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As of now, there is no law prohibiting internet gambling in Japan, placing the business in a legal grey area.
According to Keita Yanagawa, Japan Country Manager for Kafe Rocks, the igaming sector appears to be increasing in the region.
Currently, only licenced public entities are authorised under Japanese law to engage in gaming. Yanagawa remarked that in order to comprehend why Japan has such stringent regulations for the sector, we must also comprehend the distinctions between the five forms of publicly-operated gambling categories in Japan: horse racing, bicycle racing, boat racing, motorcycle racing, and lottery.
“The government defines the five types of publicly-operated gambling as activity that is expected to make economic contributions to the national and local governments that host races,” she explained.
“For online gambling to be considered legal in Japan, economic contributions to the national and local governments are necessary. But due to the fact that online gambling services are operated by foreign operators outside of Japan, it seems very unlikely for the online market to be legally permitted within the Japanese region in the near future. Changing this approach is likely to be a slow process.”
She believes that if the industry were to open up, law enforcement would need to tighten the present legal framework on gambling and perhaps add igaming to the list of fully legalised enterprises.
Yanagawa indicated that the RTP would reduce because operators would lose a portion of their income as a national treasury tax, similar to the publicly-operated gambling services already mentioned.
“THE MONOPOLY APPROACH DOESN’T HELP ANYONE. IT WOULD ESSENTIALLY DRIVE PLAYERS TO A BLACK MARKET OF OPERATORS OUTSIDE OF JAPAN.”
"One of the greatest fears the Japanese government would have when opening up to the online market is that it would lose more yen than it does today," stated the country manager of Kafe Rock.
“This is because players deposit with yen, and yen is converted into foreign currencies like US dollars or Euros automatically. Therefore, the government would probably need to impose a new consumption tax on foreign operators – something similar to what the government did to smartphone online game operators back in 2018.”
As of this writing, Japan has two state-sponsored gambling corporations: the Japanese Racing Association and the Japanese Lottery. Yanagawa stated that a similar strategy to igaming would result in "more harm than benefit" for both users and igaming operators, while examining the prospect of a similar approach to igaming.
She continued: “State sponsorship of igaming would be bad for users as it would give them less choice and also a less exciting product to play with. Having an open market gives more freedom of choice and allows users to choose best to what fits them.
“The monopoly approach doesn’t help anyone. It would essentially drive players to a black market of operators outside of Japan.
“While online gambling operators are currently based outside of Japan and not subject to any tax to the Japanese government. However, being state-sponsored means being subject to the national tax system which is significant for gambling operators, currently it’s 10 per cent on initial winnings and 50 per cent on half-yearly profits overall. This would be a significant burden for many casinos or sportsbooks in the market.”
With no apparent change in legislation for the internet casino industry on the horizon, land-based casinos may serve as a stepping stone for future expansions in Japan.
In 2018, a legislation was established outlining the rules and regulations that must be followed by integrated resorts and casinos. According to Yanagawa, these IR rules appear to be "in the planning stage," but Yanagawa also said that a small number of possible locales, including Osaka and Nagasaki, have been designated for potential IR facilities.
THE COMPLETION OF IR FACILITIES IS ALSO A CAUSE FOR CONCERN FOR THE JAPANESE GAMBLING INDUSTRY.
Yanagawa commented: “Although it has been a possibility in law since 2018, the cities that have tried to get this process underway have been hit with a raft of issues from public protest to soil contamination and a lack of fundraising.
“At the time of writing, no firm plans have been made for an integrated resort to be opened in the near future. Osaka Prefecture and the city of Osaka, which were among the first IR site candidates in Japan to pass a zone development plan, plans to invite the IR to Yumeshima, a artificial reclaimed island in Konohana-ku, Osaka City, and aims to open the IR in late 2029.
“However, the citizens there are complaining about the soil problem in Yumeshima where fluorine and arsenic above standard values were detected.”
Yanagawa was quick to note out that despite the fact that the development of the IR is "anticipated to have a number of revolutionary consequences" on the Japanese gambling sector, there are also potential issues.
“The most revolutionary impact expected is that gambling would become more accessible to the general public through land casinos,” she continued.
“At present, most people associate the word ‘gambling’ with pachinko and publicly-operated gambling. However, the establishment of a land casino in the IR would increase the public’s exposure to and visibility of casinos, and could be expected to somewhat change prejudices and views on gambling.
“In addition, the IR would create employment opportunities in the surrounding areas and enrich the economy, which may help to dispel the negative image of gambling that has long persisted in Japan.
“At the same time, however, the completion of IR facilities is also a cause for concern for the Japanese gambling industry. For example, some experts predict that the completion of land casinos would accelerate the decline of the pachinko industry.
“In fact, in South Korea, land casinos have been operated mainly on Jeju Island, and the pachinko industry was completely abolished in 2006.
“On the contrary, In Japan there are already over 11,000 pachinko parlours nationwide. It is inconceivable that many consumers who enjoy pachinko nationwide would go out of their way to visit a casino, which only exists in a few locations nationwide.”
Regardless of the path adopted to bring regulation to Japan, one component must be a priority – both online and on land – and that is embracing Japanese culture and customs.
Localization is essential for success in any nation, including Japan, whose culture is renowned for being quite distinct.
Yanagawa noted that Japan is inherently conservative, emphasising its low level of English proficiency, and has a strong influence over the aesthetics of commercial products and services.
She concluded: “In terms of low English proficiency, we should not expect most Japanese gambling players to be able to read and understand English text, while I often see bonus descriptions and T&Cs in English on online gambling operators’ JP sites.
“Land-based casinos are no exception because casino dealers should be able to speak Japanese.
“Another good example is responsible gaming. Under the IR Development Act, the number of times a person can enter a land-based casino facility is limited to three times in seven consecutive days and 10 times in 28 consecutive days, which is set by the government.
“On the contrary, players can set their own weekly/monthly bet limits when playing online, more in-line with a European model.
“From this aspect, the conservative nature of the Japanese should probably be taken into account when online casinos enter the country, mirroring the expectations set by the government and its citizens.”
By fLEXI tEAM