Pachinko

Pachinko (パチンコ) is a mechanical game originating in Japan that is used as an arcade game, and much more frequently for gambling. Pachinko fills a niche in Japanese gambling comparable to that of the slot machine in the West as a form of low-stakes, low-strategy gambling.

Pachinko parlors are widespread in Japan, and usually also feature a number of slot machines (called pachislo or pachislots) so these venues look and operate similarly to casinos. Modern pachinko machines have both mechanical and electrical components.

Gambling for cash is illegal in Japan, but the widespread popularity of low-stakes pachinko in Japanese society has enabled a specific legal loophole allowing it to exist. Pachinko balls won from games cannot be exchanged directly for money in the parlor, nor can they be removed from the premises or exchanged with other parlors. However, they can be legally traded to the parlor for so-called "special prize" tokens (特殊景品 tokushu keihin), which can in turn be "sold" for cash to a separate vendor off-premises. These vendors (ostensibly independent from, but often owned by, the parlor owner) then sell the tokens back to the parlor at the same price paid for them—plus a small commission, creating a cash profit—without technically violating the law.^[1]

By 1994, the pachinko market in Japan was valued at ¥30 trillion (nearly $300 billion).^[2] In 1999, sales and revenue from pachinko parlors contributed 5.6% of Japan's ¥500 trillion GDP, and they employed over 330,000 people, 0.52% of all those employed in Japan.^[3] However, the sales amount of these pachinko parlors is calculated based on the total amount that customers rented pachinko balls from pachinko parlors. It is said that on average, about 85% of the money spent by customers in pachinko parlors is returned to the customers, so the sales of pachinko parlors are said to be about 15% of the statistical amount.^[4] As of 2015, Japan's pachinko market generates more gambling revenue than that of Macau, Las Vegas, and Singapore combined.^[5] Pachinko gambling's grey market nature and tremendous profit historically resulted in considerable infiltration by yakuza, who used it as a vehicle for money laundering and racketeering.

Since the 1990s, however, this has been less of an issue due to police crackdowns.^[6] There were over 7 million pachinkos around the world in 2018 with more than half of them being in Japan.^[7] In recent years, the pachinko market (the total amount of pachinko balls rented by customers from pachinko parlors) and the number of pachinko parlors in Japan have continued to decline. The market size in 2022 was 14.6 trillion yen, less than half of the 35 trillion yen in 2005 when the market was at its peak, and the number of pachinko parlors in 2022 was 7665, less than half of the 18244 in 1997 when the number of parlors was the largest.^[8]

Following a number of years of decline of parlours and machines, the number of pachinko machines in Japan dropped to around 2.5 million by the end of 2019.^[9]