Japan's favorite form of legal gambling is an inexpensive vertical
pinball game that yields noncash prizes (e.g., cigarettes) convertible to
cash. ("Pachin," equivalent to "click" in
English, is onomatopoeic for the sound made by a descending pinball.) The
metallic din of pinballs raining in gaudy pachinko parlors masks even the
considerable roar of the traffic outside.
Tax Evasion Industry
The reported annual income of the pachinko industry exceeds US$100 billion. Some estimate that, including unreported income, the industry takes in over $200 billion, making it one of Japan's largest industries (and largest tax evader). The industry is recession proof, since unemployed workers are more likely to gamble.
Most pinball-parlor operators are Japanese of Korean ancestry, many of whom maintain close ties with North or South Korean residents' organizations, such as the General Association of (North) Korean Residents in Japan (Chongnyon). About one-third of operators are North Koreans; one-third, South Koreans; and one-third, Chinese and Japanese. Japanese pachinko is a major source of remittances to North Korea.
Because pachinko is ideal for skimming, organized crime is very active in the pachinko industry.
U.S. slot machine vendors have always been excluded from this industry. Now, the latest pachinko machines incorporate features of Las Vegas-type slot machines, such as a payoff. Machines do not accept prepaid cards, however, since the owners want to hide income from taxes.
Pachinko Machine Manufacturers
The world's largest manufacturers of pachinko machines are Heiwa and Sankyo. Heiwa, which was founded by Korean-born Kenkichi Nakajima, has about 30% of the world market. ("Heiwa" means peace, since the founder wanted to produce a product unrelated to war.)
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