Major Casino Developers Eager to Join the $40 Billion Japanese Casino Market

If Japan decides to introduce casinos, the country’s gaming market could be worth as much as $40 billion a year.

Wayne Duggan, author of Beating Wall Street with Common Sense and an investor owning shares of Melco Crown Entertainment, has good news for the Japanese market. In an article published by The Motley Fool, Duggan said if Japanese authorities open the gambling market by the end of 2014, the country’s economy could see a huge growth.

According to industry experts, a legal casino market could potentially generate $40 billion a year, but authorities are still debating the issue. Meanwhile, the world’s largest casino developers – Melco Crown Entertainment, Las Vegas Sands, MGM Resorts, Wynn Resorts and Caesar’s Entertainment Group – are on the edge of their seats, at the thought of all the profits to be made.

To gamble or not to gamble?

Here are the companies that could open casinos in Japan, if the country legalizes gambling:

• Melco Crown Entertainment
• Las Vegas Sands
• Caesars Entertainment
• MGM Resorts
• Wynn Resorts

The local Government has taken several steps to help the country’s economy grow, including fiscal stimulus, monetary easing and the implementation of a new sales tax in April. But Japan still needs a growth strategy that includes measures to boost tourism and plans for new “integrated Japanese resorts” – or casinos – have been announced.

With the 2020 Olympics being hosted in Tokyo, it seems like the perfect time to change the current Japanese gambling laws and allow casinos, in order to offer new entertainment options for the wave of tourists expected to flood the country. Hong Kong brokerage CLSA estimated that Japan’s casino market could generate a $40 billion annual revenue by 2025.

“Integrated resorts will be a key feature in our growth strategy and consideration should proceed from the standpoint of how to best draw visitors from across the world,” Prime Minister Shinzo Abe, who is pushing for the legalization of casinos, told reporters.

His aim is to draw three times more tourists to the country and reach a number of 30 million visitors by 2030.

The battle against illegal gambling

While the Prime Minister has most of his party members on board with the idea of introducing casinos, but the opposition is still not convinced this is the right way to go. Opponents fear that legalizing casino games would lead to gambling addiction and the spread of organized crime syndicates.

However, some might argue that this is not a valid argument, as Japan’s underground gambling scene is already thriving. With yakuza gangsters running illegal casino operations throughout Japan, often associated with underground clubs and massage parlors, crime syndicates are already flourishing.

Supporters of the idea believe that introducing a clear set of regulations for land-based and online gambling sites in Japan could actually help reduce crime rates, as most customers will prefer and choose legal operators.

Who’s interested in Japan?

As the example of Macau clearly shows, there is a lot of money to be made from gambling. If the new bill passes, major developers will line up to get their hands on one of the new casino licenses offered by the Japanese state.

Some of them have already presented their offers to local authorities, pledging to invest billions of dollars. Lawrence Ho, chief executive officer at Melco, announced that his company is willing to spend as much as $5 billion on a new investment in Japan, should the new law pass.

This would be a great opportunity for the casino developer to expand outside Macau and reach into gaming markets in the Philippines and Russia.

Caesars Entertainment Corp. also said it was ready to make a $5 billion investment in Japan. Chief Executive Officer Gary Loveman said the company “will have no trouble raising the finance for a world-class facility in Tokyo.”

Is it really worth it?

Considering the huge profits made through its Macau operations, Las Vegas Sands might also be interested in obtaining a casino license in Japan. The company saw a 49% year-on-year revenue growth in China, during the first quarter of 2014.

MGM’s operations in China generate 37% of the company’s total revenue. If the developer opened a new casino in Japan, this could help increase the brand’s presence on the Asian market. And with a brand new casino in Japan, business could also pick up for Wynn, so it comes as no surprise that both companies have vowed to invest billions in the Japanese market.

Last year, casino revenue on the Las Vegas Strip reached a modest $6.5 billion. If experts got it right and the Japanese market will actually be worth $40 billion per year, there will be some serious competition between companies, to get their hands on a casino license in the country.