomatrix CEO and Portfolio Manager Robert Howe, who has managed assets in Japan since the 1980s. But the government has yet to produce any hard economic estimates of the potential impact on tax revenue and the economy in general from green-lighting IRs, fostering suspicions that legalization is just another half-baked government stimulus idea, like the endless stream of public works projects that have failed to lift Japan’s economic pall. QUADRILLION REASONS TO TRY One basis for optimism is that Japan needs to do something to change its economic and fiscal path. Amid anemic economic growth since the 1990s, following the burst of the 1980s asset bubble, Japan’s public debt ballooned to more than 1 quadrillion yen— that’s a thousand trillion yen (US$8.5 trillion)—double the size of its national GDP. “From an outside perspective the country is in very poor economic shape: they are now doing their own QE [quantitative easing] and borrowing trillions of more yen at a time when they’re probably the most indebted country in the world per capita,” Mr Bromberg says. “Legalizing IRs is a proven method that will have a beneficial financial impact if done properly. It won’t solve all the problems, that’s for sure, but it would have tangible benefits for the government and for the country.” The 96.34 trillion yen budget approved by the cabinet last month forecasts a revenue shortfall of more than $350 billion at current exchange rates. Estimates for Japan’s gaming market range from $20 billion to $40 billion annually, so gaming taxes would still fall far short of eliminating the deficit, but they’d be a start. Proponents argue IRs would also spur related economic activity, generating further government revenue. IRs could also contribute to revamping the sluggish economy. “Japan needs a radical change of industrial structure from an export- oriented economy to an inbound-tourism-oriented economy,” Mr Okabe says, adding, “We still lack a high level of tourism infrastructure to accommodate international tourists.” “Tokyo is one of the biggest cities in the world, but it has no convention center,” observes Ms Kudo. “Tokyo needs a convention center and more accommodations.” IR development could help address that situation, without requiring government spending, even providing some infrastructure needed for hosting the Olympics. But IRs in any form won’t happen until the government presents a convincing case for them. Mr Bromberg cites Taiwan’s Penghu IR referendum in 2010 as an example. “The pro-casino lobby was complacent and ineffective while the anti-casino lobby, which was backed by the opposition Democrat Progressive Party, mobilized their forces very effectively and they managed to vote down the referendum,” he says. “It takes action on the part of the parties in favor of legalization, and I don’t think they’ve done it very effectively to date.” A Western executive with extensive experience in Japan says, “There’s one time over there, and it’s not on your watch.” Japan’s IR proponents could be playing according to that clock. Or as Mr Bromberg puts it, “You know what, they may do it in the next session. They’re a lot more patient than we are.” Mr Govertsen agrees opposition to casinos may stem from “the lack of education/ awareness of IR development and the positive effects it can and does have on tourism and economies.” He believes more outreach would help build public support. Japan’s World-Leading Debt Source: IMF, Economist.com/graphicdetail *Forecast Gross government debt As % of GDP Japan United States Euro area Britain Feature SPECIAL REPORT