Japan's first casino resort won't open until 2023 if the legalized gambling legislation currently being debated in the country is passed by the end of the current legislative session, which has. Since 2001 the Japanese government consistently turned away all efforts to legalize casinos as political leaders argued about the benefits and costs of opening the doors to the establishment of casinos in Japan. This month the Japanese Diet voted to change the laws relating to gambling in Japan.
The land of the rising sun is about to let casino gambling dawn on their land. For almost two decades, politicians have been trying to legalize casino gambling in Japan, but the measures have fallen short. Until this past year.
The Japanese Diet (legislature) approved a limited law allowing for what's known as 'integrated resorts.' An integrated resort is a comprehensive entertainment complex that, alongside casinos, incorporates facilities such as shopping malls, theaters, hotels, and theme parks.
This marks the first time that actual casino gambling will be allowed in Japan since the enactment of the current set of criminal codes that was established in 1907.
The Bakuto and the Yakuza
Japan has a complex social system. While it isn't codified by law anymore, the country still looks at certain types of behavior and occupations as undesirable. Essentially, it was a caste system.
Two of the most undesirable castes between the 1600s and 1900s were peddlers (tekiya) and gamblers (bakuto). These groups were mostly left alone and self-policed in this era (known as the Edo period).
The peddlers organized and formed groups to organize their activities for events such as festivals and fairs.
The members of the organizations received stalls at these events. They paid a rental fee and for protection and security during the events. The events were run by oyabun, or bosses, and the protection was provided by kobun, or gang members, who were at the bottom of the social pyramid.
The government legitimized the tekiya and the oyabun, and they were even given special privileges similar to samurai of the period.
The bakuto were looked at as lower than the tekiya. Bakuto were gamblers and those involved in the illegal and much-disdained gambling industry.
Small gambling houses peppered the country in abandoned places of worship, usually on the edge of small towns. In addition to gambling, the bakuto were usually involved in loan sharking businesses, and like the tekiya, they maintained their own security.
Over time, these two undesirable groups would overlap and merge, forming what we now know as the yakuza. The yakuza was and is the major organized crime syndicate in Japan.
Much of the negative perception of the yakuza comes from the bakuto groups. The name yakuza itself is derived from the numbers ya-ku-za, or 8-9-3, which is a losing hand in Oicho-Kabu, a form of baccarat.
The yakuza still exist in today's Japan as well as internationally. They have a mixed relationship with Japanese society. On the one hand, they can function as a public security force, much like the police, to stomp out crime. This is self-serving, of course, because they're actually protecting themselves from the competition. They also provide protection to businesses and relief in times of disasters.
For example, immediately after the 1995 Kobe earthquake, the Yamaguchi-gumi, a yakuza crime syndicate whose headquarters are in Kobe, mobilized itself to provide disaster relief services. The media highlighted the speed in which this group mobilized as opposed to the much slower response of the actual Japanese government.
In 2011, the yakuza mobilized again to help after the 2011 Tōhoku earthquake and tsunami. The group sent hundreds of supply trucks, provided shelter to victims, and coordinated regional efforts before the national government could organize.
On the other hand, the public still looks at some of their actions as shameful, such as their gang wars and their use of violence as a tool to bolster their power.
Introduction of Gambling Laws
The introduction of Act Number 45 of 1907 set forth the penal code for Japan. A number of these laws were specifically designed to curb the power of the yakuza and organized crime in Japan.
The penal code specified laws related to gambling in Chapter 23.
- Article 185 (Gambling)
- A person who gambles shall be punished by a fine of not more than 500,000 yen (currently US$4,450) or a petty fine; provided, however, that the same shall not apply to a person who bets a thing which is provided for momentary entertainment.
- Article 186 (Habitual Gambling; Running a Gambling Place for the Purpose of Gain)
- (1) A person who habitually gambles shall be punished by imprisonment with work for not more than 3 years.
- (2) A person who, for the purpose of profit, runs a place for gambling or organizes a group of habitual gamblers shall be punished by imprisonment with work for not less than 3 months but not more than 5 years.
- Article 187 (Lotteries)
- (1) A person who sells a lottery ticket shall be punished by imprisonment with work for not more than 2 years or a fine of not more than 1,500,000 yen (currently US$13,350).
- (2) A person who acts as an intermediary in the sale of a lottery ticket shall be punished by imprisonment with work for not more than 1 year or a fine of not more than 1,000,000 yen (currently US$8,900).
- (3) Except for the cases provided for in the preceding two paragraphs, a person who delivers or receives a lottery ticket shall be punished by a fine of not more than 200,000 yen (currently US$1,780) or a petty fine.
That's not to say that gambling is completely illegal in Japan. If you read the laws above carefully, nothing prevents the government from engaging in gambling enterprises.
Exceptions to Gambling Laws
In Japan, both the national government and the local governments can establish legal gambling under government control.
Public Sports
Kōei kyōgi or public sports are races that either the government or governmental corporations regulate betting on. These are completely legal for Japanese to bet on. These sports include:
- Horse racing
- Bicycle racing
- Powerboat racing
- Speedway motorcycle racing
Cities throughout the country have a large number of circuits and ticket booths for people to place bets on these events. Bettors can expect to receive 75% to 80% of the prize pool in winnings from the events; the rest goes back to the government.
Pachinko
One of the most popular forms of gambling in Japan is Pachinko. A Pachinko machine is a hybrid of a slot machine and a pinball machine.
To avoid running afoul of Japanese gambling laws, Pachinko parlors have developed a system that doesn't directly exchange money for winnings.
The system works in the following way:
- When a player wins, he wins a number of Pachinko balls. These balls must stay in the parlor and are even engraved to show which parlor they belong to and prevent fraud
- The balls are exchanged at the parlor for prizes or tokens
- The winner then takes the prize or tokens to another location in the vicinity of the parlor for cash
- These exchange centers can provide services for many parlors in the area. The parlors then provide the exchange center with a percentage of the prize's value when the parlors collect the prizes or tokens back from them
How Pachinko Machines Work
When starting a Pachinko game, the player gets metal balls by inserting cash or credit cards into the machine they'll play on. The number of balls varies based on how much the player wishes to spend.
The balls are then shot into the machine by pulling a lever, similar to how you would launch a ball in the game of pinball. The ball then glides across the machine through a maze of traps, cups, pins, levers, and other obstacles until the balls reach the bottom of the machine screen.
Much like pinball, the player has the opportunity to win more balls during the game if the existing balls hit certain bonus areas of the machine screen. In Pachinko, the more balls, the better, as it allows you to play the game longer, which will allow you to increase winnings.
In games that have been manufactured in the last 10-20 years, the game incorporates a digital slot machine as a bonus.
The slot portion of the game has a simple objective of matching three numbers or symbols in a row to win the big jackpot.
Legalizing Gambling In Japan
In older machines, the games tend to have a spring-loaded lever (like pinball flippers) to shoot the ball individually, but the newer ones have a round knob that controls a plunger (like pinball) that shoots the balls into the playing area.
When the balls are shot with the plunger, the balls travel through the screen, which contains a number of pins. The balls that drop into the center gate result in a spin of the slot machine. The number is limited because it is possible for balls to pass through the center while the slot spin is commencing.
Each winning spin spits out a certain number of balls based on the winning combination that appears (much like slot machines have different amounts that are won based on the combination that is spun).
In the slot mode, if the first two symbols of the spin match, animations will appear before the third reel stops. These can be long or short animations depending on the machine. The animation is known as reachi or a reach.
Once a jackpot is hit, the machine enters payout mode. Payout mode lasts for many rounds. During this mode, the player must shoot balls into the payout gate at the bottom of the machine. Every ball that passes through the gate pays out a large number of balls that are dropped into the payout tray at the bottom of the machine which the winner can place into a ball bucket.
Once the payout mode is completed, the machine will enter into one of two modes, the kakuhen or the jitan mode.
The kakuhen mode is when the Pachinko machine's random number generator (RNG) hits a jackpot on the spin following the payout mode. Because of the RNG, it's possible to win consecutive jackpots. This is known as 'fever mode.'
The other mode that a Pachinko machine can enter into is jitan. This will give the player more spins to work with than the kakuhen mode. To compensate for the larger number of spins, the machine produces the outcome of each spin faster than in normal mode.
After these modes have completed, the machine goes back to its original settings.
In addition to regular gameplay, newer Pachinko machines have included new features to enhance the game.
Some machines have the ability to change between different modes, including rare and hidden modes that are more challenging than normal gameplay.
The game itself may add hints to the odds of winning during reach animations. Some also include instant wins or second-chance spins to increase the excitement of the game.
Japan Legalized Gambling
The Numbers of Pachinko
The Pachinko machines make Japan the world's leader in the number of slot machines in one country. Japan has over 12,500 Pachinko parlors in the country. These parlors house over 5 million machines. That's one machine for every 25 people living in Japan.
The Pachinko industry in Japan is valued at ¥25 trillion. That's about US$225 billion. That's more gambling revenue than Las Vegas, Macau, and Singapore combined.
It accounts for 4% of Japan's gross domestic product.
Takarakuji
In Japan, it is common for cities to hold lotteries or Takarakuji throughout each year.
The lotteries in Japan can be broken down into three different types:
- Unique number lotteries
- Selected number lotteries
- Scratch cards
Each ticket for the lottery costs between 100 and 500 yen ($0.89 and $4.45 respectively). The top prize is usually over 1 million yen or about $900,000.
Japanese law required that the total prize pool of a lottery has to be less than 50% of sales. The rest must go to the government or charity.
People can buy Takarakuji tickets at booths and stores throughout the country. Some tickets can even be purchased at automatic teller machines.
Illegal Gambling
The yakuza has a lock on Japan's illegal gambling. They operate parlors throughout Japan. They offer traditional casino games, but the most popular is Mahjong. The parlors use the yakuza as agents to collect from those who default on their losses.
The March Towards Legalized Casinos
As far as gambling goes, the Japanese government has realized for a long time that they're behind the times. They know that they lose valuable tourist income to other Asian countries like Macau and the Philippines.
The Philippines takes in $3.6 billion in gambling revenue each year. Macau, the world's largest casino city, takes in $25 billion annually. Government officials knew that they could easily divert some of those tourist dollars from those two areas into Japan.
In 2000, a former governor of Tokyo, Shintaro Ishihara, started making the push for casinos to be built in Odaiba, a large artificial island in Tokyo Bay, Japan, across the Rainbow Bridge from central Tokyo. His argument for the location was that even though it would be a destination spot, it would be apart from the communities and businesses in Tokyo proper.
Ishihara also had a great dislike of Pachinko parlors that were sprawled across the city. But by limiting the area of operation of the casinos, it wouldn't interfere with everyday Japanese life as he felt Pachinko parlors did.
There were many reasons that the Japanese government opposed casinos. One of the largest reasons was gambling addiction.
Currently, it is believed that there may be as many as 3.2 million gambling addicts in Japan according to the Japanese Health Ministry.
Pachinko seems to be the main source of the addicts' problems.
Because of these issues, Japan has concerns that the introduction of legalized casinos in the country will create a bigger problem.
To combat this, Japan has created some of the strictest laws for citizens when it comes to the new casinos.
Legalized Gambling In Japan
All residents of Japan will be required to present their state-issued ID upon entry and pay a ¥6,000 or $50 fee to enter the casino.
No resident will be allowed more than three visits per week to gamble, with a maximum of ten visits per month.
The model they developed was borrowed from laws that exist in Singapore, where residents must pay ¥8,000 or about $70 to enter and are restricted to eight visits a month.
The July 2018 legislation was a follow-up to a law passed in December 2016 that allowed for casino gambling. The 2018 law sets that actual framework and operational regulations for these casinos.
The 2018 law allows for three 'integrated resorts' that contain casinos. These resorts will be limited to 3% of the total area of the resort to be allowed for gaming.
Operators will pay a 30% tax off the top to the central and local governments.
The law provides that a new governmental committee is set up in early 2019 to manage the licensing process. Bidding will likely start in 2020 or 2021.
The first resort is expected to open in 2025.
That date is notable because it is expected that the first casino will open in Osaka, which will host the 2025 World Expo. Osaka has already set aside land for the venture, building an artificial island called Yumeshima (seen below).
Other cities that are under consideration are Tokyo, Yokohama, Tomakomai, Wakayama, and Sasebo.
The companies that get one of the three licenses will have their use for ten years. After the first ten years, the licenses must be renewed through the local legislature every five years.
The Japanese Diet is taking a wait and see approach with adding more casinos. The new law provides that new resort locations can be considered seven years after the first three are approved.
In theory, this means that the new casinos could only be operating for a year or two before more are considered.
Many major casinos have already expressed interest in obtaining licenses.
Sheldon Adelson, chairman of the Las Vegas Sands, has stated that they would like to invest at least $10 billion to break into the market. Adelson stated that the company would like to be in a big city such as Tokyo, Yokohama, or Osaka. The Sands wants to expand its convention-resort model to any venture in Japan.
MGM also is targeting the same three cities as the Sands. They would not expect to invest the same amount of capital, however.
Caesars Entertainment presented a plan for a casino resort in a more remote location – the city of Tomakomai. The area is already a popular resort area for skiing. They feel that the tourist infrastructure is already in place and a casino would complement the area well.
Another feature of the new law is that it will allow casino operators to offer loans and credit to customers.
Tourists and high-income Japanese residents will be eligible for the loans. The loans must be repaid within two months, and anyone who defaults faces an annualized interest rate of 14.6%.
Each ticket for the lottery costs between 100 and 500 yen ($0.89 and $4.45 respectively). The top prize is usually over 1 million yen or about $900,000.
Japanese law required that the total prize pool of a lottery has to be less than 50% of sales. The rest must go to the government or charity.
People can buy Takarakuji tickets at booths and stores throughout the country. Some tickets can even be purchased at automatic teller machines.
Illegal Gambling
The yakuza has a lock on Japan's illegal gambling. They operate parlors throughout Japan. They offer traditional casino games, but the most popular is Mahjong. The parlors use the yakuza as agents to collect from those who default on their losses.
The March Towards Legalized Casinos
As far as gambling goes, the Japanese government has realized for a long time that they're behind the times. They know that they lose valuable tourist income to other Asian countries like Macau and the Philippines.
The Philippines takes in $3.6 billion in gambling revenue each year. Macau, the world's largest casino city, takes in $25 billion annually. Government officials knew that they could easily divert some of those tourist dollars from those two areas into Japan.
In 2000, a former governor of Tokyo, Shintaro Ishihara, started making the push for casinos to be built in Odaiba, a large artificial island in Tokyo Bay, Japan, across the Rainbow Bridge from central Tokyo. His argument for the location was that even though it would be a destination spot, it would be apart from the communities and businesses in Tokyo proper.
Ishihara also had a great dislike of Pachinko parlors that were sprawled across the city. But by limiting the area of operation of the casinos, it wouldn't interfere with everyday Japanese life as he felt Pachinko parlors did.
There were many reasons that the Japanese government opposed casinos. One of the largest reasons was gambling addiction.
Currently, it is believed that there may be as many as 3.2 million gambling addicts in Japan according to the Japanese Health Ministry.
Pachinko seems to be the main source of the addicts' problems.
Because of these issues, Japan has concerns that the introduction of legalized casinos in the country will create a bigger problem.
To combat this, Japan has created some of the strictest laws for citizens when it comes to the new casinos.
Legalized Gambling In Japan
All residents of Japan will be required to present their state-issued ID upon entry and pay a ¥6,000 or $50 fee to enter the casino.
No resident will be allowed more than three visits per week to gamble, with a maximum of ten visits per month.
The model they developed was borrowed from laws that exist in Singapore, where residents must pay ¥8,000 or about $70 to enter and are restricted to eight visits a month.
The July 2018 legislation was a follow-up to a law passed in December 2016 that allowed for casino gambling. The 2018 law sets that actual framework and operational regulations for these casinos.
The 2018 law allows for three 'integrated resorts' that contain casinos. These resorts will be limited to 3% of the total area of the resort to be allowed for gaming.
Operators will pay a 30% tax off the top to the central and local governments.
The law provides that a new governmental committee is set up in early 2019 to manage the licensing process. Bidding will likely start in 2020 or 2021.
The first resort is expected to open in 2025.
That date is notable because it is expected that the first casino will open in Osaka, which will host the 2025 World Expo. Osaka has already set aside land for the venture, building an artificial island called Yumeshima (seen below).
Other cities that are under consideration are Tokyo, Yokohama, Tomakomai, Wakayama, and Sasebo.
The companies that get one of the three licenses will have their use for ten years. After the first ten years, the licenses must be renewed through the local legislature every five years.
The Japanese Diet is taking a wait and see approach with adding more casinos. The new law provides that new resort locations can be considered seven years after the first three are approved.
In theory, this means that the new casinos could only be operating for a year or two before more are considered.
Many major casinos have already expressed interest in obtaining licenses.
Sheldon Adelson, chairman of the Las Vegas Sands, has stated that they would like to invest at least $10 billion to break into the market. Adelson stated that the company would like to be in a big city such as Tokyo, Yokohama, or Osaka. The Sands wants to expand its convention-resort model to any venture in Japan.
MGM also is targeting the same three cities as the Sands. They would not expect to invest the same amount of capital, however.
Caesars Entertainment presented a plan for a casino resort in a more remote location – the city of Tomakomai. The area is already a popular resort area for skiing. They feel that the tourist infrastructure is already in place and a casino would complement the area well.
Another feature of the new law is that it will allow casino operators to offer loans and credit to customers.
Tourists and high-income Japanese residents will be eligible for the loans. The loans must be repaid within two months, and anyone who defaults faces an annualized interest rate of 14.6%.
This feature has not set well with critics for a few reasons:
- It exploits players with a losing streak, encouraging them to borrow to turn things around
- Borrowing will heighten gambling addiction and debt
- The casinos will be exempt from current lending laws limiting the amount that can be borrowed, allowing casinos to lend more than the person can ever afford
The biggest reason the new laws for casino gambling passed is tourism. However, critics question this.
A study of people from 12 different countries asked which features they would visit a Japanese integrated resort for. The participants were able to choose multiple features.
- 46% said shopping malls
- 43% said hotels
- 40% said theme parks
- 7% said casinos
Other surveys state that Japanese residents will be frequenting these casinos more often than foreigners. Goldman Sachs estimates that 57% of visitors to Japanese casinos will be locals.
This is compared to a 29% average of other Asian casino destinations.
In a 2017 report, the city of Osaka forecast 15 million local casino visitors in 2030. This would be about 70% of all visitors if a resort is developed on Yumeshima.
Conclusion
Japan definitely has reasons to be cautious about rolling out casino gambling in their country. The country has a high amount of gambling addiction, and they want to protect that vulnerable group.
They also want to prevent more people exposed to gambling from being overexposed and developing an addiction.
The approach they took in passing the law by limiting the number of casinos, restricting the casinos to integrated resorts, and limiting the local population from using the casinos is a wise choice.
But it will be up to the government and the resorts to bring the people in. Just because Caesars, MGM, or the Sands wants to build a resort in Japan doesn't mean that it will attract foreign visitors, which is ultimately the goal.
These casinos will have to 'steal' gambling tourists from Macau and the Philippines. Japan already has a leg up on the Philippine market because the president of the country, Rodrigo Duterte, has put a moratorium on the opening of any new casinos to prevent the market from being flooded.
He further stated that he hates gambling and doesn't want it. He went on to say he'd not grant any more licenses beyond existing ones during the remainder of his presidency, which is expected to end June 30, 2022.
This being the case, Japan can seize on the lack of growth in the next few years, especially if Duterte is re-elected, which would push this moratorium past the expected 2025 debut of Japan's first casinos.
They'll also have to compete with Macau. This will be much tougher as Macau certainly has more to offer. Volume alone allows visitors to visit over 30 locations in the same city. So Japan and the casinos that open will have a lot of work ahead of them to compete with Macau.
