The tantalising goldmine that could await first-movers into Japan’s casino market

  • Potential for Japanese casinos expands Asian market
  • Major global casino brands expected to invest in Japan

The potential for casinos in Japan and the growth of Macau’s gaming markets have caused key US casino brands to set their sights on expansion across the Asian gaming market.

Casinos are looking to break into Japan's $20 billion dollar casino market
Building casinos in Japan is a goldmine waiting to be plundered, but regulations mean it might not be easy work. Picture: DonChewbacca

Investors and financiers predict an upcoming boost in casino stocks among established international brands like Melco and Wynn Resorts.

The first gaming licenses in Japan are expected to be available from 2019, with several parties showing keen interest – and no wonder given the success Macau has brought.

Japan moves toward legal casinos after landmark ruling

The door is officially open for casinos in Japan, after the government ruled to legalize casino games last year – despite a generally negative public opinion towards gambling.

Debates are currently ongoing as to how the casino industry will be regulated, from the limits on table numbers and floor space to the access permitted by Japanese citizens.

When opened, the integrated resort casinos will offer games such as roulette and blackjack, along with hotel and entertainment services.

The potential of the gaming market in Japan is $25 billion, reports the Las Vegas Review-Journal. Top casino chains like MGM, Wynn, Las Vegas Sands and Hong Kong’s Melco are expected to submit bids for one of the few gaming licenses available – though many are waiting to see if heavy government restrictions will remove the profitability of the casino market.

Asian gaming demand grows, along with Macau revenues

Many of the casino groups interested in the Japanese market are already established in Macau or have ties there.

The gambling market in Macau is growing rapidly, with a rise in revenues reported consistently by the state for almost a year. Strong demand for VIP gaming and an economy that relies almost totally on gambling have seen Macau transform into the gaming capital of the world, with $32 billion earned through casinos in 2016.

Investors get ready for Japanese casinos

Though casino investors have downplayed their desire to jump straight into the Japanese gaming market, there is an obvious need for competition in this potentially lucrative market and the leading operators will be waiting to strike at the opportune moment.

When the domestic market for the pinball-cum-slot game pachinko is worth $200 billion alone, it is not hard to see why Japan is a tantalising prospect.

Just three licenses are expected to be issued to integrated resort operators when legalization comes into effect, and any casino operation could be limited by the new law. Poker may not be permitted, for example, which would harm the bottom line of an international casino brand.

Floorspace could be limited, and taxes might be at the higher end of the scale. These uncertainties make it hard for a potential investor to commit.

However, Nasdaq reports that casino stocks for operators within the Asian market, including Melco and Las Vegas Sands, are likely to rise in the coming months and years.

The potential for sudden growth when the Japanese market opens up means stock prices are likely to mimic those boosted by the ‘Macau effect’ in recent years. The influence of Asian casino gaming has turned around ailing stocks struggling as Las Vegas revenues have plateaued, leaving top operators riding high once more.

An investment in upcoming Japanese operators – before profits rise and demand peaks – could certainly pay off when Japan’s casinos open.

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