When you join the cool kids and pay US$5 for that cup of trendy bubble tea in Tokyo, are you making a financial contribution to the yakuza, Japan’s notorious gangster fraternities?

This is a question many have been asking recently after the weekly magazine Shukan Post ran a story entitled “Yakuza and Tapioca.”

Asia Times has confirmed that gangsters are, indeed, engaged in the bubble tea trade. But when you look at the economics of the sector, you probably shouldn’t be shocked by mob involvement – the product itself is a steal.

Tough guys tap tapioca

The Shukan Post article claimed that a boss from a large yakuza group – of which there are at least 23 – had capitalized on Japan’s bubble tea boom and set up a shop in an entertainment district near a major station on the Yamanote subway line. The Yamanote line is the pulse of the city, circling through the major districts of Tokyo in a never-ending loop.

The Godfather is quoted as saying it’s a very easy sector to enter. You don’t need special skills, all you need to do is rent space, buy cheap, dried tapioca from abroad, make milk tea and spend a little on the storefront. He claimed it only took $20,000 at the most to get everything up and running, meaning the business could pay itself off within weeks.

Unlike, say, labor control, the drug trade or prostitution, bubble tea is hardly a typical gang business. But looked at in terms of pure economics, it may be a sound move, given that tapioca has become the big thing in Tokyo.

On weekends, Japan’s dwindling population of teenagers line up in front of the trendiest new store and fill their Instagram feeds with pictures of tapioca drinks bobbing with brightly colored straws. The trend is generally seen as originating in Taiwan, but bubble tea is popular all over the world.

Tapioca is an almost pure starch extracted from the cassava root. It’s usually sold as flour, flakes and also in pearls. Your standard high-end cup of bubble tea in Japan is usually composed of sweet milk tea or soy milk tea, with a layer of black tapioca pearls.

According to gangster lore, yakuza love pearls – the real kind – which the tattooed hardmen sometimes insert under their foreskin to transform their penises into the equivalent of ribbed condoms. But tapioca pearls are not pearls. Why would wiseguys want to muscle in on a business that is unlikely to bolster their reputation as badasses?

Gangster diversification

A veteran source in the police division of the Kano area that deals with organized crime confirmed the Shukan Post’s story.

“Oh, absolutely,” he told Asia Times. “They have been for a while. It’s probably more profitable now that bubble tea is trendy.”

The detective went on to explain that traditionally, yakuza were divided into two types: tekiya, who were street merchants, and bakuto, who were professional gamblers. In modern time, the lines have very much blurred and yakuza now engage in illegal gambling, smuggling, selling drugs, fraud and extortion, regardless of their group’s original orientation.

Yet, there are still some traditional yakuza groups that run Japan’s many traditional festivals from behind the scenes, collecting money from vendors of yakitori (meat skewers), okonomiyaki (Japanese pizza) and other street eats in return for “renting” them space.

Sometimes, low-ranking yakuza foot soldiers even run the stalls themselves and bubble tea stands have been steady earners in recent years.

As far back as the third generation leader of the feared Yamaguchi-gumi, Kazuo Taoka (1913-1981), yakuza have been urged to diversify revenue streams. Taoka once admonished his men: “Be sure to have a legitimate job as well!”

And Susumu Ishii, the second generation leader of the Inagawa-kai, advised his crew to be financially prudent, and once said: “It’s best to be a salaryman, if you can” – pointing out the benefits of a steady income.

Today’s yakuza are venture capitalists of a sort. They go where the money goes. This is why they set up IT front companies during the internet bubble between 1999 and 2002 and later made huge inroads into the Japanese stock market up until the financial collapse of 2008.

The “Emperor of Loan Sharks” – yakuza boss Susumu Kajiyama – raked in nearly US$1 billion from consumer loan companies that were illegal but modeled after legitimate companies, all the way down to the corporate logos and uniforms the office ladies wore.

He laundered a portion of those funds by buying a chain of Takoyaki – fried octopus in batter balls – stands. This reporter sampled the gangster-made takoyaki. It wasn’t bad.

Bubble tea’s a steal

Meanwhile, young Japanese are guzzling bubble tea by the gallon. “The pearls are chewy and sweet like caramel and it’s refreshing,” said one young woman buying a drink in Shimokitazawa.

The boom has been a mixed blessing for local merchants – customers often leave their unfinished cups of bubble tea in the streets or on top of vending machines because trash cans are in short supply. Cleaning up this mess is a pain for merchants. In this sense, bubble tea may be more of a nuisance than yakuza.

But for those selling the stuff, the profit margins are unbeatable.

The cost of one drink, including straws, container, milk tea and the tapioca can be kept under 100 yen ($1). The selling price is about 500 yen ($5). This suggests that, regardless of whether the salesperson is a yakuza or not, you are getting ripped off.

Still, locals should think twice before going into business with any bubble tea entrepreneur with suspicious tattoos and a missing finger or two.

“In every prefecture in Japan, especially in Tokyo, there are anti-crime exclusionary ordinances which makes it a crime to knowingly do business with the yakuza, pay them off, or share profits with them,” cautioned the Kano-area detective.

He explained a three-strike rule. The first time, there is a warning. The second time, you or your company name is released, which almost always results in your bank accounts being closed, your cell phone contract ended and sometimes you get kicked out of your dwelling. A third time can end with your arrest.

With all that having been said: cheers!