Game money in Japan: between prohibition and regulated exceptions

Japan has very strict legislation on gambling, prohibiting most forms of betting and casinos. However, some exceptions are permitted, such as horse racing or the famous pachinko. This regulation, which has been in place since the Meiji era, may nevertheless evolve in the future under the influence of economic and tourist trends.

The legal framework for gambling in Japan

Gambling is prohibited by article 23 of the Japanese Penal Code, which prohibits classic casino games such as roulette, blackjack or slot machines. This ban is based on a historic desire to limit dependency problems and to preserve social stability.

However, there are several exceptions to this legislation that allow certain types of games and bets to operate legally. Among them are official lotteries, certain types of sports betting and pachinko, which occupies a unique place in the game industry in Japan.

Exceptions: lotteries, sports betting and pachinko

Lotteries (Takarakuji)

Japanese lotteries, known asTakarakujiare organized by local governments and contribute to the financing of infrastructure and charitable projects. They are available in several forms:

• Traditional lotteriessimilar to European lotteries, they involve the purchase of numbered tickets for a draw.
• Instant lotteries: scratch tickets allow players to immediately discover if they have won a prize.
• Numbers & Lotto: inspired by the Western Lotto, these lotteries allow players to choose their numbers.

Although popular, lotteries redistribute only 50% of bets to players, the rest being reinvested in public projects.

Regulated sports betting

Unlike casino games, some sports bets are allowed under strict regulations. These bets mainly concern the“Public sports” (which include:

• Horse racing (Keiba)organized under the control of the Japan Racing Association (JRA).
• Keirin, a cycling discipline where riders compete on oval tracks.
• Boat racing (Kyōtei)and motorcycles, which follow a model similar to horse racing.

The income generated by these bets is largely redistributed to the winners, with a return rate of around 75-80%.

The pachinko: between gambling and legal circumvention

Thepachinko (occupies a special place in the world of games in Japan. This game, close to the flipper, allows players to win metal balls, which they can then exchange for various lots (toys, cigarettes, electronic devices…).

Technically, the pachinko is not considered a gambling game since the balls cannot be exchanged directly for money. However, a system bypassing this restriction has been developed: near the pachinko rooms, specialized shops buy these lots for cash, creating a parallel circuit tolerated by the authorities.

The pachinko industry is a colossal economic sector, generating several billion yen each year. It is estimated that more than 15 million Japanese regularly play this game, and that the country has about 5 million machines in dedicated playrooms.

Online gambling boom

Although physical casinos are banned, Japan is experiencing an increase in popularity of online gambling. Many Japanese give online casinos via foreign platforms, thus benefiting from a grey legal area that prevents the authorities from effectively regulating these practices.

In the face of this phenomenon, the government may have to review its gambling policy. Several discussions have already been initiated to consider regulation of online casinos and even legalization of physical establishments.

An evolution towards legalization of casinos?

For several years, discussions have been taking place in Japan regarding the possibility of legalizing terrestrial casinos. In 2016, the government passed a law authorizing the construction ofIntegrated Resorts, combining hotels, conference centers and playgrounds.

The objective is twofold:

• Stimulating tourismattracting foreign visitors, especially Chinese and South Korean, who are used to attending Macau and Singapore casinos.
• Create an additional revenue sourcefor the State, while strictly guiding practice to limit the risks of addiction.

The first complexes should emerge in a few years in cities like Osaka and Yokohama, although resistance persists among the population, concerned about the negative effects on society.

Clandestine games and mafia implications

In spite of the ban on casinos, illegal establishments exist and are often linked to criminal organisations, including theyakuza. These illegal casinos operate discreetly in some large cities and offer games such as poker, mah-jong or baccarat.

The legalization of casinos would make it possible to fight against these institutions more effectively and to drain the sources of funding from Mafia groups. However, this perspective remains controversial, with some of the population fearing an increase in dependency and crime problems.

The future of gambling in Japan

Japan is at a turning point in gambling. If current legislation remains strict, the rise of online casinos, economic pressure and the desire to strengthen the country’s tourist attraction could lead to a relaxation of laws.

The opening of the first integrated resorts will be a decisive test for the future of the game market in Japan. If these institutions are successful without generating major social problems, a gradual extension of the gambling offer could be envisaged.

For now, the Japanese still have to settle for pachinko, lotteries and regulated bets. But with the evolution of mentalities and economic interests, the game landscape in Japan may well change in the coming years.

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