Monday, August 08, 2022

Japan local governments gather at the starting line


The year 2017 saw a distinct acceleration in the race to obtain licenses to build and operate Japan’s first IRs. While everyone agrees that the potential scope of the market is vast, without the precise locations and the terms of regulation yet being clarified, estimations of the ultimate size of this market remain little more than guesswork.

What did become much clearer in 2017 was which local governments and operators were poised to make serious bids in the first round, and which were either backing out or holding off for the time being. The forward schedule was also coming into focus, provided that the IR Implementation Bill is indeed enacted in 2018, as now seems quite likely.

Presently, there are only four Japanese local governments that are signaling a serious commitment to bidding for an IR: Tomakomai, Sasebo, Osaka, and Wakayama.

Leading Local Government Candidates

Tomakomai (Hokkaido Prefecture) took the lead among all local governments in advancing its process, holding an RFI before anyone else and already 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. Part of the problem is how close the location is to Osaka’s Yumeshima, but the bigger issue is Governor Yoshinobu Nisaka’s scheme to create a foreigner-only casino. While the governor is likely to back off that position in 2018, he also faces a quickly developing anti-casino movement led by the Wakayama Bar Association. It’s far from clear that Wakayama’s bid can navigate the treacherous waters ahead.

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, facing re-election against two candidates fiercely opposed to hosting a casino (and with about three-quarters of the city residents backing the anti-casino view), Mayor Fumiko Hayashi transformed from being a clear advocate of an IR into a “blank slate,” as she puts it. Some observers expected her to return to a pro-IR position soon after the election, but so far there has been no hint of that actually occurring. 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. Tokyo is expected to sit this first round out, and then wait and see what happens elsewhere.

Other regional governments which might bid in the initial round but appear to be long-shots are Kitahiroshima city and Rusutsu village in Hokkaido. In their cases, Tomakomai city in the same prefecture will likely overpower their bids due to its early and aggressive preparations and its advanced engagement with international operators.

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.

Finally, a mention should be made of Okinawa Prefecture, where some conservative politicians and businessmen appear to be plotting to overthrow incumbent anti-casino Governor Takeshi Onaga in elections at the end of 2018 and then aggressively bid for an IR in Japan’s southernmost prefecture.

The Timeline Ahead

The only major hurdle remaining to the realization of IRs in Japan is the passage of the IR Implementation Bill. As all observers must be keenly aware by now, nothing is certain in Japanese parliamentary politics. That said, the basic expectation is that the 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.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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