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Casinos: Taking a Gamble on Japan’s Future

Can legalized gambling in Japan revitalize the economy or are the negative social impacts too large?

By 6 min read 8

If you’ve lived in Japan for any length of time or indeed if you’ve visited a few times, you will be aware that contrary to the prevailing stereotype, many Japanese love gambling. The “Keiba” (horse racing) regularly pulls in crowds in the tens of thousands and packed pachinko parlours line streets both urban and rural across the nation.

However, in spite of this, gambling remains, in principle at least, largely prohibited in Japan. Gambling on pachinko is still technically illegal, although the methods for getting around the law in this regard are well-documented. Horse racing does allow gambling, however, this can only be done through the on-course bookmakers. Online gambling and all other forms of sports betting, with the rather bizarre exception of powerboat racing, are banned.

However, the rise of online gaming in recent years as well as the boom in popularity of US style card games like “Texas Hold’em” poker has led to calls from many to soften Japan’s rigid anti-gambling laws.

Now, some of Japan’s political heavyweights want to take it a step further. Later this year, a casinos bill will come before the lower house of Japan’s parliament. Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) has expressed support for the principle of opening casino resorts in Japan. However, not everyone is on board with the idea. The social ills that stem from gambling are well known, and as such many members of the Komeito party feel that legalizing gambling could do more harm than good.

But let’s look at some realities here. Japan is still running a massive budget deficit. The stagnant economy has shown only the briefest indications of possible revival, and the aging population means that the time when the “demographic time bomb” will finally detonate draws ever closer. Japan needs additional revenue and lots of it. For all the negatives that casinos can potentially bring, the massive tax receipts they generate would give Abe’s flagging economic policy a much-needed shot in the arm.

One possible venue for the first casino is indeed my current residence, Osaka.

Osaka city mayor Toru Hashimoto, for all of his other disagreements with the Abe government, is an avid supporter of the casino plan and the revenues and new job opportunities it would bring to his city.
Hashimoto has even said he hoped legislation could be fast-tracked and a casino opened in the prefecture by 2019, to hopefully cash in on some of the pre-Olympic tourism buzz in the run-up to Tokyo 2020.
This timeline does seem optimistic, to say the least, with the wide-range of opposition to the bill as well as the snail-like pace at which the great behemoth that is Japan’s bureaucracy actually moves.

So, would a casino be a good idea for Osaka, or for Japan as a whole? Let’s look at some of the arguments in greater detail.

Supporters of casinos point to the aforementioned tax revenue and job creation. There have also been a number of ideas aimed at limiting the social impact. One suggestion is to build the casino far from the city centre and control who can have access. Some have even called for the sites to be accessible only to foreign nationals, but such a plan would surely meet with resistance from Japanese voters. In particular one of the proposed sites for the Osaka casino, is an island in the Osaka bay, which would initially at least be accessible only by boat.

Casinos can have positive economic impacts beyond just increasing government coffers. Many cite Macau as an example of how casinos can boost a local economy and revitalize areas in social decline. Much like other currently illegal vices like drugs and prostitution there is also the progressive argument that goes: “These things will happen anyway if the government legislates for them, at least they can control it and society as a whole can benefit from the tax revenues.”

However, as I have already said there are a number of people who, quite rightfully, oppose the very idea of casinos and legalized gambling coming to Japan.

The impact of addiction is huge. For every story of an individual who beat the odds to win big at Vegas, there are hundreds of stories of people who wound up broke, destitute and sometimes even dead after losing it all at the roulette table. The widespread popularity of pachinko shows that Japanese are by no means immune from the dangers of gambling addiction.

I’ve already cited Macau as a positive example of how depressed Japanese cities could use casinos as a means to stimulate their faltering economies. However, there are plenty of flaws in the Macau argument too. Although Macau saw revenues almost 5 times higher than that of Las Vegas last year, much of the money was sourced from “dubious” areas.

It is difficult to give a specific figure, given the often clandestine nature of Chinese money matters. However, research indicates that as much as 90% of the cash that passed through Macau last year from mainland China may have been illegally sourced. Mostly, organized crime figures in China see Macau’s casinos as an easy means of laundering money. Whilst Japan does have stricter controls on the money that is brought in and out of the country, there is no guarantee that we wouldn’t face similar problems here. Much has been speculated down the years about alleged links between certain pachinko operators and North Korean organized crime. It is hard to see how casinos would be any different.

What I’m about to say next may seem somewhat non-PC but it is based on real experience.

The fact is, China and Japan aren’t exactly the best of friends right now. The behavior of China’s Noveau Riche has in a number of recent cases around the world been less than stellar. The prevailing stereotype is that those exceptionally rich individuals are often rude, ignorant of local customs and societal expectations and possess an overwhelming sense of entitlement and superiority. Of course this is hardly a uniquely Chinese phenomena, but given the Chinese predilection for gambling, and if Macau is any indicator, then we should expect a massive influx of rich Chinese tourists, and as such, a possible growing resentment from the Japanese unfortunate enough to live and work close to the casino resorts.

Having considered the various pros and cons, I would say overall I am against the casino idea. Whilst we do need to look at new and innovative ways for Japan to bring in additional revenue, in this case, I believe the negative societal impacts far outweigh the benefits. I lived in Hong Kong for 2 years and I have seen firsthand the damage that can be done when a society begins to cater only for the rich elite at the expense of everyone else.

Whether you are pro or anti-gambling, the fact remains that casinos are by and large a rich person’s domain. They provide very little of benefit to the Japanese working class. However, while I don’t agree with a lot of his policies I can’t help but admire the tenacity and single-minded determination of Osaka’s Mayor Hashimoto. If anyone can make this idea fly then it’s him. As of yet, I remain unconvinced.

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  • maulinator says:

    When reading this article keep in mind that the author is
    citing very few hard facts and is interpreting a lot of factoids without a full
    diagnostic of the issue. It is more of a personal thought piece than something
    researched. This is absolutely fine for a thought piece, and so this is by no
    way meant to be a bashing, more like am initial reader warning.

    Let’s take a look at the crux of his argument, however. I
    also will try to avoid using data and facts as well, but will probably have to do so
    at some points.

    The author’s basic argument pro casino is financial and somewhat socio-political. Job growth and
    additional income due to taxation of the casinos. Let’s ignore the secondary and tertiary
    sources of income such as casino licensing fees (which can be quite high) and
    the ancillary spending that the gamblers will incur while staying in Japan etc.
    for the moment. The benefits are pretty
    much financial and socio-political.

    The main con that arises in the article is
    the social costs that are attached to gambling.
    He mentions three major categories which I will offer evidence that he
    is blowing things out of proportion.

    His first social ill is the cost of
    addiction. Gambling addiction is a real
    problem, but for him to call it a huge problem is a question of relative
    measure. Roughly 6 million people in the
    US are considered to be problem gamblers (according to one number wikipedia article
    on gambling addiction- the actual number is arguable as the criteria for problem
    gambling is not universal). This is
    slightly under 2% of the population of the US.
    Just to provide a reference, NCADD thinks about 17.6 million US citizens
    frequently abuse alcohol. That number is
    already 3 times as large as the problem gamblers. Of the problem gamblers, the number of severe cases was quoted at 0.6% or
    roughly 1.8 mln US people. One way to
    look at the problem is that more than 10 times the people have a problem with
    alcohol than they do gambling. But this
    is just to provide a means of looking at the “huge” problem from a
    relative perspective.

    His problem with the argument is
    two-fold. One is that he mentions the
    consequences of gambling addiction in terms of the individual winning it all
    versus the abundance of losers. There
    are always going to be an abundance of losers as that is the way casinos make
    money. However, most losers are able to
    sustain it and walk away. He should be
    talking about the social ramifications of gambling addiction, the stress, the
    lack of sleep, the need for a fix, all interrupting the gambler’s life and
    making life miserable for those around him/her as well. The author slightly off the mark on his
    argument. The addict gambles not to win
    or lose but to get a fix from the thrill of gambling. It is less about winning actual money but the
    process. The thought of winning and the
    accompanying rush is more important than the physical cash.

    The other is that he is forgetting about
    all the other outlets of legal and semi-legal gambling that is readily
    available in Japan. Pachinko parlors,
    OTB, keibajyo, keirin and motorboat, as well as the slightly dodgy mahjong
    lounges that are spread throughout the country.
    The addicts already have ample places to get their fix. The addition of a casino means that there is
    just another outlet. It is not like the
    introduction of a casino is going to usher in a whole new wave of addicts. In the case of Japan, the addicts are already
    there, gambling away. There is nothing
    written that provides uncontroversial proof that casinos results in more problematic
    gambling than prior to the introduction of a casino to the area.

    The author’s second argument against
    casinos is the prevalence of money laundering.
    He mentions Macau as an example. Macau was a state approved monopoly for a long
    time, where the government looked the other way while laundering was
    occurring. The same held true for Las
    Vegas while it was mostly mobbed up.
    Now, you have corporations running the casinos. I am sure there is some type of skimming and
    laundering going on, but the SEC and government agencies have little tolerance
    for doctoring the books when it comes to corporate earnings. While it does happen, (Enron for example) it
    is easier to prosecute as all the numbers have to be publicly published and the
    accounting errors will be scrutinized by more than just insiders. Basically the point is that the casinos will
    be as corrupt as the government allows them to be, and the Japanese government
    is as corrupt as they come, but will probably keep the laundering to a minimum
    at the casinos as they will be scrutinized very carefully but the anti-casino
    groups.

    The Chinese nouveau-riche tourist problem
    that the author mentions is at best racist and at worst ridiculous. The reason why the Chinese tourists make the
    news is that the behavior being reported is ridiculous and while some of it is
    accepted, most Chinese are appalled by the behavior. Most of the Chinese visitors I have met
    generally been polite, maybe a bit pushy but all tourists are, and try to be
    respectful in their own way I agree that
    the number of tourists may increase due to casinos, and tensions might rise, we
    already see a huge increase in tourists now (with the yen at 120 to the dollar-
    which is about a 40 yen discount from the highs at 80 JPY to USD). While the streets of Tokyo are more full of
    tourists than before, the streets are still harmonious as can be. The haters are going to hate. And if you are going to hate what better feeling
    than these tourists losing all their money to the casinos that are increasing
    the coffers of Japan?

    One argument the author makes in the pro
    side is the limitation of social impact by placing the casino in some isolated
    area or by not allowing foreign nationals into the casinos. He argues that the locals will object to such
    a restriction. Why? It is a weird restriction but it is not unprecedented. Walkerhill in Seoul not open to the locals
    but they are generally ok with it. Japan
    might prove different, but as many forms of gambling are already allowed, why
    not provide some high end gambling as well?

    I for one, am pretty ambivalent, but just
    from a new thing to do aspect, would like to see the casinos come to
    Japan. I always have a great time in
    Vegas, and my adventures there are another story, but then again, what happens
    in Vegas stay in Vegas.

    • Liam Carrigan says:

      Thank you for your well thought out response to my article. I have a couple of points i feel must be made.
      Firstly what I said about the Chinese tourists was neither racist nor ridiculous, but based on actual experience. Calling someone a racist is an extremely serious allegation and i would ask you look more closely at what i wrote before making such a misguided assertion. I said this is not a uniquely chinese problem, which it isnt.
      Secondly, how do you define a problem gambler? This is by its nature a concept open to personal interpretation and as such while i dont doubt your stats are accurate, they are difficult to verify given our differing views on what a problem gambler is.
      While there are a number of additonal social factors that you are correct to highlight, the primary impact someone’s problem gambling has on their family is financial. Ive heard far too many tales from Japanese friends of their fathers or mothers blowing most of their income in pachinko parlours.
      Sorry, but also i think you’re being extremely naive if you really believe that government regulators and anti casino lobbies would be able to keep a lid on the laundering and other vices that come with casinos.
      I respect your opinion, but i have to say i disagree and i stand by my original conclusion. Casinos in Japan are a bad idea.

      • maulinator says:

        My definition of the problem gambler is the one outlined in wikipedia, IIRC that definition is the “industry standard” in the US. It might not be your definition, but it is what the professionals often use.
        I never said that the government would keep a lid on the money laundering. I write that the laundering and corruption will be kept at the level the government wants. As the casinos coming to Japan are all listed companies at least in the US, their earnings and records must be maintained by an auditing firm in most cases. These auditing firms are onthe hook if laundering is discovered and would cause the casino to lose their license back in the US if something dodgy were going on. For the sake of the shareholders and invetors, money laundering would be considered very bad for business. Look at the casinos in Vegas. How much of the corporate profits are laundered? If illicit funds wer a huge portion of the take and it was revealed that there were two sets of books (like the mob used to do and acutally launder money) then the Feds would RICO their asses to SingSing. While some laundering may occur, it is going to be a t a level that the feds will not notice. Banks probably have less scrutiny than casinos in terms of laundering money. When I say this I look to Las Vegas as a concrete example, look at Wynn Resorts or the MGM Grand as examples.
        As for the other “vices” you mention, I never said the governent is going to control those, just laundering. I addressed the other main “vice” of addiction in Japan. The outlets are already there. Casinos do not add to the problem in any substantial way. So naive- really? I offer concrete evidence that a government and government agencies can control the laundering to a degree it wants to.
        Your assertions of the problems of gambling addiction are anecdotal. I am sure your acquaintances have gone through tough times with regards to the problem. At least in your example these people are not gambling illegally and getting their kneed cracked open by an enforcer or a bookie. And that problem may sound huge to you. but look at the relative numbers. You can argue my numbers but I did not make them up. And if you do please provide some fo your own.
        Once again, these people already have the problem prior to the casinos coming. Outlets for gambling legally or grey-area legally are already here. As I mentioned there is no concrete proof that casinos increase the industry defined (wikipedia look-upable) problem gambler. So, opening up a casimo in Japan is not going to severely exacerbate the problem. Your implication seems to be that with casinos the gambling problem will get much larger than it is now. The pachinko parlors and mahjong lounges are more of a problem than the casinos as they are pretty much unregulated, and typically run as independent small businesses without as much scrutiny as a typical US style casino would get. I am saying the problem is already here. Never denied that there are problem gamblers in Japan, and they already have legal outlets to gamble, hence the existence of the problem. So clearly in regars to this, the governmetn has no interest in “keeping a lid on it” as you mentioned. And I never made the assertion that the government was going to do that about this type of social ill.

  • Dale Messina says:

    Although it seems like a great idea in theory, I too feel that it would cause more issues down the road and ruin the japanese way of life since gambling has been outlawed for so long.

  • Casinos bring in all manner of other problems, most are neglected when discussion starts up about them: 1) dead zone: they do nothing for business area revitalization, they suck the air or cash out of any area you drop them into. 2) Wages and jobs spike, but then level off and the wages are suck level anyways. 3) governments screw each other over the “take” Osaka will be promised a percentage cut, but wont get it, Tokyo will take the revenue flow and externalize the costs. 4) Casinos are just a ritualization of one idiot taking the other idiots’ money with the gummint taking a cut for keeping the peace – you could have them fight in the parking lot and achieve the same thing. Very corrosive to the WA, Japan already has too much strong eat the weak – more would strain the society. 5) most semi legal gambling in Japan is captured by strong institutional bureaucracies and quasi industry groups, soldiers/police orphans, merchant marine, god knows what for the ponies. These add weird money to politics, and induce other distortions. i doubt that Casino management would go to a division of METI or the Tax department. Chinese tourists are the least of it.

    • maulinator says:

      I agree with you in most aspects, but the point one idiot is taking another idiots’ money is false, it is a savvy guy taking the idiot’s money. Otherwise the guy taking the money would not have any left for himself either.

  • Kenichi Meyer says:

    If Japan starts gambling, they need a way to protect the workers,guests and the surrounding area. It is always hard to tell guests that they need to go home because they pay your wages. Revenue will always be good the first year. The goal is to sustain revenue. Macau is trending down in revenues and could end up like Atlantic City. If Japan does decide, I hope they make the right choices.

  • Tess de la Serna says:

    Addiction to gambling is not the only problem they are going to face. With the Japanese culture the increase of suicide would be apparent.

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