Pressure Builds On Japan's Vast Online Gambling Industry

April 11, 2023
In the year since VIXIO GamblingCompliance published its last detailed examination of Japan’s online gambling industry, pressure has slowly mounted on the Japanese government to enforce the law against online gambling activity or else regulate it, but in the meantime a billion dollar industry continues to blossom unabated.


More money, more problems

As profits for Japan-facing offshore gambling companies continue to multiply, so does the public and regulatory scrutiny on the sector.

So far, however, the industry has swerved any kind of meaningful crackdown. In this latest forensic explainer, Martin John Williams examines the growing discontent in Japan over the country's vast unregulated online industry and whether it can count on a long and fruitful future.


In the year since VIXIO GamblingCompliance published its last detailed examination of Japan’s online gambling industry, pressure has slowly mounted on the Japanese government to enforce the law against online gambling activity or else regulate it, but in the meantime a billion dollar industry continues to blossom unabated.

The government’s solitary initiative over this period is an education campaign confirming and emphasising to a confused public that gambling on foreign websites is a criminal act, despite a dearth of prosecutions.

This absence of responsiveness in both the executive and legislative branches to an enormous underground industry hidden in plain sight has begun to irritate and provoke major media outlets, legal and academic experts, along with addiction treatment and awareness NGOs.

In this report, VIXIO examines the discontent that has firmed in the public eye and the new risks it presents for the online gambling industry.

An Unhappy Windfall

Just under a year ago, a freakish incident in the southwest coastal town of Abu, some 50km west of Hiroshima, seemed gift-wrapped to galvanise government retaliation against the online gambling industry.

On April 8, 2022, 25-year-old Abu resident Sho Taguchi learned the city government had not transferred a ¥100,000 pandemic relief payment to him as he had expected.

Instead, a careless government employee had sent him the government’s entire ¥46.3m ($350,000) allotment for low-income households in Abu.

Taguchi later told his lawyer that he proceeded to gamble his unlikely windfall on the internet after transferring the cash to a second account, losing all of it. Soon after, he was arrested on suspicion of computer fraud.

The following month, the town government’s counsel told a press conference that almost all the money had been recovered, not from foreign online gambling companies, but from the Japanese payments companies Taguchi used for his gambling.

On February 28 this year, the Yamaguchi District Court sentenced Taguchi to three years in jail, suspended for five years.

“The defendant committed a crime in order to be in position to gamble in online casinos, and displayed an attitude that makes light of the law,” the Kyodo News agency quoted Judge Taku Komatsumoto as saying.

Yet Taguchi’s sentence was lighter than might have been expected because the lost funds were recovered and because the defendant expressed remorse. His counsel has appealed the ruling, seeking acquittal.

The Abu town government did not name the payments companies who returned the cash and there is no indication that Japanese police pursued these companies, despite allegedly transferring funds to gambling operators.

A Japan-based legal source who requested anonymity told VIXIO GamblingCompliance that the Abu incident “provided the authorities with a golden opportunity to consolidate their stance on the criminality of gambling on online casino sites — regardless as to whether the other party is a licensed business operator or not”.

But the national government did not seize this opportunity.


A public servant's error drew public attention to the nexus between online gambling and addiction

The incident helped to reveal crucial industry positioning of underground payments companies

The defendant avoided jail, while the central government avoided a meaningful policy response

Official Inaction, Activist Reaction

By mid-year, researchers with the International Casino Institute and Amusement Press Japan had separately estimated a Japanese online gambling market of between 2m and 2.65m users, or a little under 3 percent of the population.

With discontent rumbling over the government’s apparent inaction on the sector, lower house lawmaker Issei Yamagishi on June 1, 2022 asked Prime Minister Fumio Kishida to clarify the legal status of online gambling in Japan.

Kishida told the Diet’s budget committee: “In general, if gambling relating to online casinos takes place in Japan, then the crime of gambling in the Criminal Code will have been established.”

“Online casinos are illegal,” he said repeatedly, adding that the online market should not be permitted to grow and that the government should better understand the industry’s cash channels.

Even so, online operators continued operations with seemingly little obstruction, with some continuing to advertise non-cash casino games on television as a bridge to real-money gaming websites.

Instead, the combination of the Abu incident’s notoriety and political vacillation helped increase the visibility of activist opposition to online gambling operations, particularly that of gambling addiction support groups.

Some of these support groups wrote to the government, warning of the increasing vulnerability of young Japanese to foreign gambling websites — and requesting a crackdown.

On June 10, the Society Concerned about Gambling Addiction (SCGA) and allied groups backed up the letter with a press conference, at which Toshiaki Nakajima, a lawyer with, said Japan should emulate other governments in criminalising foreign-based operators.

While admitting a ban on overseas interests would be difficult to enforce, Nakajima said foreign operators with public reporting duties were voluntarily geo-blocking markets that had a ban in place. Japan could induce a similar outcome if legislators sanctioned Japan-facing operators, he said.

Nakajima also said the government should restrict credit card companies and e-payment companies from trading in vice products.

Then, some months later, Nakajima identified payments channels as a possible Achilles’ heel for the gambling industry.

In an interview with NHK television, the lawyer said bank account data for gaming website customers suggested there are “dozens” of underground payment companies in operation.

He said none of the companies holds a required banking licence or has registered with the government to conduct fund transfers.

Therefore, “existing law” relating to fund transfers “could be strong enough” to crack down on the industry, he said.

Even so, the SCGA’s complaints and lobbying did not immediately result in any noticeable government action.

However, the mass media has picked up many of the group’s ideas, regularly quoting Nakajima and SCGA director Noriko Tanaka, a victim of gambling addiction in her family, and linking to the group’s burgeoning list of self-made educational videos for addicts, families and others affected by addiction.


The Prime Minister confirmed that Japan's millions of online gamblers are lawbreakers

With only nothing but words from officials, addict support groups have stepped into the policy vacuum

An activist lawyer floats banking legislation as a blunt tool against online gambling companies

A Joint Campaign of Mixed Messages

Eventually, in late October, the government acted, although with a more restrained strategy: a public education campaign.

Responding to repeated complaints from media, academics and medical professionals that Japan’s vast online population thought it legal to gamble on foreign websites, the police and the Consumer Affairs Agency (CAA) launched a joint campaign to remind consumers that online gambling, other than on certain Japanese sports, is criminal activity.

The participation of these organs in a campaign warning of dire consequences for internet users is not without irony.

Police have been exceptionally unwilling to crack down on gambling crime in proportion to its prevalence.

Crime metrics from the Tokyo Metropolitan Police Department for 2021, for example, indicate that very little effort was expended in enforcing gambling provisions in the Criminal Code.

For the entire year, only four cases in Tokyo were logged for simple (one-off) gambling offences, only seven cases were logged for repeat gambling offences and only five cases were logged for organising gambling activity.

Obscenity convictions, among others, tower over gambling offences for the reporting period, with 738 cases investigated in 2021.

Tokyo gambling investigation data also does not distinguish between land-based and online gambling, suggesting there was even less interest in prosecuting online gambling activity.

The CAA, meanwhile, has been a similarly unaggressive enforcer, despite its jurisdiction over affiliates, which play a central role in connecting gamblers to foreign operations. A CAA enforcement action in 2021 against a gambling affiliate whose activities had triggered customer complaints is, at this point, an exceptional punishment.

The CAA has spent considerable time over the last year or more on cracking down on online affiliates in general, producing a lengthy analysis (AI translation) of the sector in February 2022.

Since then, it has been soliciting corporate and public feedback on a draft industry standard that would attack stealth marketing, require honesty in advertising on affiliate websites, and mandate declarations of commercial interest in those sites.

The prospect of punitive sanctions for breaches has angered industry figures, however, with the Japan Direct Marketing Association (JADMA) securing a delay in formalising the industry standard from the ruling Liberal Democratic Party (LDP).

The strange thing about the CAA’s affiliates work is that it does not refer to the online gambling sub-sector in any of its headline documents, despite the centrality of affiliates to player acquisition and cultivation.

Still, the industry standard is another mechanism with which gambling industry foes could attack operators — via truth in advertising and truth in beneficial investment — and it is likely to be in place soon.


The police and the consumer affairs bureaucrats finally acted against online gambling in late 2022

The official education campaign has not been accompanied by any kind of enforcement action

Affiliates remain vulnerable to a crackdown, but officials are discussing macro matters ... for now

Pachinko? … Meet Online Casino


Japan’s enormous pachinko and pachislot market has continued its steady decline over recent years.

But even with this decline, public and political concern over potential problem gambling spawned by future integrated resorts has meshed with belated recognition of problem gambling at pachinko parlours.

Now, there is industry-sourced evidence that online gambling operators have laid claim to a material proportion of the land-based pachinko customer base.

A February 2022 research paper jointly written by Amusement Press Japan and marketing research companies Seeds and EBI found that the bulk of online gamblers are also pachinko and/or pachislot players.

Although the research was conducted via the internet and is therefore methodologically risky, the sample size was substantial, with more than 37,500 valid responses.

The headline findings were that 83 percent and 82 percent of online gamblers were also pachinko and pachislot players, respectively, and that 29 percent of all pachinko players and 37 percent of all pachislot players were crossing over to gamble online.

Additionally, the survey found that higher frequency of play in pachinko parlours is positively correlated with higher frequency of online gambling.

The findings imply a boon for online gambling operators, with one of the world’s largest pools of land-based gambling customers showing intimate connectivity with the online gambling space.

But with accelerating public awareness and activism in problem gambling mitigation since the start of the national integrated resort initiative, the nexus between land-based and online environments presents significant fuel for public alarm and support group activists.

Perhaps to the relief of the online industry, administrative responses to pachinko problem gambling have primarily focused on addiction counter-measures and fine-tuning regulation of parlour activity rather than out-and-out enforcement.

Meanwhile, decelerating revenue and an ageing customer base have hurt pachinko operators more than any one government policy.

Still, the high level of crossover between online gaming and the most iconic form of Japanese gambling is a major point of interest, as governments lumber toward a calibration of regulation and player welfare.

Mass Media Blowback

Even if the government has so far limited its action against offshore gambling to public education campaigns, mass media have continued to expose addiction horror stories and ask why the government has not cracked down harder.

The most substantial of these media responses came on December 14, 2022, when public broadcaster NHK produced a number of detailed television and written reports on the spectre of online gambling addiction.

The main report acknowledged the police and CAA efforts, but said there had been “insufficient” effort at cracking down on online gambling.

The report also probed payments companies associated with online gambling transactions. It determined that they are predominantly small, obscure and seemingly underground operations.

It added that the Banking Act could be a new enforcement option for the authorities.

However, at least one Curaçao-registered, Japan-facing online gambling operation continues to process major global credit cards, reputable Japanese payment brand JCB and other payments platforms, suggesting the market is more complex than the NHK report suggests.

In an accompanying NHK report, Professor Yoichi Torihata, an economist at Shizuoka University, said foreign online gambling operators “write with deliberate vagueness” about the market but are aware that it is illegal.

“Earnings reports indicate that Japan falls into the ‘unregulated’ category as a country … in short, the companies are aware that they’re making money in a country that lacks legal regulations,” he said.

Seiji Miwa, an NHK commentator specialising in the internet and information security, wrote in his column that the developing situation demands a “resolute response” from government.

Miwa supported a heavy crackdown on payments companies and, by extension, urged identification of gamblers through those companies’ databases.

He also supported intervening to prevent advertising of free versions of online games that eventually draw Japanese customers to actual gambling content, as well as ramping up the government’s wider education campaign.

“There is a lack of national messaging on what exactly is prohibited,” he said.

However, amid calls for tough countermeasures, one of Miwa’s reservations may shed light on why the government has been so cautious in its enforcement.

Miwa wrote that he is firmly opposed to online gambling, but also concerned about excessive enthusiasm for website blocking, because that might infringe on “free speech and freedom of information”.


Mass media, including public broadcaster NHK, are now familiar with addiction and industry shrewdness

Media pressure is building on government to act against online gambling and strengthen public messaging

Japanese liberalism and reluctance to encroach on privacy may limit enforcement against the industry

Addiction Woes

By February this year, news outlets warned of rapid growth in counselling sessions for online gambling addicts as a proportion of all gaming-related counselling.

In February, the Business Insider daily reported on SCGA concerns that online gambling addicts were beginning to suffer pressure from the companies that employ them.

Addiction fallout, such as loans by work colleagues to gambling debtors or loan shark harassment of company staff, was prompting bosses to make claims against employees via contractual guarantors such as parents and spouses, or else by taking control of the employees’ salaries, the SCGA said.

The SCGA also warned of increasing addiction involving regulated online betting on horseracing, motorbike and motorboat racing.

Business Insider reported that even Japan’s Post Office had erected posters warning its own staff against gambling addiction.

The Sankei News then reported on February 26, citing SCGA director Tanaka, that the proportion of online gamblers seeking counselling from the SCGA rose from 4.3 percent for all of 2019 to 12.9 percent for the period January-October in 2022.

The statistical significance of that increase was unclear given the small total number of people seeking aid in their sample (from 188 in 2019 to 349 in 2022).

Still, Tanaka warned that online gambling interests were now mobilising celebrities for advertising campaigns, prompting the group’s call for new restrictions on advertising.


Japanese evidence of online gaming addiction is mounting, with employer fallout snaring relatives

Online addiction is bringing similar problems in regulated wagering and pachinko to the forefront

Online gambling advertising continues to push regulatory envelopes and antagonise industry foes

Disintegrated Resorts


For the longest time, pachinko and pachislot ruled the Japanese gambling market without either being classified as gambling. In recent times, illegal online gambling has driven growth in the overall Japanese market largely in the absence of regulation and enforcement.

Government and industry supporters of integrated resort licensing must be wondering how their attempt to steer a regulatory and fiscal middle ground between these surreal, ultra-lucrative poles of the gambling industry could be coming unstuck.

The beginning of the initiative to create several huge casino-resorts in Japan began decades ago, seeking to emulate Singapore’s regime of big, brassy casinos on a tight regulatory leash, delivering world-beating EBITDA while keeping addiction and crime to an absolute minimum.

But Japan is not Singapore, and most of the political and cultural differences between the nations have conspired against the realisation of a market rated by excitable analysts as a $10bn colossus.

Today, the IR dream has faltered badly, with leading global casino companies and most interested governments abandoning the race for three licences. A corruption scandal is also enveloping the public service tasked with the opening gambit of the IR policy, the Japanese public is as gaming-sceptical as it ever has been and the central government has failed to address numerous choke points for licensing, taxation, investment and return on investment.

The inflexibility of one-IR-size-fits-all-prefectures legislation for casino regulation has also proved to be a barrier.

Today there are two candidates still in the hunt: the MGM Resorts International consortium in Osaka and the Casinos Austria consortium in Nagasaki Prefecture.

The modest Nagasaki bid is, to say the least, not the kind the central government envisaged when it was courting billionaire moguls like Steve Wynn, Lawrence Ho and the late Sheldon Adelson.

But even the MGM bid, with all of its investment firepower and nuanced construction of political and corporate alliances, faced oblivion if regional elections this week installed hostile executive or legislative line-ups in Osaka.

The central government all but admitted the gravity of this risk in recent days when it deferred its decision on which licences will be granted until after the polls.

But the Osaka result was a rare boost for the industry, with the pro-IR Nippon Ishin no Kai party on Sunday (April 9) retaining the mayor and governor's posts and strengthening its hold on city and prefectural assemblies.

Whatever the outcome of the polls, the conclusion remains the same: the industry and the government failed to win over the wider Japanese public and the politicians mandated to retaliate against IR progress.

Ironically, it is the IR initiative that has done the heavy lifting for problem gambling policy, a process so thorough that gambling addiction has become a hot topic across all segments, including the online space.

It is testament to Japan’s reputation for resistance to major reform that this achievement would never be enough to drag the casino industry across the line into the construction phase.

An End to Legal Impunity?

Despite the media attention and growing political awareness of the vastness and powerful growth of the online gambling industry, and the ongoing near-impunity with which it operates, lawmakers and police continue to kick the regulatory and enforcement cans down the road.

Some seven years ago, prosecutors dropped charges against an online gambler after his lawyer, Takahiro Tsuda, argued that his client was in a “de facto subordinate relationship” with a company legally registered overseas.

That case generated buzz in the industry and among gamblers that personal, private online gambling would be exempt from litigation.

Seven years on, the judiciary and lawmakers have yet to clarify or test the case, leaving government warnings against illegal gambling in a type of limbo.

But VIXIO’s legal source said this is unlikely to continue for much longer given the pressure building from different directions, including government protection of regulated gambling revenue.

The receding disruption of the coronavirus pandemic, at least for the moment, may also allow government officials to retrain their focus on another major, long-neglected health issue.

“One imagines that there will be a test case at some point which should clarify whether Attorney Tsuda’s interpretation of the law is accepted,” the source said.

“My instinct tells me that the chances of [the Tsuda argument] prevailing [in court] are probably limited now this has become a political issue, since the government has a direct vested interest in promoting onshore gaming."


The influential "subordinate relationship" defence for online gambling could soon be tested in court

Adaptation to the pandemic era could free up bureaucratic resources to attack addictive products

Governments retain an interest in protecting revenue from regulated online wagering segments

Inaction Redux

In the meantime, the minister of state for regulatory reform and administrative reform is giving no clues on when to expect regulatory or administrative reform for online gambling.

Upper house member Naoki Okada on February 10 tweeted his response to a recent question he answered in the Diet, placing the onus squarely on addiction prevention, but offering no details.

“As access [to internet gambling] becomes easier, we will work with relevant ministries and agencies to implement solid measures to prevent an increase in addiction,” he wrote.

Then, as if an afterthought, he added to his tweet: “Also, although I didn't have the opportunity to answer, so-called ‘online casinos’ are illegal and criminal if you connect to them in Japan, even if they are overseas. Be careful!”

In his following tweet, Okada changed the subject to the “extremely important system” of public recordkeeping.


In enforcement terms, the government has barely moved compared with this time last year

Government narratives still quarantine regulatory enforcement from addiction mitigation


Japan's vast online gambling environment may be modest in market penetration terms at this time, but for commercial beneficiaries this is more than made up for by the glacial response of government to what it calls criminal behaviour.

The last year has seen little overt evidence that the bulk of legislators and bureaucrats are taking the size and reach of the industry seriously, although official consensus on the illegal status of offshore online gambling does provide a pillar for future responses.

In the government's stead, mass media, addiction support groups, sympathetic lawyers and the odd lawmaker have made it clear that they are steeling for a long campaign against the industry. The significance of this is that the online gambling industry itself — manifested in affiliates and occasional corporate statements from offshore — has no public profile, let alone a congenial voice, with which to defend its massive but poorly marked territory.

The integrated resort initiative, for all its flaws and failures, is at least centred in national government support.

Online gambling interests, by uneasy contrast, now face the task of working for a future that boasts supporters other than their own customers. Without institutional allies, tactical nous or any public corporate resistance, the industry may discover to its peril that classification of gamblers as white-collar felons will prove caustic enough to win over the legislature and the judiciary.

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