Rules on running casinos in Japan

The proposed rules on opening and running a casino as a key feature of an integrated resort (IR), compiled by a government panel of experts last month, proclaim the introduction of regulations “of the world’s highest standard,” including restrictions on access to the facilities by residents of Japan and measures against the involvement of organized crime. These steps are aimed at addressing concerns over the possible social costs of introducing casinos in Japan — including the risk of exacerbating the problem of gambling addiction in this country — which were not sufficiently addressed when the government’s legislation to legalize casinos was rammed through the Diet in December.

However, specifics of the proposed restrictions, including the cap on frequency of visits to casinos by Japan residents as well as entry fee amounts, are still up in the air. Feasibility of the proposed use of My Number cards to keep track of how many times a resident has visited casinos may be in question given that less than 10 percent of the population has obtained such cards. The government, which plans to compile legislation regulating casino operations on the basis of the report and further public hearings, should quickly flesh out the measures so that their effectiveness can be verified.

The government reportedly plans to hold the public hearings in nine cities, including Tokyo and Osaka, which are deemed candidate sites for IRs featuring casinos, to sound out the views of local residents, officials of prospective host municipalities and businesses. Their input also needs to be sufficiently reflected in drawing up the planned legislation.

According to the panel’s report, plans to develop IRs featuring casinos by local host governments and IR operators will be screened by the Land, Infrastructure, Transport and Tourism Ministry for approval, with two to three sites likely to be selected nationwide. Each IR site can run only one casino, and must feature other facilities such as international convention centers, hotels and recreation facilities like museums and theaters.

In addition to the tax imposed on the IR operators, part of their proceeds from the casino business will be collected and split between the national government and the host municipality, which will use the resources for tourism promotion and other purposes. Only IR operators will be given a license to run casinos, which will need to be renewed at certain intervals. The government will supervise and review the IR operators, and the tourism minister will have the power to carry out on-site inspections of the operators and revoke their licenses if necessary. A government committee to be created will probe operators for possible underworld links. Their license can be revoked if they are found to have been involved in illegal activities, including money laundering.

As for measures to prevent casinos from fueling the problem of gambling addiction, the panel’s report proposes requiring Japan residents to produce their My Number cards for identification so operators can keep tabs on how many times they visit the casinos over a certain period and restrict their entry. In addition, residents will have to pay daily entry fees. To bar the access of suspected gambling addicts, their entry can be restricted via requests made by their family members or themselves.

The government has set an ambitious goal of increasing the annual number of inbound tourists to 60 million and their spending to ¥15 trillion in 2030 — compared with 24 million and ¥3.75 trillion last year. The Abe administration counts on development of IRs featuring casinos as a key component of its efforts to bring in more wealthy travelers to Japan and help boost the economy.

At the same time, the experts panel report highlights the revenue structure of IRs, which is expected to rely heavily on casino proceeds. It says that the operation of a convention center and other facilities in the IR, whose profitability on their own may be in doubt, should be subsidized by the earnings from the casino. That structure raises the question as to how far the government will go in tightening the regulation on casino operation — possibly risking curtailing its business — to guard against gambling addiction.

As the government touts the benefits of opening casinos, several prefectures and cities have expressed interest, seeing them as a potential boost to their economies. However, there are views that the economic benefits of casinos are overblown — given some examples of casino-equipped IRs overseas merely taking customers away from nearby businesses, as well as the associated social costs to the host communities. The government should listen carefully to what local residents and businesses have to say in the upcoming public hearings.