It was considered a foregone conclusion in gaming circles that Osaka will be a venue for one of the first three integrated resorts in Japan, though the entry of Yokohama into the race and shifting political sands highlight the fact that nothing should be taken for granted.
Until recently, Osaka was 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 only two locations with a concordant local assembly in support of IR development.
It is also the only candidate with a ‘clean’ or unencumbered land parcel in their Yumeshima site, with its only challenges being in construction development planning, given the overlap with the construction of the Osaka Expo and its 6-month run during the summer of 2025. There are also complexities associated with developing on reclaimed land, plus the shadow of a toxic waste landfill on the western side of Yumeshima.
Politically, Osaka also looked to be in good stead, with its Ishin To government enjoying a strong relationship with the LDP national government. Hashimoto Toru, the party’s former leader still casts considerable influence on the national political scene despite retiring from politics a few years ago. His close affiliation to Prime Minister Shinzo Abe is well known and he had even been touted himself as a future prime minister at the peak of his popularity.
All these contributed to the indomitable position that Osaka enjoyed, with 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 commences, with record-breaking investment promises tilting US$10 billion, and even avowals of ‘whatever it takes’.
But Osaka lost a bit of its sheen in August 2019 when Yokohama City announced its intent to invite an IR development in its scenic bay area. Almost immediately, two casino companies formally bowed out of the Osaka race for the obvious reason that Yokohama presents more attractive business economics with its vicinity to the Tokyo metropolitan area.
Osaka still has three major casino brands pledging allegiance to it, with one touting an ‘Osaka First’ dictum. With three locations in play, Osaka can still be seen as being in an assured position, even if it is playing second fiddle to Yokohama.
However, politics continue to be the unseen rudder as the IR saga navigates closer and closer towards its final destination; 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.
Closer to home, the knack of Japanese politics to throw up nasty surprises can cause seismic shifts to the IR tender dynamics.
Hokkaido has been lulled into a state of inertia for a year already because the prefecture’s governor decided against running for reelection in favour of a national Diet seat.
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 said was the reason why the Cabinet Secretariat 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 seems also to have been seeded by Osaka, as they aspire to open the Yumeshima IR to time with the Osaka Expo. Ishin’s 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 that will affect Osaka’s IR-elect status. If the powerful leading faction leaders in the LDP jostle for their respective wards the odds might become scrambled yet again.
It is for this reason that Wakayama may be a dark horse 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 also saw some rumblings of late.
The court of public opinion in Japan can never be trivialised and the Osaka government has so far only deflected rather than appeased the Kansai people on the argument of good outweighing bad of an IR development. The media continues 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 has 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 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.
Even as Osaka swop seats reluctantly with Yokohama in the favourite polls, the Kansai region remains fairly assured as it continues to gallop ahead of other municipal competitors in its conceptualisation and planning process. The IR license is their own to lose if they stumble over their own hurdles in their haste.
* Daniel Cheng is a founding partner of Global IR Consulting Japan (GICJ) and previously held senior executive positions with Hard Rock International, Genting Group and Bally International (now Scientific Games).