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Tuesday, Sept. 25, 2007
PACHINKO IN JAPAN
Pachinko seeks to shed shady image as market shrinks
By KAHO SHIMIZU
Filled with noise, bright lights and cigarette smoke, the attraction of the pachinko parlor is hard for many to fathom.
Seemingly oblivious to their surroundings, the players — mostly males — sit transfixed as the metal balls cascade down the front of the machines, hoping to hit the "jackpot.''
Yet this national pastime is rife with reports of shady dealings, links to North Korea, gambling addiction and crime.
Here are answers to some questions about pachinko:
What is pachinko and how is it played?
Pachinko is a gambling game played on what appears to be an upright pinball machine. According to the National Police Agency, there are some 14,600 outlets across Japan.
Parlors rent — for up to ¥4 each — the small metal balls used to play the game.
Directing them with a knob at the bottom of the machine, the player sends the balls to the top of the machine, where they proceed to cascade through clusters of pins to holes at the bottom.
Skilled gamers can subtly adjust the knob to control the speed of the balls, and thus their direction. The objective is to send as many balls as possible into scoring holes, which churn out yet more balls in a series of mini jackpots.
The game is over when all the balls are gone, or when the player decides to "cash in" the balls he or she has won.
Although the origin of pachinko is unknown, it is generally believed to have derived from the Corinth Game, an American pinball prototype imported from Chicago around 1920. Initially intended as a children's game, pachinko later evolved into an adult pastime.
Is pachinko gambling?
After winning more balls, the player can continue playing or exchange them for prizes.
The prizes include candy, cigarettes, cosmetics, handbags and even electronic dictionaries and DVD players. However, the value of the prize must not exceed ¥10,000.
Legal forms of gambling in Japan are public-run, including various lotteries, as well as horse, bicycle and boat racing. The pachinko industry is subject to restrictions under the Law Regulating Adult Entertainment Businesses, which prohibits parlors from paying out cash for the balls.
But loopholes allow pachinko players to exchange designated prizes, such as ball point pens, for cash at booths located near the parlors.
This is allowed as long as the prize-exchange shops and the pachinko parlors are under separate management. But this practice is a gray area: The prizes traded in for cash eventually circulate back to the parlors.
According to market research firm Yano Research Institute Ltd., about 95 percent of all prizes are exchanged for cash.
What is the size of the industry and its business outlook?
Annual revenue from the pachinko industry, including sales from related slot-machine games called "pachislot," totaled ¥27.45 trillion in 2006, according to a survey by the Japan Productivity Center for Socio-Economic Development, a nonprofit organization that compiles an annual white paper on Japan's leisure industry.
Although this is far larger than, say, the ¥19.7 trillion value of the vehicles manufactured by domestic automakers last year, the pachinko market is shrinking due to a declining number of patrons.
The same survey found that the number of pachinko players dropped to 16.6 million in 2006, the lowest level in a decade and about half the number reported in 1982.
"Because of tightened restrictions (in 2004) to reduce the element of gambling, pachinko parlors are shifting to machines that give customers a higher chance of winning" but for less prize money, said Makoto Ishikawa, a researcher at YRI.
This low-risk, low-return shift "has turned away players who favored pachinko's gambling aspects," Ishikawa said.
But at the same time, Ishikawa added, the industry is facing a dilemma: Those who used to visit parlors just for fun turned their backs on pachinko in the era when the industry sought to augment, rather than reduce, its gambling image by appealing to players' fascination with get-rich-quick schemes.
It is also worth noting that a YRI survey of about 2,000 respondents conducted between September and October in 2006 found that the average amount spent on pachinko was a whopping ¥28,124 per visit.
Why did authorities crack down on the machines?
The high-risk, high-return drive was blamed for rising debt among players, who found themselves turning to consumer lenders to feed the machines.
Unmanned consumer-finance lending machines started cropping up near pachinko parlors, in what appeared an intentional effort by companies to encourage gamers to keep borrowing as they played on.
Last year, though, the government started urging consumer lenders to refrain from the practice and lenders have shown a willingness to oblige.
What is the industry doing to adapt to the drop in patrons?
Parlors are trying to bring in new customers by projecting an image of good clean fun. Particularly sought after are young women, who are seen to lend an air of fashionability.
One of P-Ark Holdings' two outlets in Tokyo's ritzy Ginza district is a case in point.
Reopening in April with a renovated interior, the parlor has a strict no-smoking policy and cheerful staff are ever eager to give beginners hints on the game.
At some of the machines, players can rent balls for ¥1 each, one-fourth the usual cost, to attract new players.
The new option is designed to allow them enjoy the game longer, albeit with smaller winnings. Still, lowering the rental cost means companies must work that much harder to increase visitors to maintain profitability. The odds of winning vary between outlets.
P-Ark is even trying to list its shares on the JASDAQ stock exchange, the first attempt by a pachinko parlor operator to go public.
"We hope that P-Ark will be allowed to list its shares to boost the transparency of the industry," said Nobuo Oda, a spokesman of Nichiyukyo, an industry body representing pachinko businesses. But the screening, which usually takes three months, has so far taken more than 20 months due apparently to disputes over the legal status of pachinko parlors.
Do pachinko parlors, as is often rumored, have connections to North Korea?
Some 70 percent of the country's parlors are said to be operated by ethnic Koreans, including many thought to have obtained Japanese citizenship, according to Park Too Jin, a former member of the pro-Pyongyang group Chongryon, North Korea's de facto embassy here.
Some 3,000 parlors are estimated to be under the influence of Chongryon, said Park, who now runs the Korea International Institute, a private research institute studying issues concerning the Korean Peninsula and Japan-Korea relations.
Although the exact amount is unknown, Park said part of the pachinko parlors' revenues were channeled to North Korea. "I'd say the money flowing to North Korea would amount to about ¥200 billion annually," Park said.
Although no one can prove it, he said there is speculation that part of the funneled money is used to fund Pyongyang's missile programs.