Inside Japan's racehorse breeding empire

Harry Sweeney has his hand up a horse’s backside. The mare looks put out by this intrusion. Her eyes dart about nervously and she shifts her weight before accepting five thick human digits probing her insides. After feeling the uterus and the swelling of the ovaries, Sweeney’s arm, slick with mucus and excrement, reemerges. He doesn’t even need to look at the monitor. “She’s pregnant,” he confirms, smiling.

As well he might. Foals bred on Sweeney’s Hokkaido farm, Paca Paca (the onomatopoeic sound of a trotting horse), have sold for more than $1 million (¥102 million). In 2012, Deep Brillante, born on this farm, won the Japanese Derby, the country’s most prestigious race. Sweeney later sold her sister for $1.79 million. The clump of cells inside the belly of this timorous mare could one day be worth a pile of cash.

Given the high stakes, owners strive to improve the odds by employing the services of proven winners. Deep Impact, one of Japan’s best-loved and most famous racehorses, is also one of the country’s leading live sperm donors. Hundreds of times a year, the stallion is trundled off from his home in a farm a few hours from Paca Paca to inseminate another unsuspecting mare. If this union produces a foal, Deep Impact’s owner, Katsumi Yoshida, is rewarded with ¥30 million. So successful has the thoroughbred been that Deep Impact is currently earning ¥6 billion (almost $60 million) a year. And at 14 — middle-aged for a horse — the stallion is still young enough to sire hundreds more children, as long as the spirit — and the body — is willing.

Not every horse performs on cue. Breeding is a hit-and-miss affair: foals can turn out to be sickly or deformed. Mares and stallions can be temperamental, or worse: One of America’s most iconic racehorses, Cigar, won almost $10 million in prize money and was twice voted horse of the year in the 1990s. However, his performance on racecourses was not matched in the stable: None of the 34 mares he squired became pregnant. Cigar, it turned out, was shooting blanks.

Racing utopia

Horse racing in Japan appears at first glance to have its best days behind it: Attendance at racecourses is down by more than half from the 14 million people who went in the late 1990s, when betting revenue peaked.

Yet, the domestic industry is still big business, with annual betting turnover of more than $25 billion (about twice that spent in the United States) and some of the more prestigious races and richest purses in the world.

Not bad for a country where gambling is, with noted exceptions, illegal.

The country’s most popular race, the Japan Cup, regularly attracts more than 100,000 people to Tokyo Racecourse in Fuchu, one of the planet’s largest stadiums. The nation’s online betting system has 3.4 million subscribers, according to the Japan Racing Association (JRA). One estimate is that a fifth of the bets placed on horses in the world are made in Japan. “It’s a kind of racing utopia,” Sweeney concludes.

Most strikingly of all has been the evolution of breeding over the past two decades. From being largely also-rans in international competition, Japan-bred horses are now among the fastest and strongest in the world, thanks largely to mixing with foreign bloodlines (see sidebar). American horses, once the ones to beat, haven’t won the Japan Cup since 1991. The last time the race was won by a horse from outside Japan was more than a decade ago.

Japan-bred horses not only dominate the domestic sport, they increasingly win abroad too. Instead of Kildare or Kentucky, elite breeders send mares to Hokkaido to mate with Japanese stallions.

This success hasn’t been achieved without controversy. Like anywhere, only a fraction of the horses bred will ever have the star power of a Deep Impact; tired stallions are injected with testosterone to get them back in the mood, claim animal rights groups. And once stud fees fall, life can end with a trip to the butcher’s yard.

One each way

Despite — or perhaps because of — these riches, the industry is famously strictly run. The JRA, a public company, operates Tokyo Racecourse and the rest of the country’s largest tracks. It licenses trainers, vets and jockeys, runs betting shops and the country’s two big training centers.

Acting under the authority of the Ministry of Agriculture, Forestry and Fisheries, the JRA sends 10 percent of its annual turnover (about $2.48 billion) back to the government coffers. Legislation dictates that the money must be used to pay for livestock breeding, and public and social welfare.

The quasi-government control has mostly kept the sport out of the hands of gangsters, conmen and illegal syndicates. It is also the “great difference” between Japan and other parts of the world, says Hiroshi Ito, head of the JRA’s International Planning Division.

Elsewhere, he points out, betting shops, courses, races and training farms are often run separately.

“In the United States, racecourse ownership is (organized) by states; each racecourse in America is for profit and they have to compete against each other,” Ito says. Profits generated in Japan are plowed back to the facilities, breeders and trainers. In the long term, that improves the industry.”

Visitors to Japan are often stunned by what they see on the biggest racetracks. In addition to the sometimes obsessive fans who follow particular horses and riders, families and young couples crowd the biggest races. The bread-and-butter of the industry is the paltry ¥200 entry price paid into courses and the small wagers made by millions of ordinary punters (two-thirds of the bets are made online or on smartphones).

“(There is) a reverence for the horse and for the sport that hasn’t existed in the West for decades,” wrote Ryan Goldberg, an American journalist in December 2014.

The reverence does not extend to what happens after the animals have outlived their usefulness. About 90 percent of former racehorses in Japan end up in slaughterhouses every year, according to People for the Ethical Treatment of Animals. The victims include some of the biggest stars, says PETA, including Kentucky Derby winner Ferdinand, who was “disposed of,” aged 19, in 2002.

“They are killed, cut apart and end up as food for dogs and humans,” PETA claims.

Ito says the JRA and farms in the private sector have retraining programs to help retired racehorses become riding horses. He notes, however, that such programs don’t cover every racehorse in the country.

Many fans like to believe their equine heroes have been put out to pasture but the industry shares little of their romanticism.

“It’s a fact of life that 5,000 to 7,000 racehorses come into the world every year and they have to leave,” Sweeney says. “The most important thing for me is that it’s done as humanely as possible. The lives of sheep, pigs, dogs and horses are all equally valuable.”

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Foreign racehorse breeder tastes industry success

A quarter of a century ago, Harry Sweeney was a horse doctor in Ireland when he was asked to bring his veterinarian skills to Hokkaido.

“(It was) very dark days for the Irish economy,” recalls Sweeney, 55. His main interest in attending the interview in Dublin, however, was not the prospect of a new job but a night in posh accommodation.

“There were very few five-star hotels in Ireland at the time and I thought it would be the only opportunity I’d ever get to stay in one,” he says, laughing at the memory. When his future Japanese employers promised him six times his then-salary to become a farm manager, however, he took the offer. He and his wife, Anne, found themselves in Hokkaido’s snowy farmland. Their few neighbors spoke little English.

It was, says Sweeney, “tough”: no internet, cellphones or satellite TV. The Japan Times regularly arrived five days late; he had to follow the 1991 Gulf War with a shortwave radio stuck to his ear.

Still, the couple enjoyed the adventure and stayed on for five years before moving to a larger farm. They studied Japanese and had four children, all boys.

Eventually, opportunity knocked again. In the go-go years of the 1980s, wealthy Japanese bought trophy foreign mares, along with golf courses, skyscrapers and film studios. As the economy tanked in the 1990s, Sweeney thought some might be willing to sell.

“I remember thinking ‘I will broker these mares for repatriation and get a fine commission for it,'” he recalls.

That was Sweeney’s entry into the racehorse business, and his battle with the forces that control it. He began buying foals, rearing them and putting them up for auction in the United States. It was a gamble, he admits.

“We had some spectacular success and some frightening losses,” he says.

All was going reasonably well until he turned up with $20,000 at a Japanese auction to buy a racehorse.

There was “total pandemonium,” recalls Sweeney. After nine years in Japan, he had snagged a bureaucratic tripwire: No foreign national had ever been allowed to buy a racehorse in his own name.

“I was apoplectic and demanded to know why,” he recalls.

The bottom line, he was told, was that racehorse owners were required to own farms … but foreign nationals were banned from holding agricultural land.

“Conventional wisdom was that it was impossible for a foreigner to own a farm, and to become a racehorse owner,” he says. “I started to investigate and saw a way around it — not to buy the farm in my own name but in the name of a Japanese registered company.”

Not one to take no for an answer, Sweeney bought his farm though a legal backdoor that involved appointing two Japanese directors. Then he bulldozed his way through other obstacles, eventually winning a coveted license from the Japanese Racing Association.

He considers the latter his greatest achievement. The JRA, he points out, is an elite club of just 2,000 racehorse owners — and he was at the time the only non-Japanese member.

Sweeney’s 225-hectare farm is a short drive from where he first began working 26 years ago. Over the years he has had some remarkable successes.

One of his first originated during a family trip to Ireland, when he spotted a mare galloping in the mountains and took her back to Japan. In 2001, a colt produced by the mare won one of Japan’s most elite races. He subsequently sold a half-brother for $750,000.

“We grew from there, buying better horses, better quality,” he says.

In 2012, Deep Brillante, bred on Paca Paca, won the Japanese Derby. Sweeney subsequently sold his sister for $1.79 million. Last year, eight young horses fetched more than $2 million at a single sale.

The Irishman finds himself at the center of an industry with betting turnover greater than the United States, United Kingdom and Ireland combined, and 24,000 horses in training — the third-largest number in the world.

For years, he and his family of four boys have split their time between Hokkaido and their second home in Ireland. Still, a quarter of a century after leaving home, Sweeney’s love affair with Japan is still fresh.

“I like it here; it’s a fantastic horse industry, structure, racing and prize money,” Sweeney says. “I love the farm, the scenery, people and the food. I think I have a wonderful life: a home in Ireland and a home here.”

Among his innovations has been to leave yearlings (immature horses) out in the snow, a decision that raised eyebrows in the industry.

“We were the first in Japan to do it,” he says. “They’re healthier; they grow better, stronger muscles.”

Sweeney says that once the farm produced its first Derby winner, “our neighbors copied us.”

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The ‘new superpower’ of domestic horse breeder

The home of horse breeding in Japan is Hokkaido and its undisputed kings are the Yoshida brothers.

Katsumi, Teruya and Haruya Yoshida between them midwife over a fifth of the 7,000 foals born annually in Japan, and nearly half of the horses that compete in the biggest races. Rumor has it that despite their close working relationship, the brothers are at odds.

“If they’re sitting in the same room, they’ll be on opposite sides,” says one insider.

The family patriarch, Zensuke, began racing horses in the 1930s. His son Zenya revolutionized domestic bloodlines when he imported (at a cost of about $10 million) the winner of the 1989 Kentucky Derby to breed with local mares. Sunday Silence and the Japanese horses he bred with was a gene match made in heaven. He became Japan’s greatest stallion, helping to completely change the phenotype of Japanese horses.

Sunday Silence’s offspring have won most of Japan’s and many of the world’s top races, according to the Japan Bloodstock Information System database. Their estimated collective earnings top ¥80 billion and include Deep Impact, which Katsumi Yoshida bred and sold for $600,000. After he won the Japanese Triple Crown in 2005, the Yoshida brothers bought him back for more than $50 million, less than what he now earns in a year from squiring foals.

Makahiki, also sired by Deep Impact, won the Japanese Derby in May, earning a prize of ¥200 million. The Yoshida family owns or has a stake in most of the nation’s other top stallions, including King Kamehameha, Harbinger and Just a Way, once the world’s top-rated thoroughbred horse. Their successes abroad include Rulership, who won the Queen Elizabeth II Cup in Hong Kong in 2012, and Gentildonna, winner of the Dubai Sheema Classic two years ago.

The origins of the Yoshida empire date back to 1993 when Zenya died.

Zenya’s sprawling operation was divided between the brothers, with Katsumi, taking over the branch that would become the Northern Farm.

Katsumi’s greatest contribution to Japanese breeding has been to scour the racehorse farms of Europe, America and Australia for quality mares, says Murray Johnson, a veteran Japan-based commentator and expert.

“It wasn’t a high priority to have horses brought in before,” Johnson says.

Horse sales at Northern Farm and the other Yoshida stables now bring in the best trainers, and the richest buyers from across the world.

At a two-day auction last year, Katsumi sold 165 horses for a total of ¥6.8 billion ($55.1 million at 2015 prices). A single colt sold for more than $2 million.

Britain’s Racing Post, the industry bible, calls the Yoshidas “the new superpower of breeding.”

“If there were plans for a Disney World of bloodstock, it could open almost immediately on the island of Hokkaido in Japan,” it wrote in August 2015.