JAPAN

Satoshi Kubota Associate [email protected] John Stapleton Associate [email protected] Greenberg Traurig Tokyo Law Ofces Ryuanji Temple’s lottery meets the Fourth Industrial Revolution ’s Ministry of Internal Afairs and Communications announced a new policy on 26 January 2018 that will allow the sale of almost all types of lottery tickets via the internet from October 20181. Satoshi Kubota and John Stapleton of Greenberg Traurig Tokyo Law Ofces discuss in this article the new policy change which is a major step forwards for a business that has been an indispensable source of revenue for local governments in Japan, and which will transport a practice that dates back almost four centuries into the digital age.

Origins of lottery in Japan Modern lottery in Japan per year. In the Jumbo Draw, a player Lottery in Japan dates back to 1624 to Legalisation can purchase a lottery ticket with the a place formerly called Settsu Province, ‘Lottery,’ pronounced takarakuji numbers and group number already which comprised of what is now in Japanese, a word which uses a printed on the ticket. A draw is conducted southeastern Hyogo Prefecture and combination of the Japanese symbols where the numbers and group number northern Prefecture. Visitors to a for ‘treasure’ and ‘drawing,’ is generally are selected at random, and if the temple in the province of Ryuanji from prohibited under Article 187 of the Penal player’s ticket matches all the numbers New Year’s Day to 7 January would place Code of Japan (Act No. 45 of 24 April and group number drawn, the player into a box a kifuda, a wooden tablet, 1907). However, the Lottery Ticket Act receives winnings often ranging from with their name written on it. On the 7 (Act No. 144 of 12 July 1948) provides an JPY 100 million to JPY 700 million. The January, a monk would choose three exception for a limited form of regulated second type of lottery is the standard kifuda from the box and give each of lotteries run by local governments. The lottery, which is similar to Jumbo Draw, the winners an omamori, a Japanese main purpose of the legalised lotteries but is conducted both nationally and amulet, for happiness and good fortune. is to raise funds for the participating locally on a more regular basis than prefectures and designated cities3. Jumbo Draw, and ofers lower potential Similar practices continued during winnings. The third type of lottery is a the (1603-1867) as a way These local governments, with the number-select lottery, where the player for temples and shrines to obtain permission of the Minister for Internal selects their desired numbers. In this funding to repair the facilities and Afairs and Communications, commission type of lottery, similar to the standard for other similar purposes, until banks and similar businesses to lottery, players win when their selected 1842 when the ruling Shogunate physically sell the lottery tickets on numbers are drawn. The fourth type is a Government prohibited the practice. behalf of the local governments. The scratch lottery, where players scratch of banks, pursuant to the sales plan set the covering in a designated area of the Later, during World War II, the Special out by the local governments, select ticket to reveal whether the numbers or Funds Adjustment Act (Act No. 86 of 10 the design and print the lottery tickets, pictures match. The ticket itself informs September 1937) was amended in April distribute them to ticket ofces, oversee the player of the amount won, if any. 1945 to provide for the legalisation of advertising, control sales, conduct the a version of a lottery to raise funds for draws, announce the winning ticket The proceeds the war. The lottery tickets were sold numbers, and pay the winnings, among Around 45% of the proceeds from under the names ‘happiness tickets’ other activities. After the draw, the profits lottery sales are generally paid out to and ‘victory cards;’ however, the war did from the tickets sold are collected by the lottery players, while around 40% of the not wait for the implementation of the relevant ofces of the local governments. proceeds go to the local governments, lottery. Japan announced its surrender and the remaining 15% covers the service on 15 August 1945, but the first lottery Lotteries in Japan can be broken down fees and other expenses4. The proceeds ticket was not sold until 10 days later on into four diferent types. The first is from lotteries have been an unfailing 25 August 1945. The irony was not lost Jumbo Draw, which is the largest lottery source of funding for the operations on the Japanese, who often referred to in terms of possible winnings and is of regional municipalities. Additionally, the lottery tickets as ‘defeat cards2.’ conducted nationally only five times there is an aspect of lotteries which

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allows people to dream about winning Consequently, the loss in revenue has only number-select tickets to Jumbo the jackpot, whilst tapping into their become a major source of worry for local Draw and standard lottery as well, sense of public spirit through providing governments which have relied heavily from October of this year8. Scratch financial support to local society and life. on lottery funds to shore up tax revenue. lottery tickets, however, will continue to be excluded from online sales9. Demographics In 2011, in reaction to this trend, Sales of these lottery tickets will be According to a 2016 survey published on the Ministry of Internal Afairs and available on the Takarakuji website, the Takarakuji website5, people who have Communications formed an expert which will be accessible via PC as well played the lottery at least once make up group called the ‘Lottery Revitalization as via smartphones. To get started, about 76.4% of the population, which, Review Group.’ According to the Group, users will simply need to set up an based on population estimates, equates the recent slump in lottery sales is account on the site. For those players to about 81,150,000 people. More men due to external factors, including a without an internet bank account, than women have played the lottery, stagnant economy and more generally tickets will also be available for sale with 81.4% of men and 71.6% of women a lower personal income in Japanese using credit cards. According to Minister having experienced the thrill at least society. The Group has also stated that Seiko Noda of the Ministry of Internal once. Additionally, 79.6% of the Japanese eforts to cultivate interest in new and Afairs and Communications, 500,000 public in their 30s, 81.1% of those in their younger players have been too slow, users are expected to register within 40s, 82.1% of those in their 50s, and and that although traditional sales at the first six months, with a goal of 82.7% of those in their 60s have played6. ticket ofces has been the primary sales eventually reaching 3,800,000 users10. As evidenced by these figures, a large channel, there has been a reduction portion of the Japanese population has in the number of ticket sales ofces. Conclusion played the lottery, while the population of It is safe to say that the monks of Ryuanji lottery players also appears to be aging. Based on these findings, the Group in 1624 could not have foreseen what argues that there is a need to expand Japanese lottery would become in 2018. Internet sales of lottery tickets the sales channels for lottery tickets. However, the new policy that will allow Background Accordingly, the Group says that for more comprehensive internet sales Jumbo Draw, standard lottery, number- the availability of lottery tickets of lottery tickets is necessary in the age select, and scratch lottery tickets are should be expanded to the internet of the Fourth Industrial Revolution where sold at ticket ofces located in street as well as via additional physical digital information and diferent payment markets as well as train stations, sales ofces, in order to meet the methods are central to everyday life. shopping centres, and banks, among needs of a larger base of players7. others, but only number-select tickets It also shows the ability of the Japanese have been made available online to date. The new policy on internet sales Government to be pragmatic in In response to the circumstances cooperating with local governments to Meanwhile, revenue from the sale of discussed above, the Ministry of solve issues ultimately stemming from lottery tickets hit its peak in 2005 with Internal Afairs and Communications new trends in this digital era, and perhaps around JPY 1.1 trillion in revenue, and announced a new policy on 26 January even a model for greater availability has continued to shrink ever since. 2018 to expand internet sales from of gaming online moving forward.

1. The new policy is published online via the 5. http://www.takarakuji-ofcial.jp/about/ 9. As a result, according to an article published Ministry of Internal Afairs and Communications’ research/001.html (Japanese language only). in the Nikkei newspaper by its Economy website at: http://www.soumu.go.jp/ 6. Ibid., at http://www.takarakuji-ofcial.jp/about/ Department, the percentage of lottery sales menu_news/kaiken/01koho01_02000662. research/002.html (Japanese language only). available online will increase from 43.8% to 93.8%; See ‘Purchase Lottery via Smartphone html (Japanese language only). 7. See the Lottery Revitalization Review Group’s in October on the Ofcial Site - Ministry of 2. See History of Japanese Lottery on report for background and findings, online Internal Afairs and Communications,’ 26 the Takarakuji ofcial website at http:// at: http://www.soumu.go.jp/main_sosiki/ January 2018, online at: https://www.nikkei.com/ www.takarakuji-ofcial.jp/about/ kenkyu/takarakuji_kaseika/houkokusyo. article/DGXMZO26171260W8A120C1CR0000/ history (Japanese language only). html (Japanese language only). (Japanese language only). 3. Article 1 of the Lottery Ticket Act. 8. No change in law itself is necessary for this new policy. The Ministry is designated as 10. A summary of the announcement is available 4. See an overview of proceeds distribution on the regulator of lotteries pursuant to the on the Ministry of Internal Afairs and the Takarakuji ofcial website online at: http:// Lottery Ticket Act, and so has the authority Communications website at: http://www.soumu. www.takarakuji-ofcial.jp/about/proceeds/ to promulgate changes in regulations such go.jp/menu_news/kaiken/01koho01_02000662. index.html/ (Japanese language only). as these without the need for legislation. html (Japanese language only).

A Cecile Park Media Publication | March 2018 9