New Image for Japan's Pachinko Parlors

The traditional game—part pinball, part slot machine—is making a comeback with cleaner digs and an attempted IPO

by Hiroko Tashiro

"Aim for the pegs in the middle," says a smartly dressed young man, who has come to check on my progress. I'm playing pachinko, one of the most popular gambling games in Japan, at P-ARK Ginza in Tokyo's swanky Ginza district. I could use the advice. This is only the third time I've ever set foot in a pachinko parlor, which has long had the reputation of being a seedy joint reeking of cigarette smoke and sweat and blasting Japanese military marches over the clatter of metal balls and the microphone-enhanced shouting of attendants.

But Japan's pachinko industry is now trying to reinvent itself as pachinko parlors work to shed their sleazy reputation and become more attractive to female customers. To be sure, most of the players around me are men in business suits, but there are more women than I had expected. All seem to hunch forward in their seats, dropping balls into a slot. Every few minutes a staff member stops by to give me some pointers. They want me to win a little so I'll come back. "If you have any problems, just call us any time," says the eager-to-please employee.

Pachinko is a uniquely Japanese phenomenon. Its roots trace back to the 1930s, but the game didn't take off until after the end of World War II. As Japan's economy grew and people had more money to spend, pachinko parlors were just about everywhere. Even in major cities, you had a better chance of finding a pachinko parlor than a convenience store.

A $257 Billion Business

Pachinko machines are strange-looking: part upright pinball machine, part video game, part slot machine. But pachinko's currency isn't coins; it's little steel balls. The aim of the game is to win as many of the balls as possible, which can later be exchanged for gifts or cash.

During the postwar boom, pachinko machine makers did their part, designing new models that would cough up winnings faster. And the faithful kept coming back. By 1995, more than 44 million Japanese—about a third of the population—were playing regularly, according to Japan's Entertainment Business Institute. And pachinko shop operators' annual revenues were almost $300 billion, according to the Japan Productivity Center for Socio-Economic Development.

But by 2006, the figure had fallen to $257 billion as interest in playing the game waned. What went wrong? Despite strong profits, pachinko's image was suffering. Operators were accused of everything from tax evasion to shady North Korean money transfers to ties to the yakuza, Japan's Mafia. And the game came to be seen as a pastime for deadbeat borrowers and gamblers. It didn't help that pachinko parlors skirted the strict rules in Japan for gambling establishments. Then, as today, customers weren't allowed to trade balls for cash at parlors. Instead, they stepped around the corner to an independently run kiosk to convert winnings into yen.

A Chance to Clean Up Their Image

Worse was to come. After years of looking the other way, in 2004 regulators ordered that pachinko machines offering big payouts be replaced with new machines with smaller payouts. Many shops went bust, unable to afford the big investments in new equipment (BusinessWeek.com, 6/5/07). Today, there are 13,585 parlors in Japan, down from a peak of 17,631 in 1995.

Yet many others saw a chance to clean up their image and reach out to a different crowd. Shops are now less intimidating for first-time players such as women like me, and twentysomethings or thirtysomethings whose attention is being increasingly monopolized by DVD players, big-screen TVs, and video games. P-ARK Ginza, which opened in 1995 across the street from Tokyo's Kabuki Theater, sits just a couple of blocks from the ritzy Ginza shopping district. You'd never guess it was a pachinko parlor; from the outside, it looks like an ordinary Internet café. Inside, it was quieter and cleaner than I had expected.

Big Wins in the Penny Arcade

After explaining to an employee that I hadn't been to a parlor in years, I was led to a bank of machines for beginners.