Japan's pachinko industry braces for anti-addiction regulation
27/07/2018 24:00
By Taiga Uranaka and Ritsuko Ando
July 27 (Reuters) - Like many Japanese pachinko parlours,
Naomi Suzuki's shop on the outskirts of Fukushima City was once
full of energy, with the din of bouncing steel balls and garish
lights flashing to indicate winnings.
But business is quieter for her these days as her parlour's
clientele ages and drifts away. And with new restrictions on the
game this year, she and her industry are bracing for things to
get much worse.
The rules, aimed at curbing gambling addiction, are part of
a policy barter that helped legalise casinos in 2016 despite
widespread opposition. Japan passed regulations on casino
developments last week, including those on gambling addiction.
The new anti-addiction rules call for pachinko machines to
reduce payouts. That means players win and lose money more
slowly - and will perhaps find the game less exciting and
addictive.
Pachinko halls are required to comply in the next three
years. Owners like Suzuki worry not only about the cost of
replacing machines, but that regulars will find the new games
too dull.
"If you restrict the excitement so much, people will quit,"
she said. "The point of allowing casinos was to bolster regional
finances. But the pachinko industry will be taking the hit."
ALREADY SLOWING
The industry, which gained nationwide popularity after World
War Two, has already been in decline because of a shrinking
population. Younger generations tend to favour online games and
other sources of betting.
The overall industry has shrunk to about 20 trillion yen
($179.82 billion) from around 30 trillion yen a decade ago,
according to Japan Productivity Center, which compiles
statistics on the leisure industry.
Pachinko halls have tried to keep players entertained by
incorporating animation and high-tech features into the games.
But the basic rules remain the same: players try to bounce
steel balls into parts of the board that reward them with a
payout of more balls.
Balls can exchanged for prizes, which can be redeemed for
cash at a nearby exchange point in a three-step process designed
to skirt regulations.
The number of pachinko halls has fallen to about 9,600 from
over 17,000 two decades ago, according to data based on
statistics collected by the National Police Agency, which
regulates the industry.
Pachinko hall operators are going bankrupt more often; 29
did so last year compared with 12 in 2016, according to credit
data agency Tokyo Shoko Research.
Daiwa Securities analyst Takao Suzuki predicts that more
pachinko halls will shut down, and that operators nationwide
will see sales fall up to 20 percent.
Suzuki said pachinko hall operators are already spending
about 1 trillion yen annually on new machines, a high
expenditure considering all parlours combined earn 3 trillion
yen a year. New machines usually cost 400,000 to 500,000 yen
each.
"It's a big problem for parlours that cannot afford it," he
said. "At the moment, there are estimated to be 4,000 to 5,000
parlours that are not buying new machines."
BIG PLAYERS TO STAY
But few Japanese, aside from pachinko enthusiasts, have
sympathy for the industry.
Many pachinko businesses are owned by ethnic Korean
minorities, who have traditionally faced discrimination in
other, more mainstream industries.
A government survey last year found that 3.6 percent of
Japanese have been addicted to gambling at some point, higher
than the 1-2 percent average in other developed countries, and
that pachinko was the top destination for gamblers.
The industry has not lobbied hard against the new rules,
partly because bigger and more influential companies are
positioned to benefit from the changes.
Companies that make pachinko games such as Heiwa Corp
6412.T are likely to profit in the short term as parlours buy
new machines.
And some big pachinko companies, including game makers and
hall operators like Sega Sammy Holdings 6460.T and Dynam Japan
Holdings Co 6889.HK , are planning to expand into casino
entertainment in Japan.
Industry insiders say that in recent years, operators have
focused on high rollers as their customer base shrunk.
Hiroyoshi Fukaya of the pachinko industry publication
GreenBelt said pachinko enthusiasts these days were often ready
to spend 100,000 yen ($899) in just one visit, compared with
around 10,000 yen to 20,000 yen years ago.
Some analysts said the regulations would help return
pachinko to its origins as a form of popular entertainment.
"We see it as a chance to expand the player base, and to
gain the participation of a younger generation," said Kimiharu
Sato, a director at Dynam Co.
Dynam has already shifted its emphasis toward low-stakes
"one-yen" machines. But owners of smaller pachinko parlours say
such games are only profitable for the biggest chains.
"At our scale, we cannot survive," owner Suzuki said in her
office at the back of her pachinko hall. She reminisced about
its heyday when the parking lot was regularly full and so many
customers queued outside when new machines were installed that
the shop provided portable toilets.
By contrast, on a recent weekday afternoon, the lot was
mostly empty.
"We have a lot of elderly customers," she said. "If these
neighbourhood pachinko shops are gone, some elderly people who
have enjoyed it as a pastime will have nowhere else to go."
($1 = 111.2200 yen)
(Reporting by Taiga Uranaka and Ritsuko Ando; Additional
reporting by Ritsuko Shimizu; Editing by Gerry Doyle)
((Ritsuko.Ando@reuters.com; +81 3 6441 1743; Reuters Messaging:
ritsuko.ando.thomsonreuters.com@reuters.net))