The Road to Possible Casino Openings in Japan

After more than 10 years of lobbying, there is now a good chance that a bill to legalize casinos could pass the Japanese Diet.

The lawmakers who favor legalizing casinos in Japan have formed an all-party group for the promotion of international tourism into Japan. Called the “IR Caucus,” it has campaigned for legalization of casinos in Japan. In December 2013, the members of the IR Caucus submitted to the Japanese Diet (the Japanese Parliament) a bill for the designation of areas within Japan as integrated resort areas that would allow for the development of casino resorts in Japan (the “Promotion Act”). The lawmakers in the IR Caucus are keen to have the Promotion Act passed in the ordinary session of the Diet in 2014.

Legalization of Casinos Would Be Implemented in Two Stages
The Promotion Act reflects a “two-stage” approach toward legalization of casinos in Japan. The first round would be to pass the Promotion Act, which provides a basic framework for the legalization of casinos. The Promotion Act envisions, among other things, (a) internationally competitive special zones where casinos may be permitted, (b) an independent government agency overseeing casinos and (c) public charges to be levied on casino operators and visitors. After successful enactment of the Promotion Act, the second round would be for a governmental task force established to prepare detailed laws and regulations to implement the basic framework and expedite relevant procedures for the legalization of casinos (the “Implementation Act”). It is contemplated under the Promotion Act that a bill for the Implementation Act should be prepared for further deliberation at the Diet within a target period of one year after successful enactment of the Promotion Act.

What Would Possible Casino Openings in Japan Be Like?
As mentioned above, the details of casino resorts in Japan will depend on the Implementation Act, which is currently unavailable. However, the Implementation Act would be prepared by the government task force to be established pursuant to the Promotion Act, and it is possible that what would be included in the Implementation Act may be significantly different from what is currently discussed at the IR Caucus. From recent discussion at the IR Caucus in relation to the basic idea for the preparation of the Implementation Act, it appears that the lawmakers who favor legalizing casinos consider the following items necessary to be covered by the Implementation Act:

Designated Integrated Resort Area: Casinos may be permitted only within a special zone that would be called a “Designated Integrated Resort Area.” Casino facilities may be developed and operated as one component of a complex of tourist facilities that may consist of casino facilities, conference halls, exhibition facilities, recreation facilities, accommodation facilities and other facilities promote tourism in Japan. Designation of a site as a designated integrated resort area will be made by the central government based on an application from a local government. Initial candidate sites for the designated integrated resort area would be narrowed down to a small number where the scheme would be tested. It would be preferable that such test cases are established in both a large city and a regional city. Following evaluation of such introductory round, other sites may subsequently be added for further designation as designated integrated resort areas.

Involvement of Private Sector: The local government where a designated integrated resort area is located will select casino operators from the private sector, and the development and operation of casino facilities will be made by such selected private casino operators. No prohibition on foreign investment in the development and operation of casino facilities in Japan is currently contemplated.

Casino Control Committee: The Casino Control Committee would be established as an independent regulatory committee. The committee would establish a casino license system and other detailed rules for the development and operation of casino facilities and be authorized to monitor and oversee casino businesses generally. Casino operators, suppliers of casino machines or equipment and other service providers in casino operation who are selected by the local government of a designated integrated resort area must separately receive the relevant clearance, permission, license and other dispositions from the committee. It is contemplated that the casino license system and other rules prepared by the committee would be compliant with international practices and standards that are currently adopted in other jurisdictions.

Appropriate Measures to Maintain Sound Operation of Casino Facilities: Casino operation would be regulated by the Japanese anti-money-laundering regime, as is the case in other jurisdictions. All visitors to casino facilities would be required to pass an identity verification so that groups linked to organized crime and minors are not able to enter casino facilities. A public body aided by the central government would be created to investigate problem gaming issues and provide appropriate assistance for people who are affected by problem gaming. An exclusion program similar to that currently adopted in other jurisdictions (i.e. whereby entry into casino facilities is prohibited based on an application by a player or their family) will be considered for introduction.

Use of Revenue from Casino Operation: Public charges would be levied on casino operators and visitors so that a portion of the profits from the casino operation would be given back to society. The central government would use such levies and fees to deal with the falling birth rate and the aging population, improvement of social insurance, and promotion of culture and arts. The local government would be able to levy public charges separately and use them for the purposes approved by the local assembly.

According to the lawmakers who favor legalizing casinos, if all steps proceed smoothly, the first casino resort may open as early as 2019. While there is still strong opposition to casinos, the move toward legalization is aided by Japan’s successful bid to host the 2020 Olympic Summer Games in Tokyo, and the mood of those in favor is positive.

This article was prepared based on the information available as of March 2014. This article should be read together with monitoring of the on-going deliberations at the Diet in respect of the bill for the Promotion Act and other relevant developments.

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