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Amid the globalisation wave, Chinese firms are accelerating their overseas expansion. Japan, a pioneer and model in the gaming industry, is an ideal choice for Chinese gaming companies. To stand out in this mature market, they must be well prepared.

Foreign investment in Japan

According to Japan¡¯s Foreign Exchange and Foreign Trade Act, and the Order on Inward Direct Investment, foreign investors must first submit declarations when investing in specific industries that are regulated due to their impact on national security, public order, public safety and the economy. Only after approval can they proceed with investment in these sensitive sectors.

Notably, Japanese laws do not explicitly prohibit foreign capital in the gaming industry. There are successful cases of Chinese gaming companies establishing entities in Japan and legally providing game distribution and operation services. Legally, no explicit ban prevents Chinese gaming companies from entering the Japanese online gaming market. Common market entry strategies for foreign gaming companies in Japan include establishing a new Japanese corporate entity, or setting up a Japanese branch office.

Data compliance

Japan¡¯s Act on the Protection of Personal Information (APPI) outlines basic compliance requirements for handling personal information, including defining and notifying the usage purpose, and obtaining consent for sensitive information.

Gaming companies must clearly state the purpose of using players¡¯ personal information and cannot change this purpose without additional consent. When collecting personal information, companies must inform players of the usage purpose, either immediately or through notifications such as website announcements.

According to guidelines issued by Japan¡¯s Personal Information Protection Commission, websites should make the purposes for collecting information publicly accessible via a single-click link to their homepage. This allows users to easily find out how their personal information could be used.

There have been instances where overseas gaming companies were penalised by Japanese authorities due to leaks of players¡¯ personal information. Under the APPI, if a breach occurs that could harm individuals¡¯ rights and interests, gaming companies are required to report the incident to the privacy commissioner and the affected individuals.

Gacha mechanics

In Japanese gaming culture, the gacha concept originated from a form of traditional entertainment, particularly the capsule toy vending machines. These machines allow people to randomly draw encased toys, often representing different characters or items with varying degrees of rarity, by inserting coins.

As the gaming industry evolved, particularly with the rise of mobile gaming, the gacha system was cleverly incorporated into games as a mechanism for randomly drawing in-game items or products.

The Act against Unjustifiable Premiums and Misleading Representations, which was initially aimed at regulating gambling behaviour associated with capsule toy machines, is now also applicable to in-game drawing mechanisms.

According to the act, consumer displays that overstate the quality, specifications or other aspects of goods or services, or falsely represent a business¡¯s products or services as superior to those of others, are considered unfair enticements and may impede consumers¡¯ ability to make informed and rational choices.

In the gaming industry, particularly for games employing the gacha mechanism, gaming companies must ensure that promotional materials and in-game descriptions are highly accurate and transparent.

This includes clearly indicating the estimated cost to obtain rare items, the upper and lower limits of drop rates, and providing the drop rates for each category of item. There have been cases where domestic gaming companies were warned and penalised by Japan¡¯s Consumer Affairs Agency for not truthfully publicising probabilities.

Youth protection

In Japan, video game software is categorised into five levels based on content, and each category is designated for different age groups.

The Computer Entertainment Rating Organisation categorises games based on whether they contain sexual content; violence; anti-social behaviour, language or thought; and the extent to which they do.

The categories range from suitable for all ages to suitable for ages 12 and up, 15 and up, 17 and up, and 18 and up (games in this category should not be sold or distributed to individuals under 18).

Beyond the standard game rating system, article 5 of the Act on Development of an Environment that Provides Safe and Secure Internet Use for Young People in Japan also outlines specific responsibilities for businesses involved in internet services for minors.

These operators are required to take measures appropriate to their services to minimise young people¡¯s access to harmful information on the internet and promote skills for proper internet use.

Jeff Yang is a director at Wang Jing & GH Law Firm