Media watch: Japan’s promotion of IR/casinos looking increasingly unrealistic

Artist’s rendering of planned casino for Osaka

On April 20, the Wakayama Prefectural Assembly rejected an integrated casino resort project being promoted by the prefecture’s governor and other prominent politicians. That leaves just Osaka city and prefecture, and Nagasaki as localities that have said they will submit bid plans to the central government for permission to construct IR-casino complexes. 

Wakayama’s move has refocused the media’s attention on the stalled introduction of casino gambling to Japan, and most of that attention is now directed at Osaka, whose own plans are being boosted by local leadership as represented by opposition party Ishin no Kai, which effectively controls the local government. The plan is to build an IR with casino on the artificial island of Yumeshima in Osaka Bay under the management of a consortium that includes U.S. casino heavyweight MGM Resorts International and local financial firm Orix. Yumeshima will also be the site of the 2025 Osaka Kansai Expo. In fact, the two projects are inextricably linked to Ishin’s plans for growth in the region. 

However, as the opening of any casinos in Japan gets pushed farther into the future their viability looks increasingly precarious. On May 8, Asahi Shimbun ran an article in its Sunday World Economy section about Singapore’s IR casino business as a means of trying to figure out whether Japan could possibly compete. Initially the pitch to the public regarding the legalization of casino gambling in Japan, which most Japanese people have opposed according to surveys, is that it was meant to bolster local economies by taking advantage of foreign visitors, meaning casinos weren’t being targeted at domestic users. However, in the years since the idea was first proposed matters have changed significantly, especially after the COVID pandemic wiped out the inbound tourist industry. Rebuilding that revenue base after the lifting of border restrictions will be a chore, but, more importantly, attracting the kind of high-rollers, mainly from China, who could sustain a fledgling gaming industry in Japan is going to be doubly difficult. 

Asahi’s point is that Chinese gamblers are likely to patronize Macau or, more practically, Singapore, since the Chinese authorities have been cracking down on money laundering activities in Macau, which was one of the chief reasons rich Chinese brought their money there. Singapore still has a lively Chinese-speaking community, so its success as an IR casino destination is instructive for purposes of comparison with Japan’s projections, especially since, like Japan, Singapore’s casinos were specifically designed to cater to foreigners as a means of increasing revenue, and it seems to have worked. In 2009, the year before two casino complexes opened in the city-state, Singapore received 9.7 million tourists. In 2019, before the pandemic hit, that number had increased to 19.1 million. Moreover, ever since casinos opened there tax revenues derived from gambling have increased by 50 percent. 

But the most instructive comparative statistic is the portion of foreign users. In 2016, the Osaka city assembly studied the Marina Bay Sands, one of the IR casinos in Singapore, and found that 30 percent of the patrons were Singaporeans or local residents. That portion, apparently, was still too high for the Singapore government, which in the meantime has increased the admission fee for locals from S$100 to S$150 (¥14,000), while there is no admission fee for foreigners. In 2018, casino regulators said that 4 percent of Singapore resident adults “patronized casinos.” This year, the portion has dropped to 2.7 percent. Obviously, the decrease could be attributed to the pandemic, but there are other more dedicated disincentives. Residents can actually apply to have themselves and family members barred from entering casinos for a certain length of time. According to the Asahi, many people often do this after losing substantial amounts of money in the casino, afraid that they may be tempted to gamble again. As of the end of last year, 28,000 citizens and permanent residents have applied for the prohibition. 

Singapore actively tries to discourage locals from patronizing its casinos, and given the amount of revenue they’ve collected—S$2.1 billion (¥270 billion) in 2019 alone—they seem to be doing well with foreign tourists. When the Asahi reporter was at the Marina Bay Sands in March he says he encountered very few locals at the tables, which were mostly being patronized by “loud” Chinese gamblers. 

The plans for both the Osaka and Nagasaki integrated resorts project that 80 percent of the revenue will come from gambling: ¥520 billion a year for Osaka, ¥270 billion a year for Nagasaki. What distinguishes these two IRs from their Singaporean counterparts is the portion of casino patronage that will come from overseas: only 20-30 percent. That means the majority of users are expected to be Japanese. Each IR will charge admission, but only about ¥6,000, which is less than half the admission charged by the Marina Bay Sands. Given Japan’s relative standard of living, that’s pretty cheap. Using the Economist’s famous Big Mac Index for comparing costs-of-living, the price of casino admission for a Singaporean is the equivalent of 25 Big Macs purchased locally, while for Japanese, the admission fee is the equivalent of about 15 Big Macs. Moreover, in Japan, local patrons will be limited to 3 visits a week or up to 10 times in a 28-day period, which is hardly restrictive. As the Asahi points out, anyone who visits a casino 3 times week can likely be characterized as a gambling addict. And as a professor who has studied casino gambling told the newspaper, profits made through gambling do not necessarily help local economies because the money taken in only benefits a few. The money spent by locals on gambling is effectively a deficit for the community in terms of lost consumption, as opposed to money from foreign visitors, which probably wouldn’t have been spent locally on anything else.

However, these outcomes are premised on Osaka’s and Nagasaki’s projections, which many who have studied the matter find unrealistic anyway. On a recent episode of photographer Fumikazu Nishitani’s web talk show “Rojo no Radio,” Diet lawmaker Mikishi Daimon, the Japan Communist Party’s point man for the IR-casino issue, claimed that the various political entities invested in the matter are mostly blowing hot air. One of the government’s conditions for granting permission to build an IR casino complex is that at least 60 percent of the visitors to the IR should be there for purposes other than gambling, meaning for conventions, conferences, etc. Since Osaka’s plan projects 20 million visitors a year—a figure that most experts find laughable (Universal Studios Japan, a huge tourist attraction in the same area, attracted less than 20 million prior to the pandemic)—that would mean 12 million would need to be coming for reasons other than having fun at the casino. However, Osaka’s plan also projects that 8-10 million visitors would be coming specifically to gamble, which leaves very little wiggle room for fulfilling the government’s requirement. 

Daimon doubts that Osaka could even attract 10 million overseas gamblers; and as for those overseas gamblers being Chinese, which is what Ishin no Kai is aiming for, forget about it. Chinese favor table games like baccarat and roulette, but most of the casino investment in the Osaka plan is in slot machines, which would seem to indicate that they are already resigned to the probability that they will have to rely on Japanese patrons, who have demonstrated a penchant for machine gambling because of pachinko, where slot machines are already ubiquitous—nationwide 8 million Japanese regularly patronize pachinko parlors. As to why these people would pay an admission fee to play slot machines when they can do it for free at a pachinko parlor, the Osaka plan says nothing. 

The plan also projects 5-6 million visitors for international conferences, a figure Daimon also finds difficult to accept, so he called the Ministry of Foreign Affairs to find out what sorts of conferences they had in mind. They answered that they were thinking of events like the G7 summit, which normally entails attendance of up to 30,000 people. If that’s the standard, said Daimon, then you would need the equivalent of 200 G7 summits a years to fulfill Osaka’s projection, and that just isn’t going to happen. Consequently, Daimon can’t take seriously Osaka’s other boast that the IR casino will create 90,000 jobs and have an annual economic impact for the region of ¥1.14 trillion. 

And then, of course, all this is predicated on the belief that MGM will be helping to build and manage the IR, which is not a done deal. Since the national IR project was first proposed many years ago, a number of powerful international casino companies have shown interest only to pull out later over delays and roadblocks, not to mention the pandemic. Osaka has had to practically beg MGM to stay the course by offering lots of expensive financial incentives, such as paying ¥80 billion for land preparation prior to construction. Daimon thinks that when MGM finally realizes that the Osaka IR won’t turn a profit they’ll pull out.

Though all these problems seem self-evident to people who are already against casinos, Ishin’s only concern at the moment is to get past the approval stage, which may be a foregone conclusion given that Nagasaki is the only competition (High stakes casino companies would prefer an IR in Tokyo, which hasn’t yet committed to submitting a plan) and the central government seems determined to forge ahead with the IR project now that it’s legalized casino gambling. The government has gone too far and invested too many resources in the idea to turn back now. 

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