Japanese pachinko maker pushes for legalization of casinos

08.12.2009, Japan.- The government lacks the will to legalize casinos and let the industry compensate for declining tax revenue amid deflation, according to the head of pachinko maker Universal Entertainment Corp.

In Japan, politicians are very weak in showing the will to do something," Kazuo Okada, chairman of Universal Entertainment, said Wednesday in Singapore. "If a politician who displayed such a will were to emerge, the legislation would likely be passed at once."

Prime Minister Yukio Hatoyama's Democratic Party of Japan hasn't taken up the topic of legalizing casinos since coming to power in September. The previous government led by the Liberal Democratic Party didn't submit a bill legalizing casinos partly because of the global financial crisis, said Paul Bromberg, chief operating officer of Spectrum OSO Asia Ltd.

"Before the election, before the economic problems last year, I was quite bullish and thought certainly by 2010 they might have legalized," Bromberg said Wednesday. "Now we're coming into 2010 and there's no sign of legalization."

The government has been talking for 10 years about allowing casinos, he said. Tax revenue fell 22 % between April and October, so legalizing casinos could be one way to bring in more money.

Pachinko is played by about 13 % of Japan's population, who fed us$ 2.3 trillion into the machines last year, according to the government's Leisure White Paper. Pachinko players win stuffed toy animals instead of cash because casinos are illegal in Japan. The prizes can usually be exchanged for money at booths just outside the nation's 13,000 pachinko parlors.

In Singapore, the government awarded two casino licenses in 2006, about two years after it first considered legalization. The stated goal was to boost tourism and create jobs. Two casino resorts, built and managed by Las Vegas Sands Corp. and Genting Bhd., are scheduled to open in the first quarter of next year.

Okada wants Japan to allow casinos soon because he faces a shrinking domestic market and delays in opening an outlet in the Philippines. Universal Entertainment is lobbying the Philippine government to let it own more than the 40 % cap on foreign ownership of property, Okada said. The company plans to spend about us$ 2.2 billion to build and operate a casino in Manila. "If approvals are made officially, we are ready to begin construction quickly," Okada said.

Outside Asia, Universal Entertainment plans to "aggressively expand" its business in the U.S., seeking opportunities as rivals review their operations amid the downturn. The Japanese company aims to sell 10,000 gaming machines over the next year, marking its return to the U.S., a market it exited 30 years ago, Okada said.

Universal Entertainment's investment in billionaire Stephen Wynn's casino operator is helping the company make a comeback to the U.S., Okada said. "Since we were away for a long time, the Nevada Gaming Control Board wasn't sure of our existence, so having such a great partner did help us a lot," he said, referring to the gambling regulator.

Universal Entertainment shares have risen 39 % this year, compared with an 8.5 % gain for the Nikkei 225 average. Aruze Corp., the previous name of Universal Entertainment, is the biggest shareholder of Wynn Resorts, at 19.9 %. Wynn has an 18 % stake.

"At the time, we had invested about us$ 551.9 million. Now, we have gotten back almost all of this in the form of dividends," Okada said. "If there is a chance, we would like to increase our stake." Okada is also a Wynn vice chairman. He said in an August 2007 interview that he and Wynn would submit a joint bid to operate casinos in Japan if they are legalized.

Yogonet.com / Bloomberg

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