JAPAN

Will Abe’s IR bulldozer hit a wall?

On the issue of IR development in Japan, the Shinzo Abe government has acted like a political bulldozer, assuming that the opposition parties and the majority opinion of the Japanese people could be swept aside by overwhelming force. This approach has taken them a long way forward, but the costs are now mounting and the limits may be in sight.

This characteristic method is being employed once again in relation to the 500 Dot Com bribery scandal.

As usual in high profile cases, the prosecutors have been leaking most of the details to the Japanese news media, and the emerging story is a damning one. If the prosecutors are to be believed, the basic story goes as follows.

On September 28, 2017, 500 Dot Com adviser Masahiko Konno brought 22.5 million yen (about US$207,000) in cash from Hong Kong to Japan, failing to make the required customs declaration.

In the following days and weeks, Konno and his colleague Katsunori Nakazato took bundles of this cash, in bags or envelopes, and delivered cash bribes to six Japanese lawmakers on behalf of 500 Dot Com, which at that time aimed to be licensed as an IR operator in Japan.

The largest sum—3 million yen—was allegedly handed over to state minister of the Cabinet Office Tsukasa Akimoto, who was then in charge of compiling the nation’s IR policy regulations. Akimoto has been arrested by prosecutors.

Apparently guilty of the same crime of bribe-taking, although at the lower sum of 1 million yen each, are five additional lawmakers. Among these five is the very prominent procasino lawmaker Takeshi Iwaya, who is a familiar figure at IR industry events, having been a keynote speaker on multiple occasions.

One of the allegedly bribed politicians, Mikio Shimoji, who also happens to be the only one who wasn’t a member of the ruling Liberal Democratic Party, has admitted receiving the bribe.

Interesting for our purposes is the stark difference in how Osaka Mayor Ichiro Matsui, head of the Japan Innovation Party (Osaka Ishin), handled the matter as compared to the Abe government.

Matsui, as well as his junior colleague, Osaka Governor Hirofumi Yoshimura, made very clear that they have zero tolerance for this kind of corruption. They rejected Mikio Shimoji’s offer to resign from the party and they expelled him instead. They followed up with a new policy stipulating that any company or individual connected to the IR industry would no longer be welcome at any of their lawmakers’ fundraising parties.

The Abe government, through the person of Chief Cabinet Secretary Yoshihide Suga, took the opposite tack, suggesting that 500 Dot Com’s alleged bribery has absolutely nothing to do with IR policy and is nothing more than an irrelevant distraction. There was no talk of punishing lawmakers who might have accepted bribes, no open admonition to anyone thinking about taking bribes, and no new policies to combat bribe-taking within the ruling party ranks. Suga simply pledged to advance IR development as scheduled so that the Japanese people, eventually, would see the positive results.

Hardly for the first time, Abe and Suga are essentially defying anyone to stop them. The public arguments they are making are illogical and even demonstrably false, but they know that the opposition parties are too divided and weak to hold them to account. There’s no plausible alternative government waiting in the wings, and they know it.

But if the Abe government is insulated from the Japanese public, that’s not equally true for the local governments that are now engaged in IR bids. Many of them can indeed be defeated in elections, and they are thus directly exposed to local public opinion.

So while at the national level the opposition parties are planning to submit legislation that would abolish the 2016 IR Promotion Act and completely reverse the national policy, this effort is almost certain to fail. Most likely, the Abe government will contemptuously dismiss the bill and have little difficulty in doing so.

The outcomes at the local level, however, may indeed be put in jeopardy by the 500 Dot Com bribery scandal.

The conservative Hokkaido governor has already declined to make an IR bid, with the inability of ruling party assemblymen to back the initiative being a key factor. The Chiba mayor has also backed out of the IR race.

The biggest remaining local battleground, obviously, is Yokohama—both because it would likely host the nation’s largest IR, and because the city administration is already battling hostile local opinion opposed to the IR construction initiative at Yamashita Pier.

EY wins Yokohama advisory contract

EY Japan has pulled down a major IR advisory contract with the Yokohama municipal government scheduled to run through March 2022. The value of the contract is estimated to be about JPY217 million (US$2 million).

EY Japan will assist the Yokohama municipal government in forming and implementing its IR policies, including the selection of an IR operator partner. The same firm, EY Japan, won the earlier advisory contract for the Yokohama RFI, and won an initial contract to produce an IR study for the city that was published in March 2017.

EY Japan has also been advising the Wakayama and Aichi prefectural governments on their potential IR bids.

Japan to help finance luxury hotels

Chief Cabinet Secretary Yoshihide Suga says that the government is planning to assist the private sector in the financing of about fifty luxury hotels throughout Japan due to demand created by the increase in tourism.

“We’ll offer financial aid through the Development Bank of Japan using a fiscal investment and loan program in order to support hotel development,” Suga explained. The government wishes to attract a larger number of affluent tourists to Japan, and in fact this is one of the key objectives of its push for the creation of three IRs in the second half of the 2020s.

Suga’s comments did not make clear whether or not luxury hotels within the prospective IRs will be eligible for the special government financial support.