Pokemon Go and Japans “Shikin Kessai Hou” Prepaid Regulation Clause

According to reports from the Nihon Keizai Newspaper, game developer Niantic, the company that is behind the hit game Pokemon Go is going through a series of investigation with regards to their in-game currency system.

Unlike the US, or Europe, Japan’s Prepaid billing system is heavily regulated and any company that looks to establish any type of prepaid system in their business model, must abide by the “Shikin Kessai” regulations or face prosecution from the Japanese Legal Affairs bureau. This also includes all hard currency in freemium mobile games.

“Shikin Kessai Hou” or Pre Paid Regulation Clause was passed due to the sheer number prepaid system that was happening in Japan in the 2000’s. The clause states that for all services that provide a prepaid currency, the provider must provide a platform where these users can effectively spend their currency in a specific time period. This time period was set at 3 months.
For those going to Japan or live in Japan and you go to any retailer with a prepaid service (ie Game center), you will always notice a clause that states that, all remaining hard currency balance after 3 months will reset to 0.

Now, this clause affects the freemium platform in every way. The clause is game breaking. Imagine firing up your mobile app after a 3 months hiatus, and notice that all your hard currency you spent is gone.

Developers took to the legal affairs bureau to discuss their claim. After a series of discussion, the outcome was that for all developers that provide a pre paid (hard currency) system, the overflow of of any currency per user, must allocate 50% of their balance to the Legal Affairs Bureau. Once a specific user spends all their hard currency overflow, this is when developers can request for their money to be re deposited back into their accounts.

Imagine the headache the accounting team had when hearing this new clause pass. Not only do the accountants work multiply, server engineers had to refactor their code so that it can provide these types of data to the Bureau.

Because of this clause, Niantic is being investigated by the financial service agency regarding the “Shikin Kessai Hou” and working towards advancing their hearings with the Legal Affairs Bureau.

Although not the Top Ranked Grossing App in Japan, like other Countries, Pokemon Go is sitting comfortably in the top 3, in which you can assume that Niantic is comfortably making about $1-$3 Million a day. That’s a lot of money going to the Federal Bureau.


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