Gaming | Japan’s coalition parties reach tentative casino agreement

Poeple walk through the Dotonbori district at night in Osaka, one of the locations expected to house a casino

A new agreement between Prime Minister Shinzo Abe’s Liberal Democratic Party and its junior coalition partner Komeito suggests the creation of three integrated resorts in Japan, while revenue from casino activities will be subject to a 30 percent flat rate tax.

The agreement, which was negotiated earlier this week, was made on an inter-party basis and has yet to reach Japan’s legislature. Komeito and the LDP together command a majority in both the upper and lower house of Japan’s Diet.

The two parties now say they back a total of three integrated resorts with the suggestion that each of them would be located in different cities across the country.

This represents a compromise between earlier statements from the LDP that called for as many as five casino resorts and the more gambling-averse Komeito that had preferred just two or three.

They have also agreed on a flat 30 percent tax rate for gross gaming revenue, as opposed to earlier calls from Komeito for a sliding scale that would reach up to 50 percent depending on the level of revenue generated by operators.

With regard to the taxation compromise, GGR Asia noted that “it was decided that any sliding scale for GGR [gross gaming revenue] tax that went higher than 30 percent would significantly constrain the competitiveness of the casino industry and affect the benefits it could offer Japan. Such benefits are said to be likely to include an increase in inbound tourism.”

The Integrated Resorts Implementation Bill will likely include a mandatory entrance fee for Japanese citizens and residents wishing to visit the casino. Legislators have looked to Singapore as a model, where such an entrance fee has already been implemented.

Komeito had wanted it to be set at 8,000 yen per person (MOP610), similar to that in Singapore, while the LDP insisted on 5,000 yen (MOP380), citing a difference in per capita gross domestic product between Japan and Singapore.

According to various media reports, the two parties now stand united on a 5,000-yen entrance fee.

Among the other terms negotiated was a seven-year review of the resorts starting from the approval of the first casino. The Japan Times, citing unnamed sources, reported that Komeito had wanted a 10-year period before the review.

Furthermore, casinos will be permitted to occupy no more than 3 percent of the overall integrated resorts’ floor area, though there remain many unanswered questions over how this proportion should be calculated and applied.

The LDP has previously said that it wants to present the Integrated Resorts Implementation Bill to the legislature in the first half of this year, with the aim of securing parliamentary approval by June 20, 2018. However, some analysts maintain that even if the bill is approved by June, casinos in Japan may not open earlier than 2026.

According to information previously released, there are several companies linked to Macau competing for Japanese licenses, including Melco Resorts & Entertainment, Las Vegas Sands Corp. and MGM Resorts International. Tokyo, Yokohama and Osaka are locations where casinos are being considered. To be selected, operators and municipalities will have to team up and submit a proposal to the government. DB