As investors place bets on Prime Minister Shinzo Abe's program for economic growth, the success of Japan's revival plans may rest, oddly enough, on casinos.
For more than a decade now, Las Vegas Sands chief Sheldon Adelson and his counterparts have salivated over bringing gambling tables to Asia's richest nation. Abe is nudging lawmakers to legalize casinos to help boost gross domestic product. With analysts estimating Japan's gambling-resort market will be worth $40 billion a year by 2025, it seems like a safe bet.
But Abe faces tough odds winning lawmakers over. Worries that casinos will do more to enrich organized crime and create a generation of gambling junkies than raise living standards run deep. That's why investors view this debate as a test of Abe's ability to restructure the economy. What are his chances? Decent, but not great. Abe must work harder, and need a dollop of luck, if he's going to engineer the Las Vegas-ization of Japan.
In some ways, I find this whole argument about the social ills of gambling silly. Japan has long been awash in pachinko, lotteries, and betting on everything from horse, boat, bike and motorcycle racing. Japan engages in the fiction that gambling is illegal when in 2012, pachinko (a kind of vertical pinball machine) alone had $186 billion in revenue. Japanese like to think their nation is bookmaking-free, just because they walk around the back to collect their winnings, as opposed to a counter inside an establishment.
Getting this bill near the parliament floor is a breakthrough for what could soon be the second-biggest gaming market in Asia after Macau. It would mean more jobs, visitors, consumption and, in turn, a more internationalized Japan as Tokyo prepares to host the 2020 Summer Olympics.
"Integrated resorts are expected to provide a great contribution to tourism, regional economies and industry, I think, and can be one of the key elements of Japan's growth strategy," Abe told Bloomberg News in a June 24 interview.
But this remains an uphill climb. The fact the bill was added at the very last minute to the Diet session and won't be voted on for months shows Abe doesn't have the votes, even within his Liberal Democratic Party. Why? The same reason Abe has failed to implement a single one of the structural reforms he's waxed on about for 18 months now: powerful vested interests.
The real resistance to Las Vegas Sands and MGM Resorts isn't puritanical thinking or fears of a crime wave (betting tables haven't destroyed Singapore). It's the politically connected existing gaming outfits that fear being bankrupted by the arrival of the Vegas tycoons. This, after all, is why it's taken almost a dozen years of lobbying to get Japan even close to its Las Vegas moment.
The other problem is geopolitics. Any economic fillip related to baccarat tables and roulette wheels will rely on attracting a sizeable share of Chinese wagerers. That could be a reach considering Abe's nationalist rhetoric, his visit to the controversial Yasukuni Shrine and plans for a more assertive military. Today, Chinese gamesters who have had their fill of Macau can head to Cambodia, Malaysia, the Philippines, Singapore, South Korea, Vietnam, Australia or elsewhere to sit before the sacred green felt. Will they really flock to Abe's Japan?
It's a risk worth taking. Japan's underperforming tourism industry could use a boost, and so could national tax revenues. Casinos also could be strategically built in depressed areas such as Tohoku, which was racked by the 2011 earthquake, and Okinawa. It's up to Abe to invest political capital and see this legislation through. If he plays it right, Abenomics could win a slew of new converts and find itself on a roll.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter at @williampesek.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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