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Thu 8 Dec 2011 02:51 PM

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Japan eyes casinos to bring in quake aid

Gambling bill seen as potential shot in the arm for Japan's devastated economy

Japan eyes casinos to bring in quake aid
MGM Resorts International is closely monitoring Japan’s moves toward casino legalization

Japan’s record earthquake may achieve what Las Vegas magnate
Sheldon Adelson has been trying to do for years: Persuade the government to
allow casinos.

Adelson, chief executive officer of Las Vegas Sands Corp, has
for at least half a decade sought to reverse a ban on the gambling houses in
the world’s third-biggest economy, only to be blocked by Japanese legislators
arguing casinos would fuel organized crime and provide little benefit. Now, a
group of 150 lawmakers plans to introduce a bill that could allow resorts that
combine slot machines and gambling tables with hotels, shopping and
restaurants.

Japanese casinos could emerge as a 3.4 trillion yen ($44bn)
industry, according to a 2009 study by Ryosaku Sawa, an economics professor at
Osaka University of Commerce. That would provide an attractive source of tax
revenue for a government facing a 19 trillion yen reconstruction bill from the
March 11 earthquake, on top of the world’s largest public debt.

“It would be an engine for fiscal revival and job creation
that wouldn’t require raising taxes,” said Takeshi Iwaya, a member of the group
of legislators from six parties, including the ruling Democrats and their main
opposition Liberal Democrats.

Issei Koga, who leads the group, said today that he hoped to
introduce the bill during the Diet session that begins next month, because time
had run out on advancing the proposal during the current session, which ends
tomorrow.

 “The liberalization
of potentially Japan and Taiwan are on the cards,” Lawrence Ho, chief executive
officer of Macau casino operator Melco Crown (MPEL) Entertainment Ltd. and son
of gambling billionaire Stanley Ho, said in an interview. He will be “open
minded” about selling more stock in Melco Crown, which listed in Hong Kong
yesterday, to raise funds that may be used to expand outside the Chinese city,
he said.

Other casino operators are also betting that Japan will
overturn the ban.

“It’s a very attractive market,” said Steven Tight,
president for international development for Las Vegas-based Caesars
Entertainment Corp. “There just seems to be a very strong affinity to that sort
of entertainment.”

MGM Resorts International is also closely monitoring Japan’s
moves toward casino legalization, said Ed Bowers, the Las Vegas-based company’s
senior vice president for hospitality.

Nanami Kasasaki, Genting Singapore’s representative director
for Japan, said her company is paying attention too.

Adelson said he hopes all the talks he’s held with Japanese
government and business leaders will put Las Vegas Sands in pole position,
should the law pass.

“We’ve been lobbying there for years,” he said. “There’s no
doubt that we’re the leading candidate.”

Proponents point to Singapore as an example of how casinos
can generate cash without attracting the vice that some Japanese associate with
gambling.

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Singapore’s Marina Bay Sands, opened in April 2010, two
months after Genting Singapore’s Resort World Sentosa, and the city-state is
already set to raise an estimated $1 billion in gambling taxes this year,
according to Richard Huang, a Hong Kong-based analyst at CLSA Asia-Pacific
Markets. In Macau, the government may collect $13bn in taxes this year from its
34 casinos, he estimated.

The money generated by gambling in the two cities has
prompted countries across Asia to embrace the concept of Las Vegas-style
resorts. The Venetian Macao, operated by Adelson’s Hong Kong-listed Sands China,
generated more than $2.4bn in revenue last year.

“There’s more momentum and greater optimism than there has
ever been in the past,” George Tanasijevich, chief executive officer of Sands’
Singapore operation and Adelson’s representative for Japan, said in a phone
interview.

South Korea, which has casinos catering mostly for
foreigners, is making its own legislative push to permit the development of
casino resorts.

In the Philippines, Japanese pachinko company Universal
Entertainment, the biggest shareholder in Wynn Resorts, plans to build a $2.3bn
hotel and casino as part of Manila’s Entertainment City project.

Casinos in Japan would compete with existing forms of legal
gambling, including bicycle, motorboat, motorcycle and horse races, along with
pachinko - a type of combination slot and pinball machine - and some soccer
matches. Those pastimes earned more than 25 trillion yen, or about $322bn, last
year, according to a 2011 White Paper on Leisure published by the nonprofit
Japan Productivity Center.

Keiko Itokazu, an independent legislator, said she was
concerned that organized crime, known as the yakuza, would exploit casinos for
prostitution and selling drugs.

“The yakuza would certainly get involved.”

Takashi Kiso, head of Tokyo-based consulting firm
International Casino Institute Ltd., told lawmakers in November that it would
be a mistake to assume Japan would copy Singapore’s success in controlling
vice. Singapore’s gambling resorts are isolated from the rest of the city. The
city-state’s small size and strict rule of law also make it easier for
authorities there to clamp down, he said.

Casinos may fail to deliver the expected level of economic
windfall for the country, according to William Thompson, a professor at the
University of Las Vegas, Nevada. The benefits would depend on Japan’s ability
to draw a large number of gamblers from overseas.

“If they don’t get foreign gamblers, for the economy it’s at
best a zero and at worst a negative,” he said. “If the gamblers are Japanese,
the money is coming out of the Japanese economy.”

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