CHAPTER EIGHT

Pachinko 101

The first pachinko parlors had humble beginnings in Nagoya in 1948, but had expanded to a scale making it comparable to the casino industry in the United States. In addition, the typical pachinko customer is estimated to put in four times the amount of money as the American casino customer. According to the White Paper on Leisure 2004 compiled by the Japan Productivity Center for Socio-Economic Development, the pachinko market turned over 29.634 trillion yen in 2003. That was the significance of the industry at the time I was first approached to look at it.

Compare that to the figures for horse racing, which made 3 trillion yen, cycling 1 trillion yen, boat racing 1.1 trillion yen, and the lottery 1 trillion yen, meaning the pachinko industry surpassed all other forms of gambling combined. There were good odds of making money investing in that business.

Even as an individual industry it is massive. The automobile industry, including parts, made 41 trillion yen back in 2003, and all forms of health care added up to 31 trillion yen. Pachinko is sneered upon by the upper echelons of Japanese society, but it doesn’t change the fact that it was one of the biggest industries, in line with cars and health care. And in 2007, before the iPhone, it was one way for the ubiquitous Japanese salaryman to blow off steam.

The 30 trillion-yen market came from the 6,000 pachinko parlors nationwide. In 2003, 17.4 million customers were spending an average of 112,800 yen playing pachinko, resulting in each pachinko parlor making an average monthly profit of 166 million yen and an annual profit of 2 billion yen. No other industry was making such an enormous profit per store.

No wonder Japan resisted casinos—it already had a casino industry of its own. And pachinko machines had evolved as well. There were pachinko-slot machines now (pachi-slo), which seemed like the gambling equivalent of a speedball (heroin and cocaine), more exciting and more addictive.

Many people seek a piece of this 30 trillion-yen pie. The yakuza had been skimming protection money from the shops for decades. The shop owners couldn’t do much about this, because they knew they were operating nearly illegal gambling dens. A pachinko parlor owner in Saitama had told me that getting rid of the yakuza had been a nightmare and that it was only after 1992, when the first anti–organized crime laws went on the books, that the police even seemed to give a fuck.

Not only would the local yakuza demand protection money, but they were also sore losers—prone to kick and punch the equipment when they lost, which could ruin an expensive machine. It was considered a worthy investment to pay the yakuza to make sure that they and other yakuza customers didn’t frequent the establishments.

Until the mid-1990s, Japan’s National Police Agency, which had allowed the industry to exist in a legal gray zone for many years, decided to crack down hard. They were going to help the businesses get rid of the yakuza—and, in return, all they wanted was assurance that the pachinko parlors would offer well-paid retirement positions to select police officers.

While the yakuza have mostly been replaced, the penchant for tax evasion by pachinko parlors has not withered over time. Especially if the parlors are run by North Korean Japanese.

Police sources note: “North Korean–owned parlors in particular feel that rather than paying the Japanese government taxes, they prefer handing over the money to their own government. Although there is high risk in this industry because the police always have an eye on it, its long tradition as the worst industry in tax evasion will not go away easily.”

Life as a Korean in Japan has never been easy, and after the war the residents created a support group for themselves that eventually grew into two different divisions: one allied with North Korea, and the other with South Korea.

The Korean war split apart the Korean diaspora in Japan just like it did in Korea itself.

Postwar ethnic Korean organizations arose to combat discrimination, aid fellow brothers and sisters, and engage in politics—like the anti-defamation league for the Jews in the United States. After the end of the war, The League of Resident Koreans in Japan (zainihonchōsenjinrenmei), sometimes abbreviated as Chōren, was established. Chōren functioned as a de facto government for Koreans in Japan, collecting taxes, dispensing welfare, and even trying criminals during the period when Japan’s government was in chaos. The league had been formed in October 1945, and quickly leaned toward support for North Korea. Initially, its major goals were the repatriation of all Koreans and the teaching of Korean to Korean children in Japan as part of their preparation for repatriation.

Reflecting the Cold War in general and the division of the Koreas in particular, Chōren didn’t achieve a united front among ethnic Koreans in Japan. Those unhappy with the communist leanings of the Chōren formed a right-to-center group in 1946, the South Korea–affiliated Korean Residents Union in Japan (zainippondaikanmindan), which is now known as Mindan. Mindan’s expectation was that Koreans would soon repatriate and, unlike Chōren, it assiduously avoided intervention in Japanese politics, aligned itself with South Korea, and was broadly pro-Japanese and pro-U.S. because of South Korea’s pro-U.S. stance.

The outbreak of the Korean War deepened the divided allegiances and oriented ethnic Koreans to homeland politics. In 1955, Chōren evolved into the current General Association of Resident Koreans in Japan (zainihonchōsenjinsōrengōkai), usually called Sōren, Chosōren, or Chongryun.

Homeland orientation was the foundation of Sōren ideology, but the organization provided support for ethnic Koreans living and working in Japan. Its two critical pillars were finance and education. At a time when Japanese banks would almost never lend to ethnic Koreans, Chōgin Bank, as Sōren’s financial arm, filled a critical need.

There’s no question that the Sōren was and is a money-making machine for North Korea. Katsuei Hirasawa, a parliamentarian and former National Police Agency high-ranking officer, discusses this in no uncertain terms, and with surprising empathy, in his book, A Police Bureaucrat Looks at Japan’s Police.

Hirasawa notes that those (residing in Japan) who have family or relatives remaining in North Korea cannot disobey the orders (from Sōren) to “send money back to the fatherland.” It’s because their loved ones are essentially hostages. In the past, individuals in the pachinko business who donated more than $1 million were given a merit badge, and their names were published in a magazine as individuals who had contributed to the fatherland. Sōren is essentially a branch of the North Korean government, according to former officers of the organization.

The tax authorities in Japan have been reluctant to collect money from pachinko parlors connected to North Korea. Once, when a branch office of the National Tax Agency raided a pachinko parlor, Sōren gathered an army of protestors and harangued them. The National Tax Agency was greatly intimidated by this incident.

It was well known that the authorities hesitated to bother the North Korean–affiliated pachinko parlors after this. The Sōren leaders used this to argue that the money saved in not paying taxes to the Japanese government was due to the organization’s efforts, and thus the pachinko parlors should kick some money back to the homeland in thanks.

While Mindan and Sōren provided financial assistance to the Koreans in Japan, ethnic education was even more significant. Sōren ideology followed the North Korean brand of communist nationalism and promised repatriation for all zainichi. Meanwhile, the South Korean–backed Mindan also set up their own banking institutions and school systems.

It was important to understand the differences between the two, because the CEO of Wahei Entertainment was considered to have been well connected to the Sōren group. When you considered the U.S. and Japanese rules about doing business with North Korea, that association alone could be enough to give the request for a loan a fat thumbs-down.

I met with a corporate investigator from Teikoku Databank, and got hold of a copy of their report on the company. It gave the firm a C+, and noted that the president of the firm, Mr Lee, had been born in Korea and had come to Japan when he was ten years old. He had little more than a high-school education. He liked to play golf. (It seems that every CEO in Japan likes to play golf, even if he doesn’t.) There was no mention of any ties to Sōren, but there was a note that Mr Lee had gained South Korean citizenship—date unknown.

If he indeed had Korean citizenship and was also a member of Mindan, that would pretty much exclude him from the ranks of Koreans with North Korea ties, I thought. I knew where I could ask about his Mindan connections, if he had any at all.