CLSA’s Aaron Fischer believes the Japanese government will legalise casinos in the next couple of years, with Okinawa a frontrunner for the first license. Mr Fischer discusses the approval process currently in progress, and considers what form future casinos in the country could take
Casinos have been legalised in 120 countries and Japan is the only G8 country not yet to have joined the party. Casinos are no longer considered a hive of illegal or immoral activity but rather a major drawcard for domestic and international tourists and business visitors and a generator of taxation revenue. Along with a few other Asian governments, the Japanese government recognises the potential lost opportunity and is currently framing policy for the introduction of casinos in the coming years.
We understand that the Liberal Democratic Party (LDP) and opposing parties have agreed in principle to make a proposal to the Diet for the legalisation of casinos. The LDP Policy Research Council established a Special Committee on Tourism Casino Entertainment Study Group, which published a draft paper titled the Basic Policy for the Introduction of Casino Entertainment into Japan on 16 June 2006.
The policy recognises that “casino entertainment is currently being introduced in many locations around the world based on the Las Vegas model of an entertainment complex which can be enjoyed by all ages and sexes and even families, comprising not only casinos but also theme parks, theatres, cinemas, shopping and restaurant malls, sports facilities, international conference centres, hotels and so on.”
While casinos have been banned by the Penal Code in Japan since the Meiji period, the prevailing view in other developed countries is that ills from casinos do not derive from the casinos themselves but from those who use casinos to conduct improprieties or become addicted to gambling. On the second point, it is recognised that non-casino gaming such as suburban clubs create more problems with respect to gaming addictions.
The benefits
The policy document outlines several benefits to be derived from introducing casinos, including: increasing tourism; increasing government revenues; subsidising and boosting the entertainment industry; and benefiting the Japanese public through economic ripple effects. These are discussed below.
The policy document also recognises that legalised casinos decrease the funds flowing to illegal casino activities, which are often associated with underground organisations and other illegal activity such as loan sharking, drugs and prostitution. However, we would note that the policy does not explicitly state that illegal casino activity is a major concern in Japan. We agree that this is more of an issue in other Asian countries such as Thailand.
The direct beneficiaries of an increase in tourism include hotels, airlines and retailers, while indirect ones include food producers and cleaning companies. Global tourism is a high growth industry, particularly in Asia – incomes are increasing at a rate that is triggering a disproportionate growth in spending on leisure activities. This is particularly true in China, India and other developing Asian economies. Easing visa restrictions, increasing leisure time and shifting demographics are also driving growth in these countries.
In the past 15 years, outbound tourism has increased by around 300 million trips to 694 million per annum. Over the next 15 years, the World Tourism Organisation expects absolute growth to be three times as great; increasing by 900 million to 1.6 billion by 2020.
In terms of originating countries, the Chinese are likely to become the most prolific travellers. We estimate that Chinese outbound travellers will reach around 115 million by 2020 based on a compound annual growth rate of 9.6%. Opportunities to gamble, particularly for Chinese, would clearly increase the attractiveness of Japan as a tourist destination.
Currently, the number of outbound Japanese tourists is three times the number of inbound tourists to Japan. Since 2002, the Japanese government has been working to achieve a “Japan that is open to the world as a tourist destination”, promoting strategies which will increase the annual inbound tourists to 10 million by 2010.
Japan, as the dominant Asian country over the past few decades, economically and culturally, is an obvious candidate for travelling Asians. According to the policy document, “Japan’s extremely attractive tourism resources, typified by its history, traditions and culture, as well as the richness and beauty of the natural environment that forms the basis of Japanese culture and exhibits changing faces with each of the four seasons, are highly acclaimed worldwide and constitute a large motivation for foreign tourists to visit Japan”.
The committee will be looking to leverage these existing resources but recognises the need to develop new tourism resources to cater for the diversifying needs of overseas tourists including business people, and the changing lifestyles of Japanese citizens.
Recognising the prolonged boom expected in global, and in particular, Asian tourism, other countries within the continent are moving quickly and aggressively to tap into the growing pool of international tourists.
