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Sunday, July 11, 2010
Japan's great gamble
All forms of gambling are illegal or rigidly controlled here now, but the odds are shortening fast on a seismic shift that could see huge, Las Vegas-style casino complexes opening across the land
By EDAN CORKILL
Sheldon Adelson, crusading chairman of the Las Vegas Sands Corporation, was in Singapore last month to launch his company's latest casino-anchored mega-resort, the $5.5 billion Marina Bay Sands Singapore.
What the 76-year-old found himself talking about most often, though, was not what his company had just achieved in the Southeast Asian island state, but what it was going to do next and, crucially, where it was going to do it.
At the press conference for the new resort, Adelson was peppered with questions in this vein. Was he interested in building a Marina Bay Sands-type resort — complete with convention, retail, accommodation, amusement and, of course, gambling facilities — in South Korea / Italy / China's Hainan Island / the Middle East / North Africa?
Yes, he was interested in all those places, he answered, usually giving a quick summary of what legal change needed to be made in each market before his company could play its hand.
From the sound of it, Las Vegas Sands Corp. has designs on every corner of the globe. But, like any company in the midst of rapid expansion, the world's largest casino operator has its priorities — key markets on which its sights are set. Talk to Michael Leven, the company's president, and he tells you that "our first priority right now" is Japan.
And American operators are by no means alone in wanting to bring casinos to this country.
In April, more than 100 Japanese lawmakers from a broad range of political parties got together to form what they called the "league of Diet members for the promotion of the international tourism industry." This cross-party grouping now convenes once a week to explore what kind of legislative reforms are needed to make the first Japanese casino a reality.
While it seems unrealistic to suppose they will hit their stated goal of drafting a "casino law" by autumn, it does seem likely that, when it is ready — probably in spring 2011 — their law will be passed. When that happens, the door will open onto what one commentator described to The Japan Times as "the last major untapped market" for the casino business.
As Japanese law stands today, casinos and most forms of gambling are illegal. Article 185 of the Penal Code states that "a person who gambles shall be punished by a fine of not more than ¥500,000." Article 186 makes it a crime to "run a place of gambling."
There are six legislated exceptions to the prohibition: the parimutuel betting on horse racing, bicycle racing, motorcycle racing, motorboat racing and also the Toto and Takarakuji lotteries — all of which are operated, exclusively, by public agencies.
The wildly popular game of pachinko — generally played in large, cacophonous "pachinko parlors" housing hundreds of machines — has no exemption from the laws banning gambling. Both this slot-machine game that's like vertical pinball, and its electronic cousins known as pachislot, are permitted because, as far as the law is concerned, they're not used for gambling.
The trick is that a pachinko parlor only makes "payouts" in the form of tokens. If you want to exchange those for cash (and research suggests that 95 percent of players do), then you need to take them to "exchange centers" which are invariably located nearby.
It's the separation of the game parlors from the exchange centers that allows pachinko to circumvent Japan's no-gambling laws.
In 2003, Tokyo Gov. Shintaro Ishihara floated the idea of running a casino whose payouts would be effected in the same narrow legal space as pachinko. It didn't work. Ishihara couldn't get the National Police Agency and the Justice Ministry to agree to a system whereby "prizes" won at the casino could be recouped for cash.
Since then, it has been the generally accepted wisdom that any attempt to build a casino in Japan must be preceded by legislative reform.
So why would anyone want to build a casino?
Shozo Azuma, a lawmaker member of the ruling Democratic Party of Japan and a member of the pro-casino Diet league, outlined his reasoning in a speech last week.
"What this country needs is a way of stimulating the economy that won't use tax money. The only way left to do that is casinos," he said.
"In order for this country to develop energetically in the future, then I think the casino industry has potential worth exploring."
Of course, it's not just the central government that stands to gain through tax revenues from casinos. Regional governments, which are suffering from drastically reduced revenues as their residents age and decrease in number, are desperate to host what they see as potential gold mines.
According to a study by the Tokyo Metropolitan Government that was completed in 2002, a combined casino, hotel and entertainment facility that attracted 2.25 million people each year would generate ¥57 billion in earnings, resulting in a total tax yield of ¥13.84 billion (including local and national taxes on the operator, as well as income tax levied on the earnings of the projected 4,095 employees).
Naturally, Gov. Ishihara's interest in casinos hasn't waned: "I still want to make one. (The problem is) the national government won't move," the feisty 77-year-old told the press in November.
The list of other prefectures that have expressed interest in hosting a casino is long — according to some counts, longer than the list of prefectures that haven't. In the last six months alone, prominent claims have been made by and on behalf of Okinawa, Nagasaki (the plan is to build one at the Huis Ten Bosch amusement park), Osaka, Wakayama, Kanagawa, Chiba, Miyagi, Akita and Hokkaido.
Toru Mihara, a professor at Osaka University of Commerce, is one of Japan's leading authorities on gambling law and casinos. He is not only advising the current league of Diet members, but also advised a similar group in 2006/'07, when the Liberal Democratic Party was in power.
As was the case back then, the current group of pro-casino lawmakers is comprised primarily of members of the two largest political parties, the LDP and the DPJ. Participation is on a voluntary basis, and the goal is that a casino law will be sponsored by Diet members — as opposed to being sponsored by one or more political parties.
"Political parties can't sponsor this kind of bill, because there will always be division within their own ranks," Mihara said. "But because we have been through this once when the LDP was in power, and now we're doing it with the DPJ in power, the chances of a Diet member-sponsored bill being passed are high."
Also, as the issue is not linked to a single political party, Mihara explained that the outcome of the Upper House election on July 11 is unlikely to affect the debate.