Japanese Casino Concerns Following Draconian Regulatory Proposals

Japan’s parliament finally approved casino legalization last year, paving the way for at least three high-end integrated casino resorts to be built by 2023, complete with hotels, shopping and conference facilities.
According to estimates these three venues alone could generate around $10 billion in annual net profits, or 0.2% of Japan’s current gross domestic product, with international companies such as Wynn Resorts, MGM Resorts International and Caesars Entertainment lining up for an opportunity to win operating rights.
That said, the casino industry’s appetite for the lucrative Japanese market has been diminished somewhat of late following two pieces of news that are sure to hit any investor badly. One of those is an announcement that the government is considering imposing a steep 30% annual tax rate on any casino revenue of up to $2.8 billion, rising to 40% on less than $3.7 billion, and a whopping 50% rate above that figure.
According to the government, the money collected from imposing such high rates of tax will help counteract any negative effects that may stem from Japan’s new gambling market. This includes allocating a greater level of funding towards social security provisions, as well as gambling addiction programs. However, some experts are predicting it will simply create a less attractive investment opportunity for casino companies who will subsequently be less willing to spend more money developing integrated resorts.
Casino companies also heard another piece of troubling news this month after the government proposed a plan to limit casino visits to just ten times per month, and no more than three visits over seven consecutive days. Authorities will then track compliance with the scheme through the monitoring of special issued identity cards with an embedded IC chips.
Added to previous proposals to limit the gambling space at an integrated resort to just 3% of the land space, and a possible admission fee for all Japanese citizens, its fair to say that the Japanese government’s plan to build casinos in order to increase capital expenditure and expand its tourism trade may end up backfiring. As Seth R. Sulkin from the American Chamber of Commerce in Japan’s (ACCJ) then explains:
“Gaming companies are very rational: they’ll calculate how much revenue they can generate with a 15,000-square-meter casino floor, and they will only invest as appropriate for that, which certainly won’t be $10 billion.”