Costs, politics erode chances for a Tokyo casino by 2020

Plans to open Japan's first casino in Tokyo before the 2020 Olympics are becoming increasingly unlikely, with developers facing skyrocketing building costs and a city government that no longer considers casino development an economic priority.

Prime Minister Shinzo Abe has called legalizing casino gambling a pillar of his plan to revive economic growth. Casino operators including Las Vegas Sands, Genting Singapore, MGM Resorts and Melco Crown Entertainment have all been positioning themselves as potential investors in what analysts say is one of the world's biggest untapped markets for this sort of gaming.

For months, the casino operators have courted the governments of Tokyo and Osaka, the most likely locations to build large-scale integrated resorts, as Japan's parliament prepared to debate an initial casino bill.

Sands, especially, has focused more on Tokyo than Osaka as a potential location. Asked to comment about any potential delay, George Tanasijevich, the company's global development chief said: "Until we know exactly what this opportunity is going to be, it is difficult to comment specifically on which city is best."

On Monday, parliament began its autumn session, during which the initial casino bill is due to be debated. Proponents hope to pass legislation by November that would allow pro-casino lawmakers to prepare a second, detailed proposal, which they hope will be approved in 2015.

HIGHER COSTS, WEAKENED SUPPORT

Previous Tokyo governors had supported plans for a casino. Current governor Yoichi Masuzoe, who took office in February, however, said in June that pursuing a casino was "not at the top" of his agenda.

Masuzoe has also downgraded the team tasked with preparing for the casino, government officials said. Maho Yoshino, a member of this team, told Reuters the governor's caution would impact their work. "We are, after all, working under the direction of the governor," she added.

Tokyo government officials say the governor appears to be overwhelmed by preparations for the 2020 Olympics, and has put the casino plans on the backburner. The officials declined to be named due to the sensitivity of the issue.

The apparently weakened political will to set up a casino in Tokyo also coincides with a spike in construction costs, driven by higher demand ahead of the Olympics and the rebuilding efforts after the 2011 earthquake and tsunami.

Costs have become such a worry that the Tokyo government is considering scaling back its plans for the Olympics, officials said. Costs are also likely to become a concern for foreign casino developers, said Satoshi Okabe, a senior manager at a mega tourist resort project being developed by Dentsu, Japan's largest advertising agency.

"The reality is that preparations for the Olympics are going to be pretty challenging. Casinos are secondary," Okabe said.

"Building costs are going to spike and foreign casino operators are going to find investment returns inefficient," he added. The city of Tokyo is a major client of Dentsu.

Meanwhile, Osaka is pushing ahead with its plans for a casino. Caesars Entertainment said it remained bullish on Japan's second city. "We are actively in talks with potential Japanese partners about an Osaka project," Steve Tight, president for international development for Ceasars, said in a statement.