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What the future holds for the Japanese casino market

There are a lot of reasons to be excited about the Japanese online casino market. Though at present, most forms of gambling remain illegal, online and otherwise, industry experts have two reasons to be hopeful: First, the plan to build brick and mortar casinos and, second, the huge popularity of existing, legal forms of gambling.

Japan to Build First Casinos

The most exciting indication about the potential of online casinos in Japan is the passing of the Integrated Resorts Promotion Act (IRPA) in July 2018. This bill saw the Japanese government authorise the development of integrated resorts, featuring hotels, entertainment complexes, restaurants, bars, and, most importantly, casinos.

At present, there are three major cities in the running to build casinos. Tokyo, Osaka, and Yokohama, as well as Nagasaki and Tomakomai (on Hokkaido island). Though slated for construction, they’re still some way off from them opening their doors, with them due to open in the mid-2020. In fact, some optimists are hoping it’ll be open in time for World Fair in Osaka in 2025, when Japan is expecting a huge influx of tourists from all over the world. Though many others think this is an unrealistic timescale.

Regardless of whether the first integrated resorts open in time for 2025, the global gambling industry has their eyes on Japan, as it has so much untapped potential. In fact, it’s believed that Japan, the world’s third-largest economy, could also be third largest gambling market, after Macau and the USA and worth $15bn, with some experts predicting as much as $20bn.

Many hope this legislation will just be the beginning and their success will cause the Japanese government to consider the status of other types of gambling, including the regulation of online casinos in Japan.

Legal Types of Gambling in Japan

This isn’t to say that all forms of gambling are illegal in Japan, as there are a limited number of closely-regulated sports that people are permitted to bet on. This includes:

  • Horse Racing (Keiba) - There are over 21,000 races held annually, including the prestigious Japan Cup.
  • Cycling (Keirin) - Cycling originally started as a sport after World War 2, solely to place wagers on, before being elevated to a sport after the 2000 Sydney Olympics.
  • Boat Racing (Kyotei) - Like cycling in the past, boat racing mainly exists for betting purposes.
  • Motorcycle Speedway (Oto Resu) - The last of Japan’s four ‘public sports’, Japan’s version of the motorcycle started in the 1950s and came under government regulation in 1967.
  • Soccer pools (Toto) - Introduced in march 2001, this allows bettors to bet on the outcome of a selection of that week’s football matches in Japan’s J-League.

In addition, there’s also the Japanese lottery (Takarakuji), which originally started in 1945 but has been in its current form since 1964, with the establishment of the Japan Lottery Association. Players have a number of games to choose from including daily Numbers 3 and Numbers 4 draws, the bi-weekly Lotto 6 and Lotto 7, and the Jumbo Lottery that’s held several times a year.

The Popularity of Pachinko: Japan’s Favourite Way to Gamble

Of course, no discussion of gambling in Japan would be complete without talking about Pachinko, which first emerged in the 1930s before skyrocketing in popularity after the second world war. Pachinko sits somewhere between a game of pinball and a slot machine, as players drop small, metallic balls into a machine’s playing field, in the hopes of getting them into a ‘catcher’. When they achieve this, they’ll be awarded more balls, which they can use to continue to play – with the aim being to win as many as possible.

Pachinko inhabits a legal grey area within Japan. Firstly, it's classified as a game of skill by the Japanese government and secondly, and more importantly, players don’t win money but prizes, such as gadgets, toys, and snacks, by cashing in their balls. However, players can also trade their balls for a ‘special prize’ that can be traded for cash at a separate place close by, known as a ‘token-redeeming business’. It’s the separate step between winning and cashing in, done at two separate locations that allows Pachinko to operate under Japan’s complex gambling laws.

On the other hand, there’s nothing complex about the amount of revenue that Pachinko brings in, with it generating JPY19.5tn ($180.3bn) in 2017, which is nearly 30 times that of Las Vegas. More impressive still is the fact that this represents close to 4% of Japan’s GDP!

Also, this is an astonishing three and a half times the JPY 5.206tn ($48.4bn) generated by the four public sports (horse racing: JPY3.3tn ($30.5bn), boat racing: JPY 1.2tn ($11.4bn), cycling: JPY 640bn ($5.9bn), motorcycle speedway: JPY 66bn ($600m)).

In even better news for Japan’s casino industry, some big pachinko companies, including Sega Sammy Holdings and Dynam Japan Holdings Co., are looking to expand into manufacturing machines for casinos. As such companies already have an understanding of the unique Japanese market and familiarity among consumers, they’ll know how to create and market games that will appeal to Japan’s new casino visitors.  

The Future of Online Casinos in Japan

Although at present, there are no licensed online casinos in based in Japan, forcing players to play games like slots, roulette, and blackjack on websites based in countries like the UK and Malta, the future looks bright for the Japanese gambling industry. The massive annual revenues brought in by Pachinko, horse racing, and other legal gambling activities prove that the Japanese have a taste for betting and placing wagers.

Plus, with the novelty factor that casinos offer, and while the proposed casinos are mainly aimed at boosting tourism, they could capture the imagination of the local population, who may visit to experience something new and exciting.

From there, once casinos have grown in popularity within the Japanese market and the government has seen the desired boost in tourism from integrated resorts, the next step is regulating their own online casinos and benefitting from the massive revenues they’re sure to bring in.