Japan Legalizes Casino Gambling
Legislation offers companies such as Las Vegas Sands and MGM Resorts their first chance to open in Japan.
TOKYO—Japan legalized casino gambling and cleared the way for three casino resorts, giving companies such as Las Vegas Sands Corp. and MGM Resorts International their first chance to open in the country.
Global casino operators have said they would spend as much as $10 billion on each location under the legislation, a pillar of Prime Minister Shinzo Abe’s plan to boost tourism and stimulate growth.
The law, however, is highly unpopular among Japanese voters. Critics said it would encourage gambling addiction and organized crime.
Parliament gave final passage to a casino legalization bill on Friday, concluding years of debate over the issue.
Japan hopes to lure tourists, especially from China and other parts of Asia, who currently go to casinos in Singapore, Macau and elsewhere.
Casino-centered resorts “will help stimulate regional economies and eventually lead to growth of the overall Japanese economy,” Mr. Abe said on June 1. The prime minister aims to increase the number of foreign tourists to 60 million by 2030, up from about 29 million in 2017.
The legislation allows construction of three casino resorts but leaves the decision on the specific locations for later. Analysts said the first casinos would likely open around the mid-2020s.
The resorts would also feature hotels, restaurants, shopping malls and theaters. Daiwa Institute of Research estimated that investment in the three casinos, if the locations included Japan’s two biggest urban areas, could approach $50 billion. Visitors could spend nearly $20 billion each year on entertainment, retail and lodging at the resorts once they open, Daiwa estimated.
The law, however, met with strong objections from opposition parties.
“Some say casinos would create more employment, but this will be built upon someone else’s loss from gambling,” Yukio Edano, the head of the opposition Constitutional Democratic Party of Japan, said on June 24. “It is impossible to grow the economy through casinos.”
Opinion polls show the legislation is deeply unpopular. A July survey by Jiji Press found 62% of respondents opposed allowing casino resorts, compared with 22% in favor of the plan. It didn’t supply a margin of error.
To ease concerns about local gambling addiction, the law requires residents of Japan to pay a ¥6,000 ($53) entrance fee to get into a casino and limits admissions to 10 times within a 28- day period. Foreign visitors will be able to enter free.
The floor area of casinos will also be capped—the government plans to set the limit at around 3% of an entire resort—and a 30% tax will be imposed on gross gambling revenue.
The next question is which companies will operate the three casinos and which cities will host them.
Las Vegas Sands Chairman Sheldon Adelson has said he would pay $10 billion to set up shop in Japan. The company is interested in urban areas such as Tokyo, Osaka or Yokohama—a port city just south of Tokyo—because they would fit better with its conventions-focused business model, George Tanasijevich, chief executive of Marina Bay Sands Pte Ltd. in Singapore, told The Wall Street Journal recently.
MGM has expressed interest in the same three cities, with a similar budget in mind.
“It would be a difficult competition for [smaller] regional cities because many operators seem to be more interested in metropolitan areas where there are also more locals with extra cash to spend at casinos,” said Takayuki Miyajima, an economist at Mizuho Research Institute. While the government expects the casino resorts to attract foreign travelers, Osaka estimates about 70% of expected visitors would be Japanese.
Some more remote locations still hope to be selected, including areas in the northern island of Hokkaido, a popular ski area for Asian visitors. Caesars Entertainment Corp. recently presented a plan for a casino resort in Tomakomai in Hokkaido.
Gambling is illegal in Japan, but the government has made exceptions for sports betting including horse, bicycle, motorcycle and motorboat racing, as well as some lotteries.
So far, Osaka is the only big city in Japan with real estate set aside for a casino. A man-made island called Yumeshima, or “dream island,” is set to grow to about 960 acres, and eventually could hold multiple resorts, analysts say.
The advent of casinos could be bad news for pachinko, a long-popular vertical pinball game. Pachinko isn’t officially viewed as gambling, but players can convert their noncash prizes into cash at windows near pachinko parlors.
With young people turning to other pursuits such as smartphone games, the industry’s revenue fell 4.3% in 2017 to about $173 billion and is down nearly half from the peak, according to the Japan Productivity Center.
Once casinos open, “gambling industries including pachinko will be hit if they don’t take appropriate measures to keep customers interested,” said Yuji Yamaguchi, a professor at J.F. Oberlin University in Tokyo.
—Takashi Mochizuki contributed to this article.