Inside Asian Gaming

INSIDE ASIAN GAMING | April 2011 18 “The aggressive introduction of low denomination machines equivalent to US$0.05 or US$0.01 per ball did [initially] increase the number of players but the impact of these measures seems to be over,” stated Mr Yanagida. The Center added the average pachinko player made 20.4 trips to pachinko parlours during that year—one trip every two and a half weeks—a much higher frequency than most mainland Chinese casino players visiting Macau, who are currently limited to one trip per month under China’s Individual Visit visa scheme. Source: Japan’s National Police Agency/ Vision Search Inc. Table 4: Pachinkomachine installation trends in Japan1995-2009 Slot machines Pachinko Machines 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Fighting the Law or Framing it? Pachinko’s unusual regulatory status has tacit support from powerful groups Powerful friends—pachinko parlour in rural Japan Pachinko Versus Casinos Which model makes most economic (if not cultural) sense? J apanese law essentially prohibits gambling organised by private entities. However, pachinko is defined as a “speculative pastime” in government guidelines. As a result, it’s classified as part of the leisure industry and supervised as such by the National Police Agency. In 2005, the English-language daily newspaper The Japan Times carried an article by Ronald Morse, professor of international economics and business administration at the University of Nevada at Las Vegas on the strange legal status of pachinko . Prof. Morse stated: “Self-deception on issues like this is a national sport in Japan.The administrative fiction that pachinko is not gambling in Japan is based in the Japanese government and its antiquated regulatory structure. This is what Japanese refer to as gyousei shido (administrative guidance).” Pachinko guidelines are listed in an addendum to the legislation that covers prostitution—known as the Adult Entertainment Business Law. Pachinko customers must be over 18 years of age. Under the rules, pachinko halls and operators are technically prohibited from giving cash or securities as a prize, from repurchasing prizes given to players, and from allowing players to take balls off the premises. The way pachinko prize redemption works in practice clearly breaches the spirit if not the actual technical terms of the first and second of these rules. “The main reason some politicians speak in favour of pachinko is because it is the biggest (in the sense of money spent) pastime for Japanese,” says Prof. Tanioka of Osaka University of Commerce. “Some politicians feel a duty to legalise pachinko as Class III gaming [i.e. to follow the US system—with Class III in this case being anything that is neither casino slot machine nor video lottery terminal]. “Another unofficial reason,” adds Prof Tanioka, “is that they [politicians] get money [from the pachinko industry] to lobby, of course.” Japan has a long and rich history of post war political funding scandals across many industries. One possible reason is that holding political office in Japan is an extraordinarily expensive business, with MPs routinely expected to attend constituents’ weddings and funerals, making cash donations to the families on each occasion. periodically been pursued by the authorities for non-payment or underpayment of corporation tax—with mixed results. Some operators are very transparent in their business practices, even investing in carded play technology that allows player credits and/or points to be recorded and stored on card at the end of a session (in the way that player points are saved on casino player cards). There are reports that a police social association in Japan has invested heavily 1. Taxation Pachinko operators do pay tax on the gross—but not in thewaymost international casino operators would understand the concept. The most bizarre aspect of the pachinko hall business model is probably the revenue share done with the police meant to supervise them. The parlours do this by operating the forex-style arbitrage system mentioned earlier. They sell the balls to players at a higher price than they buy them back—with some of the difference going to the police, according to sources in Japan spoken to by Inside Asian Gaming . It seems the investment doesn’t always pay dividends either in terms of police protection of the industry or in terms of intimidating criminals. In October last year, an armed robber stole ¥37 million (US$447,000 at current rates) froma pachinko prize exchange booth in Saitama. Some pachinko operators have Cover Story Units (millions)