Japan's casino bribery scandal deals Abe a tough hand

Monday 24th February 2020

YOKOHAMA -- A few hundred meters from the constituency office of Japan's top government spokesman, a group of about 150 Yokohama residents braved the rain to protest against ambitions to build a casino in the city.

The demonstrators called on Yoshihide Suga, the chief cabinet secretary, to "immediately scrap" the plan. "Gambling will mean the extortion of money from the people of Yokohama and the people of Japan," group member Masatoshi Goto shouted into a microphone at a crowd holding "No! Casino" placards. "We can't allow this!"

The protests last week in Yokohama echo widespread Japanese disdain for gambling and the baggage that comes with it.

This aversion, backed up by public opinion polls, did not stop Prime Minister Shinzo Abe's government from passing legislation in July 2018 to legalize casinos. The government argued that opening "integrated resorts" or "IRs" -- large entertainment complexes centered on casinos along with hotels, restaurants and conference centers -- would ignite more growth in tourism.

But after a casino policy point man from Abe's Liberal Democratic Party was arrested late last year on bribery charges, the government is taking longer than expected to set basic guidelines for the selection of resort host cities. In the meantime, a groundswell of opposition is building.

In Yokohama, Goto is launching a petition to hold a city referendum on the issue. His group needs 62,000 signatures, or one-fiftieth of Yokohama's population, to force a plebiscite. Nearly 30,000 people have already signed up to collect names.

And the odds are stacked in their favor. A local newspaper poll showed that, even before the bribery scandal, 64% of respondents in the city wanted to scrap the resort plans. Goto told the Nikkei Asian Review that his group is also seeking to collect the nearly 500,000 necessary signatures to force a recall election for Mayor Fumiko Hayashi.

The bribery scandal has been a gift for casino opponents like Goto.

On Christmas Day, lawmaker Tsukasa Akimoto was detained for allegedly receiving 3.7 million yen ($34,000) in bribes from 500.com, a Chinese sports betting group that had been seeking to set up a resort on Japan's northern island of Hokkaido. Prosecutors now allege he received more than 7 million yen and have arrested him again. He was released on bail earlier this month.

While Akimoto denies all charges, the optics are bad: He had been deeply involved in crafting casino policy, and gave a keynote speech at a symposium hosted by 500.com in Okinawa. He also met repeatedly with company representatives in the Hokkaido village of Rusutsu, once a potential resort site.

With the government stung by Akimoto's arrest, the process for choosing three casino locations has been interrupted. The plan was to set detailed criteria in January, based on which local authorities would conduct bidding. Now the criteria will not be set until next month or April, though the local officials are still required to submit their chosen operators in the first half of next year. The delay leaves time to lay down rules about contact between operators and politicians.

Some industry insiders expect the resorts will still open in 2026 or after, as anticipated before the scandal. But they also warn that the arrest will trigger stronger opposition and make it harder for local authorities to win over residents.

This lowers the odds of all three licenses being approved for an untapped market worth an estimated $15 billion per year, according to Morgan Stanley.

"Local authorities [such as Yokohama] have difficult decisions to make," said Ayako Nakayama, the CEO of the Japan IR Association, a group that promotes the industry. "They might have to force their way through the final [July 2021] deadline amid a stronger backlash, which would turn public perception even more negative."

Several polls by major Japanese media groups taken after the bribery scandal found that nearly 60% of respondents nationwide want the government to either rethink or ditch the plans.

City council members, sensitive to public opinion, could request further measures to prevent addiction and other social ills, according to Takashi Kiso, the CEO of the International Casino Institute, a consultancy.

"This would take time, and the decision on a resort plan may not be taken during an assembly session, making the authority unable to submit a proposal to the central government," Kiso said. "It's unclear if the number of [viable] candidate host cities will reach three."

Within parliament itself, the ruling LDP and opposition parties continue to spar over the resorts.

On Jan. 20, the first day of the general Diet session, four opposition parties introduced a bill to undo the laws that made casinos legal in 2018 and, by extension, upend Abe's economic revitalization plans.

Two days later, Yukio Edano, the leader of the Constitutional Democratic Party of Japan -- the biggest opposition party -- said the bribery scandal stemmed from the way Abe governs. He turned to the prime minister and asked, "Do you realize that you are heavily responsible for this?"

Abe answered, "It is a great pity and I am taking the situation seriously," without going into the details of the scandal to avoid "impacting the investigation."

Suga, whose office in Yokohama has become a target of protests, told reporters on Jan. 20 -- after the opposition submission of the bill -- that the resorts will be for family entertainment. "We have been discussing this from various aspects and will prepare so that IRs can bring benefits as soon as possible," he said.

Abe and his cabinet believe casino tourism can help boost a lackluster economy hamstrung by a shrinking, aging workforce. Overall, they aim to attract an annual 60 million visitors by 2030, up 88% from 2019, and triple annual tourist spending to 15 trillion yen. They are convinced casinos will draw in travelers, who would drop cash in surrounding communities as well as fan out across the country for sightseeing.

The prime minister claims that Japan is seeking to introduce casino regulations of "the highest global standards." Gaming areas will be limited to 3% or less of total resort floor space, and foreign visitors will have free entry. Japan residents, meanwhile, will have to pay 6,000 yen ($54) and have visits limited to three a week, and up to ten in a single month.

Pro-casino lawmakers point to Singapore, which legalized casino resorts in 2005, as a success story. That year, the city-state recorded 8.94 million international visitor arrivals, according to the Singapore Tourism Board. Last year, it welcomed just over 19 million.

Casinos would make less of an impact on Japan's much larger economy. But global operators such as U.S.-based Las Vegas Sands and Hong Kong's Melco Resorts & Entertainment sniff a huge opportunity in the Japanese market, and have spent more than a decade lobbying the government to open it up.

The companies say they would make investments of around $10 billion in their resorts.

Other than Yokohama, cities including Osaka, Wakayama and Nagasaki are in contention for hosting rights.

Osaka is a front-runner to win a spot, but it is now unlikely to have a running resort by the time the World Expo opens there in 2025. It also suffered a major hitch in its bidding process.

When the western Japanese city closed applications for operators on Feb. 14, it ended up with only one bidder -- a collective group of Las Vegas-based MGM Resorts International and its Japanese partner Orix. This means the city will be unable to profit by having multiple operators pitted against each other.

Despite the scandal, snags and public sentiment, prospective operators maintain optimistic poker faces. At an industry expo in Yokohama late last month, Las Vegas Sands' managing director George Tanasijevich said the arrest of Akimoto has not diminished his company's interest in the city.

The city of Yokohama is pressing ahead with guidelines for its upcoming bidding process, while seeking to get residents on board.

Takanori Yuki, who heads the city's integrated resort promotion division, questions whether the opponents really understand what the complexes entail.

"Some people say they want a resort like Marina Bay Sands instead of an IR," Yuki told Nikkei, implying these critics are unaware that the iconic Singapore resort houses a casino that generates most of its profit.

But Goto and his allies are not backing down.

"Mayor Hayashi was reelected [in 2017] saying the city would start again from scratch regarding a casino plan," Goto lamented. "But she suddenly changed her mind after the election and announced the bid in August 2019. Yokohama citizens were duped."

More than 90% of public comments to the city on the integrated resort plan were opposed to its development.

Naoyuki Abe, 77, has worked for more than three decades at a local public group that helps people who have lost money playing pachinko, a type of pinball machine played for prizes. Despite anti-gambling laws, these prizes are often exchanged for cash in an elaborate workaround.

At the rally near Suga's office in Yokohama, Abe said: "Almost everyone loses from gambling, and many end up suffering from reckless loans and seeing his or her family destroyed."

We use cookies and other tracking technologies to improve your browsing experience on our website, to show you personalized content and targeted ads, to analyze our website traffic, and to understand where our visitors are coming from. By browsing our website, you consent to our use of cookies and other tracking technologies. View more
Agree & Continue