Business | YEN FOR LIVING

Industry divided on government's casino gamble

by Philip Brasor and Masako Tsubuku

Special To The Japan Times

In its zeal to ramrod some bills into law before the New Years holiday, the ruling Liberal Democratic Party finally legalized casino gambling, a matter that has been in legislative limbo for a number of years. However, the problems that always prevented the bills from advancing in the past have not gone away, the biggest one being Japan’s perceived penchant for gambling addiction.

Even the government’s own health ministry reports that more than 5.36 million Japanese suffer from some sort of gambling addiction, and while groups like Gamblers Anonymous say that passage of the casino bill will provide the government with an incentive to tackle the problem, in order to do so the LDP would first need to acknowledge its source.

According to the magazine Big Issue, 93 percent of Japanese men who say they gamble cite pachinko as their main form of betting recreation. The problem is, pachinko is not legally recognized as a form of gambling. Strictly speaking, pachinko, a mechanized game based on a crude, vertical species of pinball, is characterized as “entertainment” (yugi) in the eyes of the law. As long as winning at some game is not directly compensated with cash, it doesn’t qualify as gambling, or tobaku, which is controlled under the Criminal Code.

In theory, pachinko falls into the category of popular amusements commonly found at the kind of neighborhood festivals that popped up in the years after World War II, where participants could win canned goods or chocolate bars by playing lightly competitive games.

Eventually, enterprising spirits recognized the loophole in the law that allowed for these games and exploited it by establishing pachinko parlors as havens of recreation. Pachinko “winners” are compensated with prizes such as ballpoint pens that are then sold off-site at special nonrelated “stores” for cash. And because these off-site stores are bureaucratically overseen by the police, the government has a stake in them.

This relationship is an open secret unacknowledged by the LDP in its drive to legalize casino gambling, and so the question is: Once casinos are up and running as magnets for so-called Integrated Resorts, will pachinko be allowed to emerge from the shadows?

The Nihon Keizai Shimbun reported in 2011 that all gambling revenues in Japan amounted to ¥24 trillion, only ¥5.16 trillion of which was amassed through “public” gambling endeavors such as lotteries and various forms of racing. The rest was pachinko. In fact, over the previous 20 years, according to Nikkei, Japanese people spent ¥540 trillion on pachinko. In a year, pachinko brings in more than twice as much money as do all gambling endeavors in the United States.

In 2013, the Australian Game Machine Association found that there were 7.67 million “gambling-related” machines in the world, and that 4.59 million, or 60 percent, were located in Japan. In second place was the U.S., with only 889,000. Gambling-related machines were defined as mechanical or electronic vending games that offered a potential return, and included slot machines, video lottery terminals and pachinko. The Caribbean island of Saint Martin had the most machines per capita, one for every 12 inhabitants. Monaco was second, and Japan third, with one for every 28 people.

The fact that pachinko remains a business outlier despite its huge earnings is epitomized by the absence of any pachinko-related company on any of Japan’s stock exchanges. It was big news when the pachinko parlor operator Dynam Japan Holdings was listed on the Hong Kong exchange in August 2012 after a Japanese lawyer for the company submitted a 20-page brief to the exchange explaining how pachinko is “not illegal” in Japan because of the three-store system wherein winners at the parlor exchange their metal ball winnings for premiums at a different location and then exchange those premiums for cash at a third location. It was perhaps the only instance in the annals of pachinko where a clear legal explanation of the loophole was given in an above-board manner. In Hong Kong, there was nothing wrong with describing pachinko as a form of gambling. It just can’t be done in Japan.

The industry is split about the advent of casinos in Japan. Some operators see it as unwanted competition, while others want to take advantage, thinking wider legal acceptance of gambling will provide them with investment opportunities. With the aging population, pachinko as a pastime is shrinking, and casinos are, by definition, 24-hour operations.

Open-ended gaming is integral to the profit motive of gambling. If the gambler is cognizant of a temporal limit to his or her activities, much of the incentive for betting is gone. It’s in the house’s interest to allow the gambler to play as long as possible so as to continue accumulating winnings or recoup losses, whichever the case may be.

According to the Public Morals Law, however, which regulates pachinko, parlors must close by 1 a.m. (An exception is Mie Prefecture, where they are allowed to be open all day, but only on New Year’s Eve.) So if casinos are allowed to operate 24 hours a day, pachinko parlor operators may demand they be allowed to operate 24 hours a day as well.

When casinos are finally regulated, there will need to be public debate about pachinko parlors’ de facto status as gambling havens, but in any case, it’s not as if gambling is being suddenly thrust upon an innocent citizenry.

In 2010, Osaka Mayor Toru Hashimoto tried to make the case for bringing casinos to his city by saying that revenue from local taxes on gambling could be used to fund education, welfare benefits and health care. However, his civic rationale was odd. He said Japanese society was naive about gambling because the authorities prevented them from playing, and that by legalizing casinos the public would become more savvy and, presumably, cosmopolitan.

Hashimoto obviously has a romantic image of gamblers, but in any case, he was wrong. Japanese already know a lot about gambling, which may be why they don’t like the new bill.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month.

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