Pachinko not ‘morally’ suitable for Japan’s casinos, lawmaker says

A Japanese lawmaker has a beef with pachinko. Takashi Takai, of the Constitutional Democratic Party of Japan, has created a laundry list of questions for the government that questions the pachinko industry’s “moral fitness” in casinos. His main argument is that the game is the primary root of addiction in the country, and that the industry does virtually nothing to protect consumers.

Pachinko machines don’t reward money directly. They reward captured balls for tickets, which are subsequently traded for money elsewhere. To many, this helps the hybrid slot/pinball machine avoid the classification of being a gambling game but, rather, one of amusement. However, with the possible spread of casinos in Japan, lawmakers are revisiting the industry and have, so far, introduced lower payouts to the games.

In 2015, the pachinko industry dealt with a scandal that involved tampering of the machines. The ensuing government investigation, according to Takei, is a good enough reason to consider the validity of the machines in casinos. He was quoted by Asia Gaming Brief saying, “Considering that there was a major tampering case by pachinko makers from a mere three years ago, I believe we must take a strict view towards their participation in the casino industry. Also, the National Public Safety Commission, as well as the prefectural public safety commissions, have proven themselves unable to prevent large-scale tampering by the pachinko makers and therefore it is inappropriate to have them supervise the casino business.”

Takei should rest easy in knowing that the industry is already on life support. Last year, 420 pachinko cafes—one out of every 25—shut down. Additionally, 177 companies went belly-up, roughly 5% of all the operators in the country. There has been a decline in interest for a number of years as millennials seek out more exciting opportunities. Perhaps he should just let the industry have its remaining days in peace and let it die happy.

Pachinko operator ‘ripe fit’ for casino investors eyeing Japan

Now that Japan is a step closer to legalizing casinos, foreign investors may have already started forming links with their local counterparts in order to jointly bid for a Japanese casino license.

And one firm that is well-positioned for such kind of strategic investment is pachinko hall operator Dynam Japan Holdings Co Ltd., according to brokerage Union Gaming Securities Asia Ltd.

Pachinko operator ‘ripe fit’ for casino investors eyeing Japan: analystUnion Gaming Securities Asia analyst Grant Govertsen said the pachinko hall operator is “has significant unrealized value as it is ripe for strategic investment on the part of an international IR operator.”

“The company is well positioned for M&A opportunities as one of the largest and well-capitalized operators,” Govertsen said in a note. “[It also] has option value as a front-runner to win a small-scale regional IR license in Japan.”

Because its pachinko parlors are located in areas “that will not be in close proximity” to an integrated resort, Union Gaming believes Dynam will be “largely insulated from any negative impacts” of the IR development in the country. Only 6 percent of Dynam’s parlors are located in the prefectures that are being considered as potential candidates to host Japan’s first integrated resorts—namely Tokyo and Osaka. In comparison, Dynam’s rivals—Maruhan and GAIA—have 24 percent and 56 percent, respectively, of their parlors located in the same prefectures.

“Dynam has one of the largest data sets of gaming-related customers and customer behavior based on its nearly 50 years of operations and market-leading position in terms of number of parlors operated. Given our belief that Japan integrated resort revenues will be driven primarily by locals it would make sense for a potential integrated resort developer to make a strategic investment in Dynam,” Govertsen said.

Dynam disclosed in 2015 its plans to enter the “resort development business” in Japan. At the time, the company said it was looking at a land in Shimonoseki, the largest city of Yamaguchi prefecture, as its target site for development. Union Gaming forecast Dynam to be a frontrunner for a regional IR license, especially if such license is available in the Yamaguchi prefecture, where the company has “very strong ties.”

“We also note that Prime Minister Shinzo Abe is also a native of Yamaguchi, which could give the prefecture an advantage as it relates to becoming an IR host community,” the brokerage stated. “A native Japanese company that already has exposure to and knowledge of the gaming industry should have a distinct advantage in any regional small-scale IR RFP process.”

Eldery Japanese in Kobe banned from playing pachinko

Elderly residents at day care centres in Kobe Japan have been banned from playing cards, Pachinko and other forms of gambling as the city’s Municipal Assembly voted to ban those forms of activities as they foster a self-reliance on the part of the elderly.

This week the Kobe Municipal Assembly unanimously adopted a local ordinance as the country’s first municipality to ban day-care centers operating under the public nursing-care insurance system from letting elderly people play such games.

Under the ordinance, day-care centers cannot regularly provide activities such as pachinko and mah-jongg that may “stir up the passion for gambling.”

Also companies offering those activities will be banned from advertising to the elderly there.

Kobe city officials said day-care centers pitching these “casino type” activities are springing up nationwide, running counter to the spirit of the public nursing-care insurance system, which is partly funded by taxpayers’ money.

Japan may finally cash in on the elderly’s love of gambling

Japan is reforming its gambling industry, with plans to introduce a new law this autumn that will legalize casinos as a way to boost economic growth and tourism before the 2020 Tokyo Olympics. One of the biggest potential beneficiaries? Pachinko, the pinball-slot machine hybrid played across the country.

One in seven Japanese adults play pachinko and its revenues last year were put at 19 trillion yen ($175 billion), according to The Economist. But pachinko players are mainly, as the magazine puts it, “chain-smoking geezers.”
The number of regular players is falling and they are getting older. This is part of a broader trend; Japan has the world’s oldest population, with a quarter of its people over 65, which means that in order for the country’s economy to grow, it needs to find ways to get more from what it already has.

As pachinko was previously classified as a game, it hasn’t been taxed. Players win small metal balls, which can be exchanged for token prizes at the parlor—or cash at a separate location, a contrivance that led to pachinko being used for money-laundering by the yakuza. As casinos are legalized, pachinko is likely to come under similar rules, and may finally contribute to the public purse. Given the sums involved, it would mean billions of dollars worth of taxes for the government.

The biggest pachinko operator, Dynam, operates almost 400 parlors. The proceeds from a 2012 listing in Hong Kong is funding plans to open 1,000 more—these will be air-conditioned and smoke-free in a bid to attract younger customers. The company is also in talks to build a casino in Japan once the law passes.

Analysts told Reuters that Japan could become the third-biggest gambling market in the world, with annual revenues of more than $40 billion. And doesn’t even count the massive pachinko market.