The debate about casinos in Japan elicits as much eye-rolling as passion.
Gambling, by some measures, has long been the biggest industry by revenues. Never underestimate the power of collective denial as Japanese pretend those ubiquitous pachinko parlors, horse-racing stadiums, cycling tracks and boating circuits aren’t betting establishments.
Tokyo wants to make it official. In December, the parliament ended years of political wrangling to legalize casinos in Asia’s No. 2 economy.
That set the table for tens of billions of dollars sure to zoom Japan’s way and, eventually, perhaps $30 billion to $40 billion in revenues when such resorts are spread around this deflation-wracked nation.
To magnate Sheldon Adelson, Tokyo is the “holy grail” of his Las Vegas Sands’ global ambitions.
Adelson, one of the world’s richest men and a key Donald Trump booster, vows to invest about $10 billion to do for Japan what he’s helped do for Macau and Singapore.
Such projects also could be a holy grail of Shinzo Abe’s efforts to boost Japan’s economy and end deflation.
Such projects also could be a holy grail of Shinzo Abe’s efforts to boost the economy and end deflation.
Abenomics has three “arrows” aimed at reflating Japan: monetary easing, fiscal loosening and deregulation. The first two have long since been deployed, but the third and most important — structural change — is mostly sitting in the quiver.
Greenlighting casinos could be a sizable win and might amount to a fourth arrow: a tourism boom that creates jobs and fills government coffers.
Japan’s tourism upsurge is already well underway, particularly from China. In 2016, Japan welcomed about 6.4 million mainland visitors, while Chinese outbound tourists spent globally an astounding $261 billion, a fifth of the global share.
Casinos could pull more of those billions Japan’s way. Singapore, Macau, Malaysia, the Philippines, Australia and soon Japan are all vying for mainland high rollers.
They’re vying, too, for middle-class Chinese to pump fresh profits into hotels, shopping centers, eateries and transport businesses.
Abe’s nation also is on a long-term tourism roll.
In quick succession, it will host the Rugby World Cup (2019), the Summer Olympics (2020), open the first casino resort (likely around 2022) and host the World Expo in Osaka (2025).
But the longer-term payoff from casinos isn’t a sure bet. Japan’s parliament is still mixing it up about the specifics of gambling legislation.
Debate points include where casinos can operate, who can patronize them, which tax policies apply and local ordinances to contain social ills from crime to gambling addiction.
Three big unknowns remain.
One: Local, location, location. Possible sites are Osaka, Tokyo and Yokohama. But this is an ideal moment to diversify growth engines away from huge metropolises.
Why not build integrated Sands, MGM or Wynn resorts in less-traveled areas? The western island of Kyushu, perhaps.
Putting a casino near, say, Fukuoka would harness its equidistance from China, South Korea and Taiwan. Even better, direct Adelson and his ilk to open shop in Tohoku, a region devastated by a giant 2011 earthquake.
Two: Timing. Japan must brace for the risk its version of Vegas is coming at the top of an Asian casino bubble.
Given the region’s demographics, one can argue the pool of potential punters can only grow. It’s just as possible, though, that China’s long-awaited slowdown and ranks of potential punters is more finite than Tokyo believes.
High-cost Japan needs to get creative playing up cultural attributes — great food, impeccable, bevy of hot springs and ski resorts, low crime rate — to stand out.
Three: Killing the fun. There are valid concerns Japan’s bureaucrats are going overboard with writs to squeeze the vice out of an industry that thrives on it.
Earlier this month, a government panel released 130 pages of recommendations to, well, “Disneyfy” the industry.
Steps to be debated next month include limiting gaming space relative to family-friendly attractions, banning ATMs, access for locals, forcing foreign residents living in Japan to provide tax-identification numbers, you name it.
The American Chamber of Commerce fears Tokyo will kill the proverbial goose laying the golden eggs.
It’s quite a balancing act to ensure casinos do more to harness Japan’s culture than taint it, but it’s entirely possible.
Given the size of the jackpot for Abenomics, it’s incumbent upon to Tokyo to get this game right.
(William Pesek is a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” Twitter: @williampesek)