By Daniel Cheng
It seemed that all and sundry in gaming circles had considered it a foregone conclusion that Osaka will be a venue for one of the first three Integrated Resorts (IR) to be developed in Japan.
There are good reasons for the unanimity in sentiment as Osaka has been, until recently, the only metropolitan location aspiring to host an IR. The Osaka government has the highest level of readiness, having committed considerable human resources and municipal budget over the last few years in the IR planning process. They are one of the only two locations with a concordant local assembly in support of IR development. Till now, Osaka is still the sole candidate with a ‘clean’ or unencumbered land parcel in their Yumeshima site with its only challenges in the construction development planning which overlaps with the construction of the Osaka Expo and its six-month run during the summer of 2025 in the same vicinity, and construction complexities of such a major developments on reclaimed land plus the shadow of a toxic waste landfill on the western side of Yumeshima.
Politically, too, Osaka looked to be in good stead with its local government enjoying a strong relationship with the LDP national government. Toru Hashimoto, the party’s former leader, still cast considerable influence in the national political scene despite retiring from politics a few years ago. His close affiliation to Prime Minister Shinzo Abe is well known and had even been touted himself as a future prime minister at the peak of his popularity. All these factors had contributed to the indomitable position which Osaka had basked and enjoyed, feted by the all the major casino operators falling over each other to get into its good graces. A bidding war had begun well before the official tender exercise commenced, with record-breaking investment bid promises tilting US$10 billion, and even avowals of ‘whatever it takes.’
Osaka lost a bit of its sheen in August 2019 when Yokohama City announced to the world of their intent to invite an IR development in its scenic bay area. Almost immediately after, two casino companies formally bowed out of the Osaka race in favor of Yokohama for obvious reasons that Yokohama presents a more attractive business economics with its vicinity to the Tokyo metropolitan area. But Osaka still have three major casino brands pledging allegiance to it, with one touting an ‘Osaka First’ dictum. With three locations in play, Osaka can be seen to be still in a assured position even if it had fallen into second fiddle to Yokohama.
But politics continue to be the unseen rudder as the Integrated Resort saga navigates closer and closer towards its final destination and three victorious berths; and the politics is not merely confined to Japanese national politics but also a geo-political penumbra ever since the topic was broached at a round of golf in Florida.
That inducement at the highest level gives leverage to the American investment camp contrasted with Chinese suitors whose government has an uneasy relationship with Japan. The latter, however, can contend that China contributes the highest Japan inbound tourism receipts, and for that matter, by far the biggest spending customer segment in the IR industry.
There is also a lot more volatility in this De Civean globe and a ‘Girl With The Balloon’ shredded social contracts.
A presidential election looms in America in a year’s time. The rogue North Korean state continues to strut its feathers. Closer to home, the knack of Japanese politics to throw up nasty surprises can cause seismic shifts to the IR tender dynamics.
Hokkaido lulled into a state of inertia for a year because the prefecture’s governor decided against running for reelection in favor of a national Diet seat. The Osaka Restoration Association’s temerity to renewed endeavor against the wishes of the LDP to combine Osaka City and Prefecture under a single governing ordinance will test a relationship held only be reciprocity and mutual gain. This coming after already angering their ally in the last Upper House elections when they chose to double-team with the Komeito Party.
Of late, the Osaka political leaders have taken to the bully pit to strong-arm the national government to accelerate the IR selection process, which observers had pointed to as the reason why the Cabinet Secretariat had capitulated in publishing the draft IR policy earlier than originally planned. A two-phased IR selection plan to first choose one location followed by the other two seemed also to have been seeded by Osaka as they aspire to open the Yumeshima IR in time together with the Osaka Expo. The Osaka leaders’ main braggadocio lies in the LDP’s reliance on their support to change the country’s pacifist Constitution, arguably the chief mission in Shinzo Abe’s political career.
The reverberations from a perceived underlying skirmish among the LDP top leadership might have aftershocks affecting Osaka’s IR-elect status. If the powerful leading faction leaders in the LDP jostle to vie for their respective wards, as it had been attested of the sudden about-turn of Yokohama’s longstanding tabula rasa, the odds might become scrambled yet again.
It is for this reason that Wakayama wears a dark horse tag despite tepid investor interest, and the anticipation of Hokkaido coming to the fore again with a powerful mentor behind the new governor. Fukuoka, resolutely silent so far despite being considered a prime IR site by many investors saw some rumblings of late; if Fukuoka does throw its name in the hat, it will come with the patronage of one of the highest offices in Nagatacho.
The court of public opinion in Japan can never be trivialized, and the Osaka government had so far only deflected rather than appeased Kansai people on the argument of good outweighing bad of an IR development. The media continued to be scathing and critical of the high-handedness of the government in that the IR legislation has been regarded more or less as a fait accompli. Nagasaki aside, polls everywhere in Japan were resounding in the rejection of IRs; and Yokohama had seen the first of social action groups taking to the streets in numbers to picket against IRs.
It can only get more vociferous in the run up to the final leg of the IR passage; and if one municipality gets cowed into a referendum, others may be compelled to follow suit. In that respect, both the national government and local authorities have fallen short in delivering an appealing and convincing enough narrative to placate the Japanese people and should consider redoubling their efforts in this area.
Across the aisles in the national and local assemblies, opposition lawmakers are on their haunches, ready to pounce for any slight missteps, and sniffing for the slightest whiff of a scandal. Even as Osaka changes seats reluctantly with Yokohama in the favorite polls, the Kansai region has remained fairly assured as it continues to gallop ahead of other municipal competitors in its conceptualization and planning process. The IR license is their own to lose if they stumble over their own hurdles in their haste.
It is wise to take nothing for granted.
Daniel Cheng is a founding partner of Global IR Consulting Japan (GICJ), and previously holds senior executive positions with Hard Rock International, Genting Group, and Bally International (now Scientific Games).