Legislators in Japan’s lower house passed an integrated resort (IR) implementation bill on Tuesday, then extended the legislative session to July 22 to enable upper house consideration of this final step toward casino legalization. Casino companies from across the world can scarcely contain their excitement about the world’s last casino frontier beyond the forbidden zone of mainland China. But Japan won’t consider a concept for creating compelling IRs worthy of the world’s third largest economy, one aiming to double visitor arrivals to 60 million and become a global top five tourist destinations.

Official Japan’s approach to IR legalization has been rather schizophrenic. It wants the economic and image boost of IRs, exemplified by Singapore’s iconic Marina Bay Sands, but fears increased problem gambling. Losses on pachinko, a souped-up version of pinball, and pachislot machines, exceeded US$30 billion last year. Pachinko’s association with organized crime and money transfers to North Korea – industry figures dismiss that as ancient history – adds to negative public perception of gaming overall. Surveys find two-thirds of Japanese oppose casino legalization, though antipathy softens with information about IR non-gaming features.

Japan’s IR bill includes several restrictions, including Singapore-style limits on casino size – 3% of total gross floor area – and a 6,000 yen (US$55) entry tax for residents, plus awarding just three IR licenses nationwide in three different areas. Casino companies have declared they’re prepared to spend US$10 billion on IRs in major metropolitan areas such as Tokyo and Osaka.

In effect, each licensee gets a monopoly in its area, and competition for the licenses will be fierce. But once licensed, the IR won’t face competitive pressure to excel. At last month’s Japan Gaming Congress, Morgan Stanley Managing Director in Hong Kong Praveen Choudhary said that without competition within markets, Japan won’t get the spectacular IRs it deserves. He suggested that instead of one US$10 billion IR, allowing three US$3 billion IRs in an area. “You’d get more non-gaming and more variety,” Choudhary said.

“The level of investment and tourism draw would increase significantly if multiple operators would come together on a single large site such as Yumeshima Island in Osaka to form an Osaka Strip or in the Tokyo/Yokohama area, where is it possible on a couple of sites,” Global Market Advisors Director of Government Affairs Brendan Bussmann says. “As opposed to one operator that may be willing to contribute $10 billion to a single IR, if you could bring together multiple operators while still staying within the 3% casino size, you are likely to see a number well north of the $10 billion.”

In his Japan Gaming Congress presentation, Wynn Development President Chris Gordon emphasized that Wynn Resorts wants to create “an entertainment district, not one building,” though he didn’t mention multiple operators. Similarly, renowned hospitality architect Paul Steelman favors a Japanese reimagining of Fremont Street in downtown Las Vegas, anchored by an IR surrounded by mainly small and medium Japanese enterprises to lend authenticity and vibrancy. Create that cluster with two or three US$3 billion IRs – roughly the cost of Sands China’s Parisian and Melco’s Studio City in Macau – and you’ve got a very compelling proposition for domestic and international travelers.

But it won’t happen, a key adviser to Prime Minister Shinzo Abe’s administration insists. Toru Mihara, a member of the government’s expert panel on IR, says legislation dictates IRs “shall have to be constructed and operated as an integral single unit by a single entity. The bill equally will not authorize that casino licenses given shall be split to create sub-licensing or that several casinos are to be operated by different entities within the same IR zone. Hence the bill intends to create three gaming licenses only, giving quasi-regional monopoly for the operators involved,” Mihara, a professor of comparative public policy at Osaka University of Commerce, says.

“Above is the intent of legislators. which will never change. [The] whole idea is never to create a gaming hub like Macau or Las Vegas but strictly limit numbers of IR zones and casinos from the beginning. A gaming hub concept is judged to be not appropriate in this market where gaming competition is considered to increase unintended risk of increasing speculative spirits instead of creating social/economic benefits. This fundamental policy, fixed by and among legislators, shall never change.”

Spectrum Gaming Managing Director Fred Gushin, whose firm advised Singapore on casino regulation and believes multiple hotels and gaming facilities within an IR would generate “certain synergies that would benefit the entire IR,” says, “Legislation can always be amended, and regulations can always be changed. That is the case in every jurisdiction that has enacted legalized gaming or IRs. Technology changes and public perceptions change – governments react to those changes.” Stay tuned.