Yen for Living

Where’s the money? Pachinko patrons at an off-site exchange booth

In line with plans to make casino gambling legal in Japan, the government needs to come up with some sort of scheme to tax gambling receipts, but even before they do that they have to address another problematic potential revenue source: pachinko. As it stands, pachinko winnings are not taxed and pro-casino forces are thinking of implementing a 1 percent levy on those winnings, so they went to the National Police Agency and asked for figures to see what kind of tax revenues they could expect. An NPA representative told them, seemingly with a straight face, that they don’t keep such statistics since there are no winnings.

Classic pachinko is like pinball in that the player earns points by being able to send balls into certain holes, which gives him more balls to play with. In gambling terms, a player wins when he ends up with more balls than what he started with. However, pachinko parlors cannot reimburse the player for the balls he wins. Instead they give him tokushu keihin (special premiums) — ball point pens, lighter flints, etc. — in exchange for balls. Then, he can take those premiums to an off-site, unaffiliated shop that buys them with cash. The shop then sells the premiums back to a wholesaler, which, in turn, redistributes tham back to pachinko parlors.

This “three-shop exchange system” (santen kokan hoshiki) bypasses anti-gambling laws because the venue where the customer plays the game does not offer cash rewards. Everyone understands this system and how it works, but the police representative told the group of lawmakers that they don’t have figures because “we don’t know anything about places” where pachinko players exchange prizes for money.

According to the Asahi Shimbun, the lawmakers were “disgusted” with this ingenuous display of “tatemae” (official principle). The group, established last February, believes a 1 percent tax on pachinko winnings would generate ¥200 billion a year in revenues for the government, which is important since the present administration has decided to reduce the amount of corporate tax it collects and has to make up the shortfall somehow. Consequently, according to the Asahi, these lawmakers have to “destroy” the illusion that people don’t exchange pachinko balls for cash, which means they have to publicize the three-shop system and explain it for what it is, which is gambling by indirection.

The system was devised in Osaka in the 1960s. At the time, players exchanged the premiums they won for cash directly from organized crime members. Later, the police forced underworld elements out of the business and entrusted the exchange system to local chapters of the Japan War-Bereaved Families Association, which consists of people who lost heads-of-household and other loved ones on the front lines in World War II.

It was a form of public welfare, and at this point the NPA acknowledged, albeit tacitly, that pachinko exchanges weren’t strictly illegal any more. Eventually, they set up their own bureaucratic organization, the Pachinko Gyokai Dantai (Pachinko Industry Group), and staffed it with retired NPA officials to administer the exchange system. Some media have said that profits from the system go into the police pension fund and other NPA-related schemes. In any case, the police have never allowed anyone outside this organization to have anything to do with the system.

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Not so easy money: Wanted posters outside koban near Okachimachi Station

The idea of offering “rewards” for information leading to the arrest of a criminal fugitive didn’t really take off in Japan until the Lindsay Hawker murder case. In 2009, two years after the young English teacher was killed, the police offered a ¥10 million bounty for any leads, and five months later her killer was apprehended thanks to several tips. According to media reports the reward was divided among four persons. Previously, the prevailing wisdom was that offering monetary incentives to the public for helping police catch suspects was mercenary and thus unacceptable, but results are results, and the system now seems firmly in place after the recent series of arrests of suspects in the Aum Shinrikyo sarin gas attack of 1995.

The three remaining Aum fugitives have all been captured in the last six months, two of them since the National Police Agency increased the reward for useful information from ¥3 million to ¥10 million in February. There has been speculation that the increase was actually occasioned by the arrest of the first Aum suspect, Makoto Hirata, in December. The police subsequently intensified their search for the other two fugitives, which the public had every right to believe had previously been lax given the almost comical circumstances surrounding Hirata’s surrender. However, old attitudes die hard, and the reward system is still in a state of evolution. For one thing, two terms are being used interchangeably, hoshokin and kenshokin, both of which also mean “prize.” Perhaps the authorities can’t decide because they feel the two words send the wrong message.

The Metropolitan Police Agency won’t release the names of the informants who may receive the rewards, though the media has been busy trying to describe them. Information about the whereabouts of Naoko Kikuchi was received by the police the morning of June 3, and they arrested her later that day, though others have said they offered tips about Kikuchi much earlier. Apparently, someone, reportedly a neighbor, brought the tip to the police, though it’s not clear if that person will receive a reward.

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Getting paid: A patron exchanges prizes for cash outside a pachinko parlor

Pachinko isn’t the huge money maker it used to be. At around the turn of the century, it was a ¥30 trillion a year business, putting it on the same revenue level as medical care, but according to the Nihon Yugi Kanren Jigyo Kyokai, the pachinko industry association, pachinko parlors now pull in about ¥10 trillion less, give or take a few trillion. Ten years ago there were about 17,000 parlors nationwide. Now there’s only about 12,500.

Unlike horses and certain other racing sports, pachinko is not approved by the government for gambling purposes, but the industry has traditionally gotten around this obstacle by offering prizes to winners. These prizes can then be exchanged for cash at secretive little booths (keihin kokan-jo) located outside the premises, since having the booths inside the parlors themselves would be against the law. The businesses that run the booths sells the prizes to a wholesaler who then redistributes them back to pachinko parlors.

Organized crime elements used to be centrally involved in this buy-back cycle, but in the early ’90s the police managed to lock them out of it and set up their own organizations to administer the business. It’s been reported in the past that a portion of the money these schemes make go to the National Police Agency for things like pension funds. A prepaid card system for pachinko parlors was introduced in the ’90s that made it easier for the police and tax authorities to monitor revenues.

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There's a lot of work to be done in post-3/11 Tohoku and organized crime wants a piece of the action. (Satoko Kawasaki photo/The Japan Times)

Like ants to sugar, underworld organizations have been making their way to the towns and cities of the Tohoku region that were destroyed by the earthquake and tsunami of March 11. The cost of cleanup and reconstruction is estimated to be some ¥15 trillion, so there seems to be enough sugar to go around, but according to the Sankei Shimbun, the boryokudan (organized crime), or yakuza, seem determined to secure as big a share as they can.

Police in the area are reporting that since early April two “unknown” organizations have been making the rounds of five evacuation centers in Ishinomaki, Miyagi Prefecture, handing out plain brown envelopes to evacuees. Each envelope contains ¥30,000 in cash. Local officials have cautioned individual representatives of these organizations, saying that their way of distributing the money is “unfair,” and that it would be better for them to give the officials the money so that it could be distributed more properly. This request was ignored in Ishinomaki. However, the same groups also delivered a pile of envelopes each containing ¥30,000 to the disaster headquarters of another city in Miyagi, Minami Sanriku, for distribution. Altogether, the “contributions” in the two cities total somewhere between ¥30 and ¥50 million.

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