IntroductionLegal definition of ‘gambling’
What are the legal elements required for an activity to be regarded as gambling?
Although the Penal Code does not provide for a statutory definition of the term ‘gambling’, it is generally interpreted as the placing of things of value (including money, its equivalent, real and personal property, receivables or a stake) against the outcome of events, where the outcome is uncertain because it is subject to the element of chance. A game of skill can be interpreted as gambling, as the win or loss is ultimately decided by chance (eg, mah-jong, poker and blackjack).
In Japan, by the judgment of the Court of Great Judicature on 19 April 1925, the act of gambling was explained to have been carried out by a mere promise to place a stake and that it was not necessary for:
- the stake to have been actually offered;
- the outcome of the event to have been determined; and
- the winnings to have been paid.
The act of betting an item for entertainment purposes (such as a pack of cigarettes, a bottle of beer or other relatively inexpensive items for immediate consumption or use) will not constitute criminally punishable gambling (article 185 of the Penal Code).
If either one of the elements mentioned above is absent, the act will generally not be considered as gambling and therefore will not need a gambling licence. Because of this, free games (where the player is not required to place a stake) or games where nothing of value is awarded (such as virtual prizes or ‘additional play’ that cannot be exchanged into other valuables) do not fall under the definition of gambling.Remote activity
With respect to remote or other cross-border activity, where is the wager deemed to take place?
The Japanese gambling regulation applies to the organisation, execution and intermediation of public gambling. In order to regulate remote or cross-border activity, it is generally interpreted that the organisation or intermediation of gambling takes place where the player has the ability to participate. If the player is able to participate from Japan, the Japanese gambling regulation will ipso facto apply.Age restrictions
What is the minimum age for participating in lawful gambling?
The minimum age for participating in lawful gambling in Japan is 20, which is the age of majority in Japan. The age of majority will be changed to 18 from April 2022, however, the minimum age for participating in lawful gambling in Japan will remain unchanged. Also, students at the age of 20 or above are not allowed to participate in lawful gambling in Japan.Penalties
What are the penalties for offering unlawful gambling?
A person who opens a gambling house or assembles gamblers for gain will be subject to a prison term of between three months and five years (item 2, article 186 of the Penal Code). A person who sells lottery tickets will be subject to a prison term of no more than two years or a fine of no more than ¥1.5 million (item 1, article 187 of the Penal Code).
Does the law penalise the gambler directly for participating in unlawful gambling?
Article 185 of the Penal Code provides for the crime of ‘simple gambling’ and that a person who gambles must be charged with a fine of no more than ¥500,000. However, this rule does not apply when gambling is conducted for entertainment purposes. Furthermore, a resident of Japan who gambles habitually can be held liable for ‘habitual gambling’ under article 186 of the Penal Code, which provides that a person who indulges in habitual gambling will be subject to a prison term of up to three years.Social and non-profit gambling
Are there exceptions for social gambling, or charitable or non-profit gambling?
There are no such exceptions under Japanese law.Regulatory authorities
What entity regulates land-based and remote gambling, and what are the regulator’s powers?
Land-based and remote gambling on horse races, bicycle races, motorcycle races and motorboat races are operated and regulated by the Japanese government or municipal bodies. Also land-based and remote lottery tickets issued are regulated by municipal bodies. Furthermore, under the Integrated Resort (IR) Promotion Act and the IR Implementation Act, which were enacted in 2016 and 2018, respectively, casino activities conducted by licensed casino business operators in land-based form within IRs are legalised and will be regulated by the Casino Supervising Commission (the Commission), which has not been established yet. Meanwhile, online casino activities are still prohibited.
In addition, the operation of pachinko or pachi-slot can be categorised as carrying on an entertainment and amusement business, which requires a permit or other authorisations issued by the local public safety commissions under the Amusement Business Act. Only those operators who have obtained a permit or other authorisation from the local public safety commissions can offer pachinko or pachi-slot.
Pachinko and pachi-slot parlours must be land-based and located in close proximity to a gift shop where balls or tokens won at pachinko or pachi-slot parlours can be exchanged for goods. The offering of pachinko or pachi-slot on the internet would fall within the definition of gambling and be illegal under the Penal Code and is not governed by the Amusement Business Act or other laws.Anti-money-laundering regulations
Are gambling licensees considered financial institutions for purposes of anti-money-laundering and similar financial services regulatory requirements or are they otherwise subject to such requirements?
The casino business operator must:
- follow know-your-customer (KYC) procedures (confirmation of the identities of customers, the purposes of their transactions, the professions or business purposes and identities of the persons controlling judicial entities);
- keep records of transactions; and
- notify the authority of any transaction that is suspected to be a transfer of criminal proceeds.
In addition, the casino business operator must:
- take measures that are necessary to prohibit the transfer of chips among customers and the carrying of chips from within the casino facilities to outside the facilities;
- display signs stating that ‘the transfer or carrying of chips from within the casino facilities to outside the building is prohibited’ in the area of verification of customers’ identification, as well as the area of casino activities; and
- notify the Commission of any delivery of chips or other casino business related transactions that accompany the payment or receipt of cash exceeding a certain amount.
What types of land-based gambling are permitted in your jurisdiction, and is gambling regulated at a national or subnational level?
There are certain land-based gambling activities run by public institutions under the supervision of certain governmental organisations. This category of gambling includes:
- lottery (takara kuji);
- toto (football lottery);
- horse racing;
- boat racing;
- bicycle racing;
- local horse racing; and
- motor-cycle racing.
There is special legislation for each of these gambling businesses, and a special corporation established under this legislation or supervised by a governmental organisation that runs these gambling businesses.
Also land-based casino business will be operated by private sectors in the future. Casino business licences will be granted only to IR operators certified by the Minister of Land, Infrastructure, Transport and Tourism under the IR Implementation Act and not to stand-alone casino business operators (non-IR operators). To qualify as a licensed casino business operator, an IR operator needs to operate several facilities, such as convention centres, recreational facilities, tourist facilities, accommodation facilities as well as casinos.Establishment licensing
Please describe the licensing criteria to operate land-based gambling of each type or classification. Does your jurisdiction limit the number of available licences?Casino
Under the IR Implementation Act, the maximum number of certified IR areas is three (which number will be reviewed seven years from the date when initial certifications are issued). Each IR area may have only one casino, which will be operated by one casino business operator.
An IR operator will file with the Commission an application for a licence for operation of a casino business and the Commission will examine whether such applicant satisfies certain eligibility criteria, such as its capability to operate a casino business in terms of human resources, social credibility, financial stability, anticipated profitability, the floor area for casino activities, the technological quality of the casino facility’s structure and equipment, the technological quality of the casino related equipment, and certain other factors. In the case that the IR operator satisfies these criteria, the Commission will grant a licence for casino business operation.Pachinko
Pachinko and pachi-slot are the only forms of gambling that private entities are allowed to operate by obtaining a licence in Japan.
The offering of pachinko or pachi-slot is categorised as carrying on an entertainment and amusement business under the Amusement Business Act, which requires a licence to be obtained from the local public safety commissions under the Amusement Business Act.
The possible locations for a pachinko parlour are limited. In principle, opening a pachinko parlour in a residential area is prohibited. Additionally, a pachinko parlour cannot be located within a certain distance from the following, among others:
- public libraries;
- nursery schools;
- kindergartens; and
Must individual directors, officers or owners of licensees also be licensed or reviewed for suitability?Casino
IR or casino business operators must be companies incorporated under the Companies Act (typically, a kabushiki kaisha (KK) or a godo kaisha (GK)). There are no residency or nationality requirements to qualify as an owner of an IR or casino business operator, but any person who wishes to own 5 per cent or more of the voting rights, shares or interests of or in an IR or casino business operator needs to obtain the permission of the Commission.
Strict background checks on the casino business operator’s officers, directors, employees, subsidiaries, affiliated companies and other relevant persons and entities (including external persons who have a controlling power over any casino operation) will be carried out during the above licensing process stated in question 10.Pachinko
There are certain disqualifying preconditions, for example:
- a criminal record;
- a drug addiction; and
- a relationship with bōryokudan (Japanese organised crime).
If an applicant, its director or manager falls within such a precondition, the applicant will not be able to obtain the licence. The building of a pachinko parlour must also satisfy certain requirements relating to floor space (that is, there is a minimum and maximum floor space requirement depending on the area where the pachinko parlour is located), noise and vibration in the building and visibility within the building (that is, the pachinko parlour cannot be constructed as a structure which would block visibility from the outside) and so on.
Finally, the pachinko or pachi-slot machines in the pachinko parlour must be inspected by police prior to its operation. This inspection of machines is required whenever the parlour installs new machines even after the commencement of its operation.
Although the licence application procedures for a pachinko parlour vary from prefecture to prefecture, on an average, it takes about two months from the date of application to the local public safety commission for the licence to be granted.
However, it is currently very difficult to freshly obtain a licence for pachinko or pachi-slot under the Amusement Business Act and enter into an already saturated market.Location
May a gambling location be part of a resort, restaurant or other multi-purpose location? What limitations apply?
A casino business location must be part of an integrated resort, a complex combination of facilities, such as convention centres, recreational facilities, tourist facilities, accommodation facilities, as well as casinos. Also, the maximum floor area allocated for casino activity should be 3 per cent of the total floor area of the IR.Passive/institutional ownership
Are there provisions for passive or institutional ownership that allow for exemption or modification of licensing requirements?
There are no such provisions under the IR Implementation Act.Responsible gambling
What responsible gambling obligations apply to licensees?
The Basic Act on Countermeasures for Gambling Addiction addresses gambling addiction of casino licensee and that the casino licensee shall be responsible in prevention of gambling addiction. The maximum number of entries into casino facilities by customers other than non-resident foreigners is three times per week and 10 times per 28 days, in order to prevent any increase in the number of problematic gamblers. One entry will be counted if a customer enters the casino after the lapse of 24 hours since the previous entry. Also some people are prohibited from entering the casino and the casino business operators must restrict those people from entering the casino.
Also, to prevent gambling addiction and other related problems, only non-resident foreigners are permitted to purchase chips using credit cards.
Automatic teller machines (ATMs) are not permitted to be installed within casino facilities, and only ATMs without money-lending functions can be installed in areas surrounding casino facilities. Furthermore, to comply with regulations similar to those under the Money Lending Act and the Payment Service Act, all money transfers and receipts carried out by casino business operators upon customers’ requests are only carried out via financial institutions, and each customer’s deposit is only transferred to that customer’s own account.
The Japanese government and the relevant municipal body impose an entrance fee for customers other than non-resident foreigners for entering the casino facilities. They charge a total of ¥6000, which includes ¥3,000 towards the national entrance fee and ¥3,000 towards the municipal entrance fee. The casino business operator shall collect the entrance fees from customers upon their entry into casino facilities on behalf of the government and the municipal body, and shall pay such amount to the government on a monthly basis, by a specific day of each month.
In addition, considering that money lending might accelerate gambling addiction, borrowing of money is only available to customers who have the financial capability to make a cash deposit with the casino business operator exceeding a certain amount that includes non-resident foreign customers. Also, to prevent excessive lending, casino business operators shall check customers’ capabilities of repaying their loans, and shall set a separate cap on the loan amount for each customer.Taxes
What type of tax and what tax rate applies to each form of lawful land-based gambling activity?General
If an entity is engaged in gambling activities through establishments located in Japan (or otherwise deemed to maintain a permanent establishment in Japan for tax purposes), all income attributed to those establishments will be taxed at normal rates regardless of whether the activities are deemed illegal or otherwise prohibited. There is no specific taxation statute relating to income gained through gambling activities.
In most cases, income from gambling will be subject to taxation under the Income Tax Act (Act No. 33 of 1965). However, prize money won from the lottery is exempt from all taxation under the Lottery Ticket Act.Casino
The casino business operator bears:
- a floating national tax, the amount of which is:
- 15 per cent of the gross gaming revenue (which is composed of:
- (x) the aggregate chip amount received from customers, less the amount refunded to customers; and
- (y) the profit gained from bet-ting among customers) per month; or
- a fixed tax which covers the administrative expenses of the Committee; and
- a floating municipal tax, the amount of which is 15 per cent of the gross gaming revenue per month. The casino business operator shall pay these taxes to the Japanese government on a monthly basis, by a specific day of each month.
Is remote gambling permitted and, if so, what types?
Remote gambling is generally not permitted in Japan. At the moment there are only exemptions and licence options for lotteries and sports gambling including lottery (takara kuji), toto (football lottery), horse racing, boat racing, bicycle racing, local horse racing and motor-cycle racing. Remote gambling in the form of online poker and online casino games are not allowed.Licensing
What are the criteria for obtaining a licence to operate remote gambling?
Remote gambling is permitted exclusively for governmental entities.
How do the licensing criteria for remote gambling operators differ from those applicable to land-based operators?
Not applicable.Cross-border gambling
May operators located in other countries offer internet gambling to consumers in your jurisdiction without obtaining a licence there?
May operators licensed in your jurisdiction offer internet gambling to consumers in other countries?
What tax rate applies to each form of remote gambling?
There are no specific provisions on tax rate that are applicable to remote gambling.
Are gambling games - land-based or remote - patentable in your jurisdiction?
There is no specific regulation on patents for gambling games. Gambling games are patentable if the general requirements for patents are met. Patents may be granted for any invention, in all fields of technology, provided that it is new, involves an inventive step and is susceptible to industrial application. Mere ideas for gambling games are not protectable under copyright or patent law.Trademarks
Are there limitations on how brands, logos or other types of marks may be used in promoting gambling games?
There is also no specific regulation on trademarks for gambling games. The general trademark laws also apply to gambling. However, the use of brands, logos or other types of marks in promoting gambling games must comply with the advertising restrictions for gambling (see question 24).
What types of restrictions apply to advertising gambling games?Land-based gambling
Advertising directed at consumers residing in Japan from overseas gambling entities, which is lawfully licensed under their laws, currently appears in newspapers and magazines (such as UK gambling or overseas lotteries). The Japanese police and consumer affairs bureaus caution against overseas lotteries and warn that participating in such overseas gambling may breach the Penal Code. Since aiding and soliciting gambling constitute crimes under articles 61 and 62 of the Penal Code, Japanese credit card companies do not allow their customers to use their credit cards for overseas lotteries.
There are detailed regulations on advertising pachinko and pachi-slot provided by the Japanese National Police Agency. These regulations prohibit advertisements that could arouse a passion for gambling. For example, since the number seven suggests a jack pot, it is generally prohibited to use the number in pachinko or pachi-slot advertisements.Casino
In order to prevent addictive gambling issues and maintain the sound upbringing of young people, good morals, a clean entertainment environment and to protect the customers the following are not permitted:
- false or over-exaggerated expressions and explanations;
- expressions and explanations that may not be objectively proven to be true; and
- expressions and explanations that may violate good morals or damage a clean entertainment environment.
The installation of billboards, posters and other advertisements and the distribution of leaflets concerning casinos are prohibited outside the IR area. In particular, for the sound upbringing of young people, the distribution of leaflets and the solicitation of minors to visit casinos are prohibited, irrespective of whether it takes place outside or inside the IR area. Furthermore, every advertisement or promotion of a casino business or a casino facility shall contain:
- a warning regarding the connection between the use of casino and problem gambling addiction and related issues; and
- a notice that minors’ entry into casinos is prohibited.
Furthermore, the casino business operator must:
- educate and train its employees to comply with these rules;
- create internal compliance rules;
- appoint persons in charge of activities that are necessary for compliance with these rules; and
- appoint persons to audit such activities.
The Commission may order any person who creates any advertisements or promotion materials that is in violation of these rules to suspend or rectify such advertisements or promotion materials by a certain deadline.Remote gambling
There are no specific regulations under Japanese law for the advertising of online gaming services. However, there are certain soft laws, such as the 2004 Guidelines on Advertising on the Internet issued by the Japan Internet Advertising Association. According to the Guidelines, as a problem unique to advertising on the internet, members must refrain from agreeing to advertise online gambling services offered by offshore online gaming operators to consumers residing in Japan even though the gaming operator may be lawfully licensed under the laws of its own country. This is because Japanese residents who subscribe to online gambling may be in breach of article 185 or 186 of the Penal Code.
What types of suppliers to gambling operators require licences?Casino
- A casino facility provider must obtain a licence from the Commission if it manages and leases casino facilities to a casino business operator.
- The owner of any land that is used for IR or casino facilities must obtain the permission of the Commission if it transfers or leases the land to an IR or casino business operator.
Since the casino business operator may not execute a contract under which it will pay the counterparty an amount in proportion to the gross gaming revenue, the rent of such casino facility or land shall be agreed at a fixed amount.Pachinko
Pachinko and pachi-slot parlours (collectively ‘pachinko parlours’) are not considered to be gambling or the offering of gambling places, as the operation of the parlours involves:
- the players renting pachinko balls from the parlours, paying cash at a rate that does not exceed the statutory rate;
- the winning balls of players can be exchanged for premium goods (not cash) at the pre-determined exchange rate, with the implicit understanding (which is never openly admitted by the pachinko parlours) that there are ways to exchange the goods for cash at certain facilities; and
- the players take the special premium goods to an exchange shop (an entity that has obtained permits as second-hand dealers from the local public safety commissions), in most cases located near the pachinko parlour, where the players can exchange the premium goods for cash. The exchange shop then sells the premium goods purchased to a wholesaler, who sells the premium goods back to the pachinko parlour.
Currently, such recycling arrangements involving these three entities generally avoid the suspicion of law enforcement authorities and are not perceived to constitute gambling or the offering of gambling places where cash is used to settle wins and losses. This is because each of them is ostensibly an independent operation and knows nothing of what the other entities are doing. The same type of arrangement is used to convert pachi-slot winnings to cash (where tokens are used instead of pachinko balls).
It is only with pachinko parlour-related business that such avoidance of the suspicion of gambling practices has been observed.Registration
If licensing is not required, is there a registration or other process suppliers are subject to, and what triggers that process?
Except for casino and pachinko, there is no registration requirement or other process which suppliers are subject to.
Casino projectsCasino development
What considerations arise in developing a casino resort project that are not typical to other resort development?
Under the IR Implementation Act, up to three IR areas will be initially approved by the Minister of Land, Infrastructure, Transport and Tourism. It is currently expected that the Japanese government will approve the initial IR areas in around 2022, and the first batch of IR or casinos will be opened to the public by 2025, at the earliest. Pro-casino municipal bodies are already actively pursuing requests for concept (RFC), requests for investment (RFI) or other processes as preparation for the filing of an application for a certification of the IR Area Implementation Plan, while private casino business operators are mulling over the candidate IR area in which they will make an application for selection, the concept of the IR or casino business plan and the composition of the consortium that they should establish to build and operate their IR or casino facilities.
Labour and employmentWage and hour rules
Are there particular rules governing hours and wage treatment for casino employees?
There are general laws such as the Labour Standards Act, governing working hours, and the Minimum Wage Act that generally apply to all employees in Japan, including casino employees. Beyond that, there are no specific rules governing hours and wage treatment for casino employees.Collective labour
Must casino employees be members of labour unions or similar organisations?
No, there is no such requirement.
Acquisitions and changes of controlChange of control
How are licensee changes of control, and substantial changes in shareholdings of licensees, addressed?
The shareholders and distribution of ownership of a legal entity applying for a casino licence are checked during the scrutinising of the licensing application and before granting the casino licence. Gambling licences are usually non-transferable in Japan.Bankruptcy
How are gambling licences treated in bankruptcy?
Bankruptcy of any organisation is generally regulated by the Insolvency Act without specific rules for gambling. Since gambling licences are generally non-transferable in Japan, creditors may not obtain a licence by way of an asset deal in an insolvency proceeding, and a new licensing procedure is usually required for the potential new owner. Bankruptcy of a licence holder may also lead to a revocation of the licence if the gambling authority deems that licensing requirements, such as the reliability or the economic capability of the organiser, have been compromised.
How are forms of ‘quasi-gambling’ regulated? Are any treated as ‘gambling’, and what triggers such treatment?
Social gaming is a massive industry in Japan. However, there is no statute which specifically regulates it. Therefore, social gaming is regulated by the same regime as applicable to gaming and gambling. Generally, if social games are free to play or if there is no prize, the games are legal and the operator of the social gaming facilities does not require a licence.
If players in a social game win virtual currency that can be used as credits to take part in games, the issue becomes complicated. If the credits cannot be exchanged for cash and cannot be exchanged with other players, it is likely that such credits are not ‘things of value’ under the meaning of the Penal Code, because it is practically impossible for a player to obtain a profit through dealing in such credits. If the credits are not ‘things of value’, the social games will not fall within the definition of gambling under the Penal Code.
However, if the credits can be purchased for real money, there is an increased risk that they will be deemed as ‘things of value’, because this may create the appearance that the credits have the financial value of the purchased price. Even if there is a risk that the credits may be seen as ‘things of value’, social gaming may still be justifiable via a different route. Under article 185 of the Penal Code, ‘betting a thing which is provided for momentary entertainment’ is excluded from the definition of gambling (eg, betting a cigarette or lunch). Although obiter dictum, the Supreme Court of Japan held that a business that was licensed under the Amusement Business Act may fall within ‘betting a thing that is provided for momentary entertainment’ and therefore would not constitute gambling’ (a Supreme Court decision, dated 10 November 1953).
It can be seen that playing social games with the credits that may be purchased with real money are unlikely to fall within the definition of gambling, provided that the credits cannot be exchanged for cash and cannot be exchanged with other players. In light of the obiter dictum in the 1953 Supreme Court decision, such games may fall within the classification of ‘betting a thing which is provided for momentary entertainment’.
If the credits can be purchased for real money in relation to social games, the regulations under the Act on Financial Settlements (Act No. 59 of 2009) will also apply. Under the Act on Financial Settlements, the operator of the game issuing the credits, who must hold more than ¥10 million (or an equivalent amount in another currency) on each reference date (the last day of March and the last day of September), must:
- notify its business and other statutory matters to the relevant Japanese authority within two months from the reference date;
- deposit half of the total amount of the credits in a manner specified in the Act on Financial Settlements;
- submit business reports on a semi-annual basis; and
- disclose certain information about the operator and the credits to the holders of the credits through the internet or other means specified by the Act on Financial Settlements.
These regulations will not apply in a case where the effective period of the credits is limited to six months or less.Licensing
Does your jurisdiction license quasi-gambling operators?
There is no general licensing requirement for quasi-gambling operators in Japan.Other restrictions
Does your jurisdiction impose other restrictions on the conduct of quasi-gambling activity, including restrictions on advertising, age of participation, limitations on prizes, etc?
What, if any, significant litigation involving the gambling or quasi-gambling sectors has your jurisdiction seen in recent years?
There has been no significant litigation involving the gambling or quasi-gambling sectors in Japan to date.
Update and trendsRecent developments
Highlight any noteworthy developments or trends in the gambling or quasi-gambling sectors (legal or business) and their potential implications.Developments36 Highlight any noteworthy developments or trends in the gambling or quasi-gambling sectors (legal or business) and their potential implications.
In Japan, the number of e-sports events with prizes of high value will increase in the near future. There was a likelihood that such e-sports events may be subject to existing gambling regulations but those risks were mitigated by official notices from the Consumer Affairs Agency of Japan. The gaming industry established an organisation governing legal and business issues related to e-sports events and started a self-regulatory licensing system.