Japan Commences Construction of Its First Casino Resort 5 Years After Legalization

It has been nearly three years since legalizing commercial gambling in July 2018. Finally, Japan is actualizing its debut integrated resort (IR) casino in Yumeshima Island, Osaka. Following a competitive bidding process, global casino trailblazer MGM Resorts International and Orix Corporation, a financial services company in Japan, nabbed the license to establish an IR at Yuhemina Island, a man-made island in Osaka Bay. No doubt, the launch of construction for Japan’s first casino resort is a notable milestone, considering the many delays the initiative has faced along the way.

July 2018 was a momentous period for the land of the rising sun, especially after the passage of its casino laws. Every big player in the industry was attracted by the prospect of setting up shop in the country. The casino giants looked to utilize what at the time was said to be the biggest market opening since China’s Macau targeted partnerships for one of the three casino licenses available. Besides MGM Resorts International, other industry juggernauts interested in a piece of Japan’s casino gambling pie included Las Vegas Sands, Caesars Entertainment, Wynn Resorts, Hard Rock International, and Mohegan, just to mention a few.

It’s Been a Long, Bumpy Ride for Japan’s Integrated Casino Journey

While the prospect of setting up shop in Japan for these companies was initially exciting, Japan’s lengthy rulemaking progressions would eventually see the excitement quietly fester. This, coupled with the COVID-19 pandemic, slowed down the national appetite for setting up casino regulations for the Asian nation. For instance, the slow and often tumultuous progression toward market debut eventually saw Sands announce its withdrawal from consideration in Japan in May 2020. Sands was the world’s largest casino operator based on gaming revenue at the time.

Moreover, there were concerns about whether the Osaka casino resort’s construction would even take place in the first place. For example, earlier this year, some of the 20 or so lenders expected to join the Osaka IR initiative appeared skittish. The said lenders were especially worried in the wake of the adverse effects that the global casino industry had felt after the COVID-19 pandemic. As a result, there were serious doubts about whether the planned Osaka IR would amass the funding it required to advance to the construction stage.

Additionally, enthusiasm for the Osaka casino project had further been dampened by the vast growth of the online gambling market, especially after the pandemic. This was particularly concerning as initial projections expected the casinos to contribute about 80% of the integrated resorts’ earnings. With a price tag of JPY 1.27 trillion (US$8.6 billion), it’s worth noting that the planned financing for the Osaka IR was set to be the largest ever in Japanese history. For a better perspective, it even dwarfs the ¥360 billion provided for the privatization of seven Hakaido airports.

Japan’s First Casino Expected to Open its Doors in 2030

When the dust settled after all the delays, construction began zealously with site prep on Yumeshima Island, an artificial island in the Osaka Bay region. This casino complex will include restaurants, shops, and entertainment facilities that will all sum up the integrated resort concept being pushed by the powers that be in Japan. Assuming the project does not hit any snugs, the Osaka IR is expected to open in the first half of 2030 – one year later than the 2029 debut date the government had initially set.

The Osaka IR Corporation (a joint venture between MGM Resorts International and Orix Corporation) is the company tasked with construction. Each of the two partners owns a 40% stake in Osaka IR Corp, whereas another 20 local companies hold the remaining 20% stake. Meanwhile, the lead loan financiers, the MUFG Bank and Sumitomo Mitsui Banking Corp, both Osaka-based institutions, will chunk close to ¥300 billion each. However, Other financiers are expected to join the fold as the construction process continues.

When MGM and its local partner Orix Corporation nabbed the contract to steer the Osaka IR project in 2021, MGM CEO and President Bill Hornbuckle expressed his delight by saying:

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“It is an honor to be selected by the government of Japan to develop a tourism project of this scale…We couldn’t be more excited to get started on the development of one of Japan’s first Integrated casinos in the great city of Osaka., and we look forward to working with our partner Orix and Osaka prefecture/ city to realize this long-held goal.”

Osaka’s IR to Boost Japan’s Economy

This casino project is expected to contribute immensely to the economic growth of the Kansai area around Osaka and, indeed, to the economic prosperity of Japan. Through the three casino projects and efforts like the forthcoming World Expo 2025, the Asian powerhouse aims to recover fully from the ashes of the COVID-19 pandemic. The MGM Osaka IR intends to set up three hotels from different brands as part of the IR establishment. The three hotels are expected to offer about 2,500 guest rooms and a cumulative 730,000 square feet of convention space based on the current blueprints.

Additionally, the resort is projected to attract roughly 6 million international and 14 million domestic tourists, with the Japanese government targeting ¥520 billion in revenue annually. Should such numbers be achieved, the returns are significant enough to justify the enormous investment channeled towards the project. 80% of the said revenue is expected to come directly from the casino, which is undoubtedly an encouragement of sorts to those who worry that this investment may not be what Japan needs.

On the flip side, gambling addiction support groups, among other anti-gambling lobbyists, have expressed grave concerns about the prospects of casino resorts in the Asian nation. In an open letter to the Japanese government, these groups cited a surge in requests for help from young individuals who have become addicted to gambling. The concern is that these pleas for help could very quickly get out of control when the casino resorts begin operations. As they see it, the current systems could thus be overwhelmed, and problem gambling could soon become a national crisis.

Well, while the concerns from the anti-gambling groups are valid, everything should work out just fine in favor of Japan, provided more measures are introduced to protect vulnerable demographics. They could, for instance, borrow a leaf from the likes of Vegas, Atlantic City, and Macau, where there are thriving casino industries in environments that prioritize player protection and safer gambling.