Monday, April 21, 2014

Casino Gambling in Japan?

There has been quite a bit of chatter over the last few months about the possibility of Japan legalizing gambling.  The big international gaming companies have been lobbying Japanese politicians to change the laws, and presented plans for prospective resorts in casinos in some of Japan’s major cities.  Abe Shinzo himself made an appearance at a gaming industry event in Tokyo last fall, and pundits read his appearance as support of the inevitability of changes that will legalize new types of gambling in Japan.  Japan’s present gaming laws prohibit casino gambling, but allow bets on horse, bicycle and boat races, and non-cash reward games.  There are a number of reasons Japan would consider legalizing casino gambling and reason to prevent it.  Legalization would raise tax revenue, keep more money in Japan, and possibly create more job opportunities in the casinos themselves and in the regulatory apparatus.  But the wealthy pachinko business can afford to fight back, alongside anti-gambling elements in the Japanese polity.

Japanese tourists turn up in Las Vegas in significant numbers, yet that pales in comparison to the success of Japan’s famous pachinko parlors.  The pachinko industry reports profits equivalent to $240 Billion per year.  Gambling for money is illegal in Japan, so the pachinko industry gets around the ban the same way a business like Dave and Buster’s does here in the US.  Pachinko and pachislot machines accept cash but pay out metal balls.  When the player is finished with the machine, you turn in the balls for a set of prizes.  The prizes include various household knickknacks and a special prize that can be resold at another business for cash, such as Tokyo Union Circulation Company.  TUC and similar contractors then sell the special prize back to the pachinko parlor.  By law, those business are kept separate.  Zainichi Koreans (ethnic Koreans with Japanese citizenship) run most of Japan’s pachinko industry, and at least a third of those Koreans have ties to North Korea, and send money there, which most Japanese agree is an undesirable outcome.  The yakuza formerly had a stronger role in the pachinko industry, but police pressure in the last forty years forced organized crime out of the business, but at least the yakuza would keep their profits in Japan.

Foreign gaming companies have an uphill battle.  The pachinko industry is well entrenched, and flush with enough cash to put up a fight.  I think the Diet would consider legalized casino gambling to raise new tax revenues, especially with the Olympics coming up.  It would attract money away from the pachinko parlors, and possibly cut off remittances to North Korea, at least temporarily.  Casino gambling in Japan would discourage Japanese tourists from gambling abroad.  It might even attract gamblers from abroad.  There are also the added jobs.  Of course, the pachinko industry will not take this lying down.  I do not think the pachinko business model could compete with a casino.  I have not seen anything to indicate the laws governing pachinko are going to change.  It seems like Japan has a pachinko parlor on every street corner.

The ruling LDP introduced a bill to legalize casino gambling last fall, but there is no vote scheduled yet because it appears that members of the Diet wanted to take more time to discuss the law.  The current plan calls for licensed integrated resorts, rather than blanket open gambling like Macau or Las Vegas.  These integrated resorts would include hotels, gaming, and entertainment.  From the sound of things, every municipality will have a limited number of licenses, a limitation that may be designed to spread casino resorts around the country. 

Despite delays to the vote on the gambling bill, it seems likely that Japan will change the law and permit casino gambling in the foreseeable future.  The big casino companies are quite confident the changes to the law will pass, and they have begin to present proposals for integrated resorts in Tokyo, Osaka, Fukuoka, and even small towns that have lost much of their industry since the economic downturn after the collapse of the bubble economy.

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