Japan’s parliament approved Thursday a law on “integrated resorts” that is the first major hurdle in allowing casinos to set up shop in the wealthy nation.
Supporters of the casino legislation say it would enhance Japan’s allure as a tourism destination and draw in wealthier travelers. Big players in the industry welcomed the news, with Wynn Resorts saying it was “extremely pleased” by its passage.
Opponents object to an expansion of legalized gambling, saying it will fuel organized crime and encourage gambling addiction. Surveys have shown a majority of Japanese oppose the plan.
Casinos are unlikely to start operating in Japan until 2021 or beyond, after the Tokyo 2020 Olympic Games. The new legislation would authorize the drafting of regulations for details such as the number and location of casinos, entry restrictions for Japanese and tax rates, which are expected to take up to a year to gain approval.
The approval of the final version of the legislation came in the wee hours Thursday, after a failed attempt by opposition lawmakers to pass a no-confidence motion against its top supporter, Prime Minister Shinzo Abe. Abe has sought passage of the long-delayed legislation for years, over the objections of many in his own ruling Liberal Democratic Party.
Tokyo, Osaka and Yokohama are among the cities said to be planning to seek casino licenses.
Casino operators view Japan as a lucrative “final frontier.” In a report this month, analysts at investment bank CLSA estimated the potential market at $30 billion a year in gross revenue.
“This is a landmark occasion and should be a shot in the arm as it relates to investor sentiment in all gaming names that could be players in Japan,” Grant Govertsen, a Macau-based analyst at investment firm Union Gaming, said in a commentary.
CLSA’s forecast is based on revenues from Japan’s existing forms of gambling, which include lotteries, pachinko _ a kind of pin-ball machine _ and wagering on horse, auto, bicycle and power boat racing, which combined rake in more than $30 billion.
Billionaire U.S. casino moguls such as Sheldon Adelson, head of Las Vegas Sands Corp., and Steve Wynn of Wynn Resorts, or their representatives have often visited Japan to lobby for legalization.
The American Gaming Association, a trade group representing the $240 billion U.S. casino industry, said it had been working to inform Japanese lawmakers about various issues.
Facing down fierce objections from opposition lawmakers, Abe argued that gambling would amount to only a small fraction of the total business of the hoped-for integrated resorts, which combine casinos with hotels, convention space, theme parks and shopping malls.
“It’s not like the whole city will be taken over by casinos,” Abe said in response to sharp jibes from Renho, an opposition leader. “These facilities will attract investment and do much to help create jobs.
Japan could become the world’s second largest gambling market behind No. 1 Macau, Govertsen said.
“Quite simply, it represents the next and perhaps only other large opportunity to develop large-scale integrated resorts in Asia for a lot of these companies,” said Govertsen. “Some of these companies, their revenues and cash flow are so large today that it would take an opportunity like Japan to move the needle for them.”
Adelson told analysts in 2014 that his company was “willing to commit substantial capital investment to develop large-scale, truly iconic integrated resorts” if Japan legalizes casinos.
“The reason why everyone’s spending the time on this is that the potential is absolutely enormous,” James Murren, chairman of Las Vegas-based MGM Resorts International, said in a recent conference call with analysts.
Japan is taking a gamble as the market cools elsewhere. A sweeping anti-graft campaign by Chinese President Xi Jinping has crimped lavish spending by high-rollers from mainland China, causing gambling revenue in Macau, which provides the bulk of profits for companies like Wynn and Sands, to fall for 26 straight months until August.
Macau raked in about $29 billion in casino revenue last year, about five times more than the Las Vegas strip, but down about a third from the year before.
Japan’s casinos are expected to follow Singapore’s model in some areas, perhaps charging an entry fee to local residents. Some other Asian nations with legalized gambling, such as Vietnam and Malaysia, have tighter restrictions on their own citizens visiting casinos. Other places like the Philippines and Macau have no restrictions.
Public opposition to the casinos is mainly based on concerns over gambling addiction. In a 2014 study, researchers with Japan’s health ministry found that nearly 5 million people, or 5 percent of the adult population, were thought to be addicted to gambling. That’s far higher than the 1 percent rate found in many other countries, said the researchers, who said pachinko was the main problem.