Cozy ties between the police and pachinko industry

Updated : 31.05.2017 / Category Sentaku in The Japan Times

Few would believe that the recent crackdown on the education ministry unlawfully arranging post-retirement employment for its officials has ended the corrupt practice of elite bureaucrats landing lucrative jobs at private-sector businesses and organizations that they once supervised. Officials at government ministries and agencies continue to use clever ways to secure post-retirement positions for themselves. A typical example is the police -- which hold "reserved seats" for their retired ranks in organizations related to the pachinko industry.

The cozy ties between the police and the industry date back roughly 30 years, when the National Police Agency took the initiative of getting operators of pachinko parlors to introduce prepaid cards for their customers. This gave the police access to the vested interests in the industry, which at its peak had annual sales of more than ¥30 trillion.

A major issue confronting the industry now is how to cope with criticism linking pachinko and gambling addiction, in the wake of the enactment late last year of the law legalizing casinos as a key feature of integrated resorts. In April, the ruling coalition of the Liberal Democratic Party and Komeito launched a working team to compile draft legislation to deal with gambling addiction.

Previously the police and the government insisted that pachinko is neither gambling or illegal. This time, however, the campaign to deal with gambling addiction has come to include pachinko -- along with publicly-run forms of gambling such as horse racing -- as subjects of discussion. That is tantamount to admitting, though indirectly, that pachinko is a form of gambling.

Addiction to pachinko is indeed a serious social problem. Large numbers of crimes are attributed to the debts incurred by pachinko addicts losing money on the games. However, imposing tighter regulations on the industry is a matter of life and death for pachinko parlor operators, whose market expanded explosively three decades ago -- when the police, in their attempt to persuade the hesitant industry to accept introduction of the prepaid card system, allowed operators to install game machines with bigger payoffs. That changed the nature of the pachinko game from entertainment to gambling, and the size of the market doubled from ¥15 trillion within several years. But that also led to a sharp increases in the number of customers addicted to pachinko in ways that ruined their lives.

The way to stop pachinko addiction is simple, says an industry insider. "All you have to do is lower the amount of the prize in the game by giving players a higher chance of winning big." The odds of winning big varies according to the type of pachinko machine, but the prize will gain in value as the odds of winning are set lower. A current mainstream machine sets the odds at one out of 320. If the ratio is lowered to one out of 100 by tightening the regulation, pachinko addicts will likely disappear, says the insider, who also warns that such a step would drastically reduce the number of customers and force some parlors and machine makers to go out of business.

To avert such a regulation being imposed, the pachinko industry and the NPA have collaborated to stage a campaign that, according to the industry insider, attempts to polish the industry's image.

In November 2015, the NPA issued a notice to the industry ordering the removal of all pachinko machines that do not meet established standards. Those standards, including one that regulates the position of the machine's brass pegs, which tiny steel balls bounce off, are set by an industtry-related association in which many ex-police officers have landed post-retirement jobs. Every model of pachinko machine must clear those standards before it can be manufactured and sold. Having discovered that the pegs of many of the machines had in fact been positioned in violation of the standards, the NPA demanded that the manufacturers and parlor operators voluntarily remove those machines.

It was initially speculated that all the pachinko machines across the country -- which number some 3 million -- would be subject to the order. As it turned out, the industry removed only 700,000 machines from the parlors by the end of last December. Here is why.
In March 2015 -- several months before the NPA notice was issued -- industry associations had decided that they would remove by the end of last year all of the so-called "Max" machines that are extremely competitive in nature -- offering a bigger payoff with lower chances of winning. Those associations are, without exception, staffed with ex-police officials. Their decision to remove those machines, therefore, was disguised as being voluntary, but in effect represented compliance with the wishes of the police. In other words, the decision to remove those machines had been made well before the NPA notice was released.

Why did the police bother to issue the notice, which was not necessary in the first place? A source within the pachinko machine manufacturing industry says the notice was meant to create a clean image for the pachinko industry, the reputation of which had in the past been tarnished by tax evasion and cash remittances to North Korea.

The police instruction to stop the illegal manipulation of pachinko machine pegs and the subsequent compliance by the industry not only gave credit to the police but also served to impress the public with the idea that the industry was taking steps to cope with the problem of gambling addiction. The industry will likely seek to use that as leverage to minimize new regulations when measures to prevent gambling addiction are discussed in the Diet. The police may also refer to the removal of the high-stakes machines to effectively support the industry.

With the removal of the Max machines, the odds of winning big is now limited to one out of 320. Even though this ratio is being criticized as still too competitive, a drastic tightening of rules does not appear likely as long as the industry works hand in hand with the police.

A foundation under the wing of the national association of pachinko machine manufacturers is now carrying out a survey on gambling addiction. A 2014 survey conducted by the Health, Labor and Welfare Ministry estimated that 5.4 million people are suspected of being addicted to gambling.

With legalization of casinos in Japan around the corner, the police are desperately trying to defend their own sphere of interest.

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This is a translation of an article from the April 2017 issue of Sentaku.