The pending legalization of casinos in Japan has reignited a debate over the legal status of the country’s giant pachinko industry.
Pachinko, a cross between a slot machine and a pinball game, is a national obsession, with one in six Japanese reputed to be players, though that number is declining as younger people gravitate toward digital and mobile forms of entertainment.
The catch for lawmakers is that US$200 billion industry is not classified as gambling, which is illegal in Japan. Instead it’s treated as an amusement activity like arcades and hostess bars, and so the operators of the pachinko parlors that are found in city streets across Japan pay no gaming tax.
But with casinos expected to contribute billions to government coffers, pachinko, too, could come under regulation. Takeshi Iwaya, a leading proponent for casinos from the ruling Liberal Democratic Party, reckons any move to change pachinko laws should come once casinos are up and running, which could be as early as 2020, when Tokyo will host the Summer Olympic Games.
Reform could have enormous implications, however. And it won’t be easy, given the web of special interests involved, not least the national police agency, which oversees the industry, and pachinko’s historic ties to organized crime.
“I see no easy way out for the pachinko industry,” said Ichiro Tanioka, an expert on Japanese gaming industries and president of the Osaka University of Commerce, a leading casino advocate. “It’s a mess.”
In pachinko, players buy baskets of small silver balls, which they feed into the machine and guide into a hole that spins out numbers or characters on an electronic screen. Matching series win the player more silver balls, which can be exchanged for snacks, alcohol or small items in the pachinko hall. Most players, however, opt to trade in their winnings for “special prizes” which they then swap for yen at small booths outside, but close to, the venue. Legally, these booths are separate from the hall operator, skirting anti-gambling laws.
The police stop short of fully endorsing this system as legal, which leaves it in a regulatory grey area that has effectively barred pachinko hall operators from listing their shares on a Japanese stock exchange.
To help bring the game out of the shadows, a lawyer with ties to the industry suggests a “pachinko law” allowing balls to be exchanged for cash inside the venues. The main lobby group for parlor operators, though, wants to keep the existing system but give it legitimacy through a state-supervised scheme. Either plan would generate about US$2 billion in annual revenue for the government, according to copies of the proposals seen by Reuters.
Tycoon Yoji Sato, chairman of Dynam Japan Holdings, a leading operator whose shares are traded in Hong Kong, acknowledged the industry faces close scrutiny and backs reforms that bring all its complex moving parts—from machine manufacturers and vendors to venue and payment booth operators—under one law.
“Any industry that cannot be accepted or understood by society will cease to exist,” Sato told Reuters. “Dynam is in principle behind any move to clarify the industry’s role in society.”