Pachinko unlikely to be a legislative focus as Japan’s IR bill takes shape

Pachinko unlikely to be a legislative focus as Japan's IR bill takes shape

Japan’s Diet already has enough on its hands with the integrated resorts bill to touch on the frameworks of pachinko and horseracing, according to analysts at brokerage Union Gaming Securities Asia Ltd.

Pachinko unlikely to be a legislative focus as Japan's IR bill takes shapePachinko is a mainstay of the Japanese gambling sector, along with horse, boat, bicycle and motorcycle racing. But the future of these games are in jeopardy following reports that the government is looking to curb existing forms of gambling as part of its plan to address problem gambling before the country opens its first Las Vegas-style casino resorts.

There’s a slim chance, however, that lawmakers will focus on pachinko, according to Union Gaming analyst Grant Govertsen.

“Given that pachinko is a homegrown industry, we are inclined to think it could actual get some form of legislative support (protection), especially in the context of the likelihood of foreign-owned IRs,” Govertsen said in a note.

Over the years, pachinko has already become more of a leisure pursuit and less like gambling. This is because the government has introduced several stringent standards for the game, including the gradual reduction in payout ratios that have eliminated the jackpots.

Last week, the Japanese government began working on the second IR bill, which will focus on how to drive foreign tourism to the country a la Singapore. The government, however, has given little indication of the regulatory nuts and bolts, according to Govertsen.

“At least in public we would expect much of the focus to remain on the social aspects of IRs (e.g. problem gambling,” he noted. “Behind the scenes, we would expect the relevant details to be hashed out, including number and locations of licences, tax rates, etc.”

Japan is expected to open two to three casinos, with locations and operators chosen by 2019. At the moment, the number of licenses that will be awards remains up in the air.

Hong Kong-listed pachinko hall operator Dynam Japan Holdings Co. Ltd. appears to be “a strong contender” for a regional smaller-scale IR license, according to Govertsen. The company is eyeing a license to operate in the Yamaguchi prefecture, where the company has very strong ties.