Politicians optimistic on IR bill, but divided on details

Japan’s ruling coalition says it will push for both the implementation bill to govern the casino industry and legislation to address problem gambling to be passed before the end of the current Diet session on June 20th, even though pro-IR parties still have widely different stances.

At the opening panel of the Japan Gaming Congress in Tokyo, leading politicians from several Japan’s political parties set out some of the themes still being discussed and the progress made to date on the necessary bills to allow for the introduction of IRs.

The requested amendments and differing political priorities have led to concern that the legislation may once again miss the deadline for passage, pushing back further the likely date for the first round of IR openings.

Kiyohiko Toyama, a member of the House of Representatives and head of the IR team for the Komeito Party, said both the ruling coalition and opposition parties were aiming to discuss issues relating to the problem gambling bill in the next few weeks in an effort to present a unified bill.

“Cooperating with the LDP and the opposition, we would like to have both bills passed in both the Lower House and the Upper House before this session ends on June 20th,” he said.

However, the discussion Thursday morning highlighted many of the differing views held even between politicians in favor of promoting IRs in the country, and it’s far from clear if they will be able to make progress in the short time remaining of the Ordinary Diet Session.

“This is like a preview of the shadow boxing that we’re likely to see in the Diet deliberations,” said Mito Kakizawa, an unaffiliated member of the house.

Some of the issues raised were the taxation rates, the short length of the casino license, and the laborious process for approving the resorts, which will mean Japan will miss key opportunities to showcase its IRs at major events such as the Tokyo Olympics in 2020 and possibly even the 2025 World Expo in Osaka (should that city win its bid for the expo).

There was also discussion as to whether the IRs should be placed in main urban locations or in the country’s rural regions. Some have asserted that the law as it stands will favor major cities.

Masashi Adachi, secretary-general of the IR implementation team within the ruling Liberal Democratic Party, said 2026 will be the earliest possible date for opening, but contradicted assertions from Kakizawa that 2030 was more likely.

Toyama also contested claims by Kakizawa that the tax rate, after factoring in consumption taxes and corporate taxes, may end up being as high as 50 percent, insisting that the effective rate will end up being close to 31 to 32 percent.

Some of the details of the legislation, such as the limitation on casino floor size at 3 percent of the total property area, have raised alarm bells for being too restrictive and likely to dampen expected investment levels, especially at the smaller, regional locations.

Without the cash generation from the casino component, operators may find it’s not cost effective to invest in some of the cutting edge experiences that have been discussed in relation to Japanese IRs.

“IRs need to be given leeway to support funding on experientials so we get these things,” Morgan Stanley Managing Director Asia Praveen Choudhary said during a subsequent panel. “Three percent of the casino floor is just too restrictive, the maths don’t add up.”

The legislation as it currently stands is also likely to favor the development of a market dominated by the mass and premium mass sectors rather than Macau’s heavily dominant VIP model, the panelists said.

Japan will not be using junkets and will not be differentiating between mass and VIP when it comes to taxation, unlike it some other markets such as Singapore. These are both likely to be factors that may encourage a focus on mass and premium mass.