Gambling is banned in Japan, but pachinko parlours get around this by giving winners token prizes that can then be exchanged for cash. The industry accounts for nearly half of all leisure activities in Japan, and was traditionally run by Korean Japanese who were discriminated against elsewhere.
- Japan spends $200 billion on pachinko, a vertical pinball game, every year.
- Despite a ban on most gambling, the industry employs more people than the top 10 car manufacturers and accounts for nearly half of the country's leisure activities.
- The industry has long been run by Korean Japanese who have faced decades of discrimination and were unable to enter the traditional workforce after World War II.
- Some parlour owners support North Korea and reportedly sent hundreds of millions of dollars to the regime.
- Casinos have recently been legalized, but revenue estimates don't come close to pachinko.
Each year, Japanese gamblers spend $200 billion on vertical pinball-like slot machines called pachinko.
Around the country 10,600 pachinko parlours entice players with rows upon rows of colorful and flashing machines. The aim is to drop as many silver ball bearings as possible into a middle scoring hole by turning a single wheel that controls how the balls shoot into the machine, before bouncing down pins that the house regularly reconfigures to ensure it always comes out on top.
But despite its popularity, pachinko parlours operate in a legal grey space. Gambling has generally been banned in Japan with only exceptions for betting on horse racing and some auto races.
Min Jin Lee, the author of a historical fiction book set in Japan called "Pachinko," told Business Insider that pachinko parlours use a loophole by having an intermediary between the winning of the balls and then the conversion into cash.
"Every single ball is equal to a certain amount of points and those points get redeemed at the prizes counter. Let's say you'll get a bar of soap, or lets you get an Hermes bag, depending on how much you win. But then maybe you don't want to have 10 Hermes bags, or 100 bars of soap. So you take your winnings and you convert it far away in an alley for cash," Lee said.
This cash exchange used to be controlled by Japan's yakuza mafia, but that has largely changed with Lee saying many places now just erect a glass wall between the prize counter and the cashier.
"You take your winnings which gets converted into, let's say, a plastic disc and inside there will be an actual amount of gold, or silver. So the thing itself has market value but then that thing, the little chip or the disc, gets converted at the cashier into cash," Lee explained.
Korean Japanese dominate the pachinko industry
Nearly half of all leisure time in Japan is spent in pachinko parlours, and the industry hires more people than the country's top 10 car manufacturers.
One of the biggest corporate operators is Dynam, which runs 400 halls around the country that are promoted as being cleaner and quieter than traditional parlours.
But parlours are largely run by Korean Japanese people, who pioneered the industry after the end of World War II. During colonial rule, many Koreans had sought employment or were forced laborers in Japan, and hundreds of thousands faced isolating discrimination when the war ended.
"The reason that the Koreans ended up in Pachinko parlours is because they weren't able to get jobs anywhere else, so it became a place of employment, a safe haven for people who could not achieve regular goals like being a postal worker, or being a truck driver, or being a teacher," said Lee, adding that many Korean women ended up working in Korean barbeque restaurants. "Women go into food services, men go into gambling. And then, generationally, they become very important in this world."
Lee spent five years in Japan while writing her latest book about a fictional multigenerational Korean family, but interviewed countless Korean Japanese people, sometimes referred to as Zainichi, about their experiences.
"I did not know until I lived in Japan that it was a business dominated by the Korean Japanese. It's also seen as very second class and kind of vulgar and dirty and dangerous business," said Lee, adding that these sorts of words and attitudes are still commonly associated with Korean Japanese, even those who have lived in Japan for decades.
While many Koreans who originally arrived in Japan in the mid-twentieth century came from a united country, some do now support the North Korean regime.
Sung-Yoon Lee, a professor of Korean studies at the Fletcher School at Tufts University, estimated for PRI that pachinko parlour owners sent hundreds of millions of dollars to North Korea at the industry's height in the 1990s.
Casinos are coming for pachinko
Much like Japan's population, the number of pachinko parlours have been shrinking. There are nearly one-third less than there were in 2005, and parlours are increasingly trying to attract younger players as their market rapidly ages.
But new laws have been introduced to try and limit players' addictions by cutting the maximum payout each machine can give by one-third, which means a player should never be able to win more than $450 in a four hour session.
At the same time, lawmakers have lifted Japan's ban on casinos. In a bid to tackle addition, local residents will be limited to three visits a week and will have to pay fees to enter, but it's still expected that casinos will rake in billions in profit and taxes.
Each year, 1.5 million new pachinko machines are still sold to parlours, according to the Financial Times.
And habits, even if they aren't addictions, are hard to break.
"One out of 11 Japanese people play it once a week. Once a week," Lee said. "So it isn't like if you and I went to some silly place — it's not like Vegas where you go once a year or once every 10 years and say, 'Oh, I'm going to be a bride so let's go crazy.' It isn't like that at all."