Legal Casinos Up Ahead In Japan: Why This Is Cause For Excitement And Concern In The Country

April 13, 2021

By Anand Vasu

Change is on the horizon in Japan, which the late Sheldon Adelson once reportedly called “the Holy Grail” for casino operators. Earlier this month, Japan’s Casino Regulatory Commission released a first version of its draft casino regulations, and opened them up for public comment. All things being equal, people visiting Japan will soon have access to limited gambling options at casinos. But this will not be without a series of checks and balances, and there are restrictions on the kind of games available.

On April 2, the Commission said that nine games would be allowed in casinos. This includes variations of baccarat, blackjack, poker, roulette, Sic Bo, craps, Casino War, money wheel and pai gow. 

Additionally, casinos would be allowed to operate electronic versions of these games.

Significantly, traditional Japanese games such as pachinko, pachislot and mahjong were not available to patrons at these venues.

At the moment, these moves are at a proposal stage, and only after receiving feedback from the public till May 9, will the final set of regulations be passed into law.

Japan is also determined to be proactive in order to help prevent a rise in addictions to gambling, or exploitation of the same. Casino operators will be required to impose a one-year ban on any patron they believe shows gambling patterns that indicate addiction. In addition, the number of visits per month for these patrons could be limited even after the one-year ban is served.

Interestingly, the current local time will have to be displayed on casino floors, and no ATMs would be installed in the gaming sections, something that is not the norm in casinos in many parts of the world.

Online Gambling Will Not Be Legalized in Japan

Even as initiatives were being rolled out on casino gambling, Hachiro Okonogi, Chairperson of the Liberal Democratic Party’s National Public Safety Commission, made it clear that there were no plans to legalize online gambling.

“There are provisions on casino acts in the existing IR Development Act, but it does not include online casinos and they are not subject to this regulation,” Okonogi was quoted as saying by Inside Asian Gaming in response to a question from Hiroyuki Moriyama of the Constitutional Democratic Party. “However, when I was asked at the Cabinet Committee last week, I answered that we would continue to take strict action as the police and Chairperson of the National Public Safety Commission.”

Okonogi explained that the reason the proposed act would not deal with online gaming was because online casinos were illegal in Japan.

“There is precedent of online casinos being run in Japan, busted and tried in court.” Okonogi said, while underscoring that there was no change in government policy on this count. “Continuing to come down on online casinos is the role of the police and Chairperson of the National Public Safety Commission. The fact is that this does not fall under the jurisdiction of the IR Development Act or the minister in charge of the Casino Management Committee.”

Japan Has Historically Been Wary Of Opening Up Casino Operations

While recent developments have given the pro-casino movement some traction, Japan has traditionally been opposed to going down this route, and with good reason.

In 2000, the Governor of Tokyo proposed the construction of a casino off the coast of the capital on an artificial island. He had also suggested considering floating casinos — cruise ships that would not actually travel but operate as anchored casinos — but this did not find favour with law makers.

It was only in 2018 that there was a change in mindset, with Japan looking to the Singapore model, in which casinos were expected to cater largely to foreign visitors, while not barring locals from being patrons.

What happened next was that Japan opened up a long-term process that would involve localities bidding for the right to host casinos that would be integrated facilities — also having hospitality, convention space, entertainment, shopping and hotel rooms — through to April 2022. 

Successful bidders would then have to fund partners to operate and manage these venues.

MGM Resorts Sole Bidder For Osaka Casino Venue

MGM Resorts emerged as the sole bidder for the proposed resort in the Osaka prefecture. Osaka is Japan’s third largest city by population and have put forth a proposal for a casino resort. If they are successful in their bid they will then have to make their case in Tokyo.

MGM Resorts, who launched their “Osaka First” campaign in 2019, had partnered with Japan-based financial services firm ORIX.

“We’ve spent a lot of time and energy becoming the sole one standing … in Osaka,” Bill Hornbuckle was quoted as saying by casino.org. “We haven’t had our people on the ground there for a better part of nine months. So, it’s going to take some time to rebound. But we have that intent, and I believe that the government still has the same intent of moving forward.”

While MGM were favored by the powers that be in Osaka, they would be required to set up a venue that featured at least 215,000 square feet of convention space, which would have to be expanded to more than one million square feet in 15 years.

It was also stipulated that the resort would have to have at least 3000 rooms and that the actual gaming floor space should not constitute more than 3% of the premises.

Law Enforcement Fear Opening Up Of Gaming Will Give Organized Crime A Foothold

The greatest deterrent to casino operations getting the go-ahead in Japan is the fear that the Yakuza, one of the oldest organized crime groups in the world, would be among the first to step in and finance these operations.

A high-ranking gang member affiliated with the Yamaguchi-gumi Yakuza, told the Japanese newspaper Asahi Shimbum in 2018, that the gang would find a way to get involved in the legalized gambling sector, estimated to be worth $15B.

“Once rules are decided on how to place restrictions on organized crime, we can begin thinking about ways to get around those legal barriers,” the source told Asahi Shimbun.

The Organized Crime And Corruption Reporting Project classified the Yamaguchi-gumi Yakuza as a transnational criminal group.

The Yakuza has been present and active in Japan since the 17th century, and membership to the group is not outlawed even today.

While the Yakuza offer aid and assistance during earthquakes and invest in legitimate businesses, they also operate outside the lines of the law, usually taking care to keep these interests separate from their illegal activities.

Why Is There So Much Interest In Japan?

Japanese gamblers and Japan’s gambling industry is pegged to be worth as much as $40B annually, putting the country on par with Macau, the current hub of gambling in the region, according to Nikkei Asia.

The report said that Japanese gamblers already wager around $200B a year on pachinko and slot machines.

While Japan offered a similar environment to Singapore — infrastructure, hotels, flights, entertainment — the critical difference was the fear that organized crime, in the form of the Yakuza, would inevitably become a part of the legalized gambling space. Thus far they have operated in the shadows and been a target of law enforcement.

Matsumoto Hiroki, an investment adviser and former stockbroker who has studied yakuza strategies, noted in his book “Kyoseisha: The behind-the-scenes fixers in the Japanese stock market and yakuza money” that the groups can be exceptionally good at gaining control over a company via the use of information gathering, honey traps and blackmail.

While it was believed that advanced technology, including facial recognition, would be deployed to ensure that known yakuza members would not get access to the legalized casinos, there was the fear that these individuals could still gain back door or indirect access to these venues and extort or otherwise put pressure on legal patrons from parting with their winnings.