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The Prospects and Challenges of Regulating Online Gambling in Japan

In a country with a population approaching 123 million people, Japan holds immense potential to become one of the world's largest online casino markets.

The Prospects and Challenges of Regulating Online Gambling in Japan

However, the absence of regulatory measures means that Japanese citizens are accessing gaming sites through offshore operators—an issue that Prime Minister Fumio Kishida aims to address. The Japanese government's steadfast refusal to legalize online gambling and tap into a significant source of tax revenue has left many wondering about the underlying reasons.

SBC Leaders recently interviewed Andrea Belleza, VP of EU & Asia Pacific markets at KaFe Rocks, and Asami Tanaka, Country Manager at Acroud, to gain insights into the prospects of a regulated gambling industry in Japan. Tanaka highlighted the protracted process involved in turning drafted legislation into law as a primary reason for the government's hesitation to regulate online gaming.

On the other hand, Belleza believes that the government's stance is driven by a complex interplay of factors, including concerns about the potential adverse societal impacts and the deep-rooted conservative values within Japanese society. Belleza stated, "The first is that the Japanese government may be concerned about the potential negative impact of online gaming on Japanese society, particularly in terms of problem gambling." He further added, "The second reason is, ignoring the potential stream of revenues from taxation, the Japanese government may not view online gaming as a significant social or economic problem that requires regulation."

Highlighting the existing forms of legal gambling in Japan, such as horse racing, bicycle racing, and pachinko, Belleza suggested that the government may consider the current regulatory framework sufficient to address any potential issues related to online gaming. Additionally, Belleza proposed that the government might be taking a cautious approach, observing how other countries regulate online gaming before making any substantial changes to their own regulatory framework.

While online casinos are prohibited, one form of gambling remains incredibly popular in Japan—Pachinko. Combining elements of slots and pinball, Pachinko has garnered an estimated annual expenditure of nearly $200 billion from Japanese bettors. Tanaka attributed its enduring popularity to the game's low stakes, explaining, "When playing Pachinko, you can bet a small amount of money. This means that you don’t tend to lose much money when playing and ultimately means players can keep coming back to play without fear of losing too much."

Belleza further elaborated on Pachinko's appeal, noting its lively atmosphere in bustling parlors and its simplicity that does not require significant skill or strategy. He mentioned, "The game is also easy to learn and does not require a lot of skill or strategy to play, making it an attractive form of entertainment, especially after a day in the office."

Regarding the future of online gambling regulation, both Tanaka and Belleza expressed their perspectives. Tanaka pointed out the growth of official gambling verticals like horse racing and boat racing, as well as the emergence of amusement poker, albeit without wagering money. Belleza suggested that Pachinko's popularity could face competition from newer forms of gambling and entertainment as younger generations show different preferences. He highlighted the expanding and improving offers of online casinos and betting sites, along with the potential appeal of social casino games in the Japanese market.

While changing player preferences alone may not significantly impact the regulation of online gaming, there are indications of a potential shift in the Japanese government's attitude towards gambling. The development of integrated resorts (IRs) featuring casinos, hotels, and convention centers has been proposed as a means to stimulate economic growth. Belleza concluded, "The development of IR casinos could potentially speed up the path to online regulation, as it would create a legal framework for gambling and provide the government with more experience in regulating the industry."

Nonetheless, given the Japanese government's cautious approach, any decision regarding the regulation of online gambling is expected to be made after careful consideration of the risks and benefits involved. A swift regulation of the online market in Japan is unlikely, and a cautious and deliberate approach will likely prevail to ensure the best course of action.



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