JAPAN

Local government at the starting gates

Michael Penn | Special correspondent, AGB Nippon

Operators and local prefectures were busy in 2017 laying the groundwork to pitch for IR licenses ahead of the enabling legislation. Heading into 2018, here is the current state of play.

Tomakomai (Hokkaido Prefecture) took the lead among all local governments in advancing its process, holding an RFI before anyone else and already is deeply engaged with a number of international operators. Tomakomai might face a rival bid from within its northernmost prefecture, as three other localities have signaled some degree of interest in hosting an IR and Governor Harumi Takahashi has not shown her hand, but the local government is nevertheless decidedly proactive.

Sasebo (Nagasaki Prefecture), on the opposite side of the country, became the second local government to launch its RFI process near the end of the year. Here all the local authorities appear to be behind the project to build an IR as an overlay to the existing Huis Ten Bosch theme park. While this may become a relatively small project, its chances for success look good.

Osaka (Osaka Prefecture) is the only major urban location that is aggressively bidding to host an IR, and they are regarded as practically a shoo-in to receive one of the first licenses. The Yumeshima location will require a huge investment, including a major upgrade of the surrounding transportation infrastructure, but there is a strong chance that Osaka will become the premiere IR in the first round of construction.

Wakayama (Wakayama Prefecture) has a governor and a mayor strongly committed to building a small, resort-style IR at Marina City, but it appears to face steeper odds of gaining a license than the other three cities on this list.

Waiting for Yokohama

Had this overview been written at the end of 2016 instead of the end of 2017, it would likely have been the major city of Yokohama, Kanagawa Prefecture, that headed the list. There’s no doubt that the big international operators would be lining up to bid for Yokohama’s Yamashita Pier location, particularly in mind of its easy access to the entire 36 million-strong Kanto region population.

However, Mayor Fumiko Hayashi is facing re-election against two candidates fiercely opposed to hosting a casino. The local business community, meanwhile, has sent mixed signals. Many of them are suggesting that Yokohama’s economy will do just fine even if Yamashita Pier is redeveloped without including a politically controversial casino.

If Yokohama jumps back into the IR race in 2018, that would be a transformative development—but for now it remains passive and is the single-biggest question mark within the local government landscape.

Other Candidates

If one assumes that the Japanese government will begin by licensing only two or three IRs in the initial round, then the selected locations are likely to be among those already mentioned above. However, there are other proposals that either seem to be long-shots or else places that may become stronger candidates in a potential second round of IR building in the 2030s.

Some internationally-based analysts believe that Tokyo is still a potential IR candidate, perhaps at its Odaiba location. That may be true as regards a potential second round in the 2030s, but there’s no indication that the city government has the bandwidth to simultaneously manage the hosting of the 2020 Tokyo Olympics and a bid for a major IR.

Other regional governments which might bid in the initial round but appear to be long-shots are Kitahiroshima city and Rusutsu village in Hokkaido. After that comes an assortment of cities where some local institution has proposed an IR bid, but the local governments have not yet committed themselves either way. In this basket are Tokoname of Aichi Prefecture, Iwanuma of Miyagi Prefecture, Narita of Chiba Prefecture, and a handful of others.

The Timeline Ahead

The basic expectation is that the IR Implementation Bill will be passed this year, probably at the end of the Ordinary Diet Session in June. If so, the basic timeline should look rather like the following: FY2018 — IR Implementation Law enacted FY2019 — Local governments select their

IR consortium partners FY2020 — Central government issues IR licenses to two or three local bids FY2024 — First Japanese IRs open their doors

Operators

It was somewhat more difficult to assess the relative chances of the various IR operators in the emerging race. MGM Resorts, Caesars Entertainment, Melco Resorts & Entertainment, Hard Rock International, Galaxy Entertainment, and Barrière took the lead in terms of establishing their ground game within the country. Las Vegas Sands put on the single-most expensive media and social event of the year, but hasn’t yet opened a local office. Other major operators, such as Genting and Wynn Resorts, made statements expressing interest in making Japanese bids, but their practical activities—if there were any—took place mostly behind the scenes. Some smaller operators, like Rush Street Gaming and Clairvest, took aim at specific regional sites, especially Tomakomai and Sasebo.

Pachinko co. Heiwa proposes $2b IR plan

Heiwa Corporation, a major privatelyowned manufacturer of pachinko and pachislot machines, has put forward its own plan to build a Japanese IR, this one in the city of Kitahiroshima, on the southern outskirts of Sapporo City.

The plan calls for an IR to be built upon the existing Sapporo Kitahiroshima Golf Club (a 2.8 million square meter site) and would feature the addition of an exhibition hall that could accommodate 5,000 people, a five-star 2000-room hotel, Asia’s largest land art museum, an outdoor theater, hot springs, and facilities for skiing and snowboarding.

Heiwa envisions forming a consortium with an international IR operator and local businesses with a combined initial investment of close to US$2 billion, and ultimately employing almost 20,000 people.

JRA adopts third-party exclusion policies

The Japan Racing Association (JRA) began implementing third-party gambling addiction exclusions at the end of December, heralding a new direction in Japanese policy expected to apply not only to current forms of gambling, but also to the IRs likely to open in the mid-2020s.

The JRA’s new policy allows family members to request that their loved ones who are diagnosed with gambling disorders, or else strongly suspected of pathological gambling due to their spending habits, be placed on a list that suspends their participation in online horse race betting.

While the JRA’s initiative immediately applies only to online horse betting (and not even at the horse tracks themselves, nor at off-track betting booths), it is expected to become an anti-addiction policy template for other forms of gambling within Japan.