When completed and approved, this bill will describe and enact all the provisions needed to initiate the resort development process including a detailed regulatory provision, the number of potential locations, tax system, number of licenses, application method, selection criteria, operational regulations, admission control method, incidental facility requirements and so on.  The Japan government plans to pass the bill by the end of this year, and the country will move towards casino gambling.

So far, this process has been anything but smooth and a number of issues have been raised by the various parties vested in the future Japan integrated resort business. The location of future resort casinos has been a particular point of contention. For example, a number of developers expressed interest in situating an integrated resort (IR) in the Tsukiji fish market area of Tokyo, a prime location that is a 10 minute drive from the popular Ginza area of the city. But Tokyo city government decided to make this site off-limits to resort development, claiming they have other plans for the land.

Other prospective casino sites within the city have also been rejected ahead of the IRIB, raising concern among potential developers. “The Japan project needs to be in a high-density population area,” said Ed Bowers, executive vice president of global gaming development for MGM Resorts, after the Tokyo location they wanted disappeared from the list of prospective sites.

Integrated resort location problems of a different nature also exist in Osaka, Japan’s second largest city next to Tokyo. In this case, Osaka city government is pushing for a casino in a specific location—Yumeshima Island, originally developed as a potential site for the Olympic Games but fallen on hard times once it was passed over and is now a large vacant lot. The primary concern for developers with the Yumeshima Island site: the lack of public transportation infrastructure. There is currently no mass transit available, and the cost of extending the Japan Railway to the site is an estimated $1.7 billion dollars. Extending a subway line to Yumeshima Island will also cost billions of dollars.

In addition to location concerns, flags have also been raised by the gaming industry in regards to potential business regulation being considered by the IRIB task force. Recently, the task force let it be known that Japan won’t allow “junket systems,” the customer marketing and procurement structure that has proven successful, and controversial, in other Asian gaming markets. This means Japan-based casinos could lose a significant number of high-limit players, and the number of gamblers from Asia in particular would be considerably reduced. Also, due to the stringent financial regulations in Japan, it is certain that many restrictions will be placed on casino credit and comp services. In addition, Japanese players will be required to use a personal number card that will keep track of their play, and the number of entrances will be limited. Both these acts will likely hinder the attraction of Japan casinos for high-end gamblers.

Some developers are also concerned about the escalating costs of developing and operating integrated resorts in Japan, which could be much higher than originally estimated. Indeed, it appears many operators initially based Japan resort EBITDA on the Singapore IR model, not fully realizing how much higher labor, facility maintenance, administrative and utility expenses are in Japan, which makes ROI more problematical. In addition, the task force has stated that the overall size of the Japan casino market may be lower than the $30 billion to $40 billion some have predicted. The upshot: operators spending upwards of $10 billion to develop integrated casino resorts in Japan may have a tough time meeting projected profit numbers. 

Every time I speak to overseas operators or investors, I am reminded of the excessively high expectations of Japan-based gaming projects. Those backing these developments should be aware of the risk they are taking—the Japanese government has made it clear they will use integrated resorts and the gaming business as an economic tool;” I don’t know if they will ever consider the industry a “partner.”