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Legalization of Casinos in Japan and its Possible Influence on the Asian Gambling Industry

Author: Rode Arteaga
5 November 2019, 17:03
Votes: 1

A gambling zone in Japan, wherever it is built, will have become a new Macau in 7 years. That is the time when casino business will be allowed to legally operate in the Land of the Rising Sun.

Legalization of Casinos in Japan and its Possible Influence on the Asian Gambling Industry

The Parliament of Japan passed a law on gambling legalization on its territory even despite the negative attitude of the local population towards this initiative. However, what is behind the decision? The answer is simple:  the Japanese economy requires a new way to increase budget revenues.

Japan has been following the Keynesian model of development for a long time, much longer than any other country. That is why it has the highest debt-to-GDP ratio among all nations of the world (230%). In addition, Japan is a rapidly aging country. Moreover, its population, which has not grown since the beginning of the XXI century, has decreased by 1% as compared to 2011. This is logical, considering the recent study results, according to which 40% of single people in Japan are virgins. Perhaps gambling could somehow help to solve this problem.

The time for gambling legalization has been chosen very well. The first casinos are planned to open not earlier than in 4 years, which means that Japan’s debt bubble will have plenty of time to burst.

The Land of the Rising Sun has been accumulating its debt over the years. It exceeded 100% of the country’s GDP back in 1996, while the United States crossed this milestone in 2012.  The possibility of the Japanese economy collapse has existed for many years, but the financial system is still holding firm.

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4 years of gambling business launch delaying give investors 2 clear options. If a certain monetary and/or debt crisis occurs in Japan during this time, then it is really worth investing, because all negative aspects (or at least part of them) will go away. However, if the debt pit grows, it is better to wait until something collapses, because investors do not want to be caught off guard when this happens.

casino business

Legalization of gambling in Japan will be the main challenge for Macau. The Land of the Rising Sun has an obvious advantage over this region – business stability. The legal regime in China is impulsive, unpredictable and unlimited, which makes this country confusing for investors. In turn, the Japanese authorities, in spite of excessive money printing, create fewer reasons for worrying and give more freedom both in theory and in practice.

Over time, both countries will face the financial crisis, but in China this may result in a relapse into totalitarianism, while in Japan this is unlikely. It definitely will not fight with the USA during the Trump presidency, while China can escalate the conflict (directly or indirectly).

If it were necessary to create a new, more stable Macau, Japan would be the best region for this. Macau has some kind of competition with the Philippines, but its government is also unpredictable and there are no good conditions for long-term business planning. The same goes for Cambodia.

If Japan really becomes the next Macau (i.e. the gambling center), its authorities will have to simplify the movement of people and assets from China and other countries. Knowing Japan, we can be sure that its authorities will make the most of the situation and will not conduct such a disastrous policy as Beijing in relation to Macao regarding the fight against money laundering.

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In this regard, over the next 4 years, it is expected that digital currencies (such as Bitcoin) will become much more popular and stable, which should help to gain control over the capital flow. If the boundaries between the two countries remain open, Japan will have a solid chance to become the main gambling center in Asia.

Most likely, this will be the initial goal of the Japanese government. The fact that gambling became legal (despite the protests of the society) means that politicians are looking for a way to reduce the debt after years of economic stagnation. The best way to do this is to minimize government spending and taxes, as well as to legalize gambling business in order to attract investors and tourists from all over the world.

In 2014, Macau reached its maximum GDP – $55.5 billion. This is 1.3% of Japan’s total GDP, so you understand the potential of this country. Of course, the results will not be instantaneous, but with the right policy and liberal regulation, Japan has a chance to become the new gambling center in the foreseeable future. Especially if China continues to follow the doctrine of Maoism in response to the debt and/or monetary crisis. After all, Japan’s decision to legalize gambling can completely change the Asian gambling industry for future generations.

As mentioned earlier, according to fintech experts, the Japanese IR industry is likely to generate around 10bn dollars every year.

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