Domestic Transportation in Japan – Present and Future

SPECIAL FEATURE Domestic Transportation in Japan – Present and Future

The transport market of a country is sometimes not easily understood by outside observers. Japan's Shinkansen and the French TGV (High Speed Train) are famous but few people know exactly how these high speed trains function within the economies of these countries. Japan's domestic transportation market is, like in other industrialized countries, extremely competitive. Railways are struggling for survival in a fiercely aggressive environment. The theme of the special feature in this issue is "Japan's domestic transport system". Views and insights have been contributed by individuals from the academic and governmental spheres and from people within the railway industry. In addition, we have a contribution from a slightly different standpoint by a British researcher on current issues affecting Japan.

dential areas sprawled outward, and people living in the suburbs now spend Japan's Transport Market – 1 hour on average, commuting one way to the city centres. Congestion is an ev- eryday phenomenon and the traffic is Railways as a Major Player always overcrowded. To correct the regional disparities re- Yataro Fujii sulting from excessive centralisation in Transportation systems in any country hove factors Tokyo, Japan has established a policy of common to the same socio-economic developmental stage, shifting from centralisation to multipo- and unique factors depending on the natural and social lar distribution. Under this policy, environment. Unlike in the West, Japan's railways play a various measures have been taken to consolidate rapid transport systems major role in the domestic transport market. (Shinkansen, motorways, and airports) on a nationwide scale. Figure 1 shows 1. Natural and social to the natural environment and partly the travel times from Tokyo to various environments due to the restricted bridge construc- places in Japan. At present, people can tion during the feudal period. The belt- travel to nearly 70% of local areas Japan consists of a long archipelago like development of cities and indus- within 3 hours including access time. stretching from northeast to southwest. tries along the coast led to the forma- However, the decentralisation policy The major part of the country is the tion of markets that were ideal for rail- has not yet created the intended results main island (Honshu) and three ways and coastal shipping. The and centralisation of population in smaller islands connected to Honshu by country's mountainous land separated large cities is actually accelerating. long bridges and tunnels. The extreme by straits also contributed to the rapid tips of these islands are approximately progress of civil aviation in Japan. 2. Changes in transport 3,000 km apart by rail. If Japan were The largest metropolitan area in Ja- placed in Europe, it would stretch from pan is Tokyo. Over 8 million people live market Stockholm, across Western Europe, to in Tokyo alone and 29 million people Figure 2 shows the contributions of the Pyrenees. live within a 50-km radius. In short, various modes of transport to the do- Japan falls between Britain and nearly one quarter of Japan's popula- mestic market in major countries. As 2 France in terms of size (378,000 km ) tion live in this area. The second-larg- far as the passenger service is con- but its population (120 million) is twice est metropolis is Osaka with 2.5 million cerned, the single most unique aspect of that of Britain or France. Steep moun- people living in the city and 16 million the traffic in Japan is the high contribu- tains, including 21 higher than 3,000 within a 50-km radius. Eleven cities in- tion ratio of the railway. The ratio was m, run down the spine of the islands. cluding Tokyo and Osaka have popula- 82% in terms of passenger - km in 1955, Most cities and industries are found in tions over 1 million. and fell below half the original ratio to a belt along the coast. Post-war Japan achieved rapid eco- 35% after nearly 40 years. Neverthe- The steep mountains and rapids pre- nomic growth starting in the 1960s. less, it is still high compared to railways vented early development of road traf- The population and economic activities in the West. The second unique aspect fic. Unlike in the West, there was no centralised in large cities, particularly is the high share of civil aviation. These age of horse-drawn coaches partly due Tokyo, in the process of growth. Resi-

play a far more important role in passen- Figure 1 Travel times from Tokyo ger transport than elsewhere, but their share of domestic freight transport has fallen drastically over the past decades. It plummeted due primarily to the growth of rival modes of transport, energy conver- sion (from domestic coal to imported oil), and the change in the traffic structure ac- companying the country's economic growth (from heavy bulky cargo to high added-value small lightweight cargo). Frequent labour disputes in the 1970s also impaired the reliability of railway transport, which was replaced gradually by mushrooming road transport companies. On the other hand, passenger transport by railway saw a completely different development. The rapid increase in competition between different modes of transport reduced the railway's com- petitiveness to medium-distance travel on trunk lines, commuting, and moving about in urban areas. When the first Shinkansen was completed in 1964, there was public pessimism about railways competing with the rapidly-grow- ing road and air transport. But the "bullet trains" soon proved very competitive and inspired revitalisation of Japanese railways. aspects reflect the natural and social lion km of national and local roads. Ma- One prominent feature of the passen- conditions of the country. jor cities are connected by air via about ger market in Japan is the important Unlike the passenger service, the 90 airports. role played by private railway compa- railway has a very low contribution ra- nies in large cities. Figure 3 shows they tio for freight transport in Japan. The Railways carry the same passenger loads as the ratio is lower than the railways in Eu- The first railway in Japan was built JRs in large cities. For example, central rope. It fell drastically from 53% in in 1872 by the government. Many rail- Tokyo is served by subways operated by terms of tonne-km in 1955 to only 5% ways were built later by private compa- public corporations. Suburban areas today. The second unique aspect is the nies throughout the country. Then, in are served by private railway compa- big percentage of coastal shipping, al- 1906, all the inter-city trunk railways nies along with JR East. Many of their though marine cargo is limited to oil, were nationalised. The ownership was lines are connected directly to subway ore, cement, and other bulky goods. changed after World War II from the systems, serving through runs. The pri- The current transport infrastructure government to a public corporation. vate railways are presently trying hard in Japan consists of 20,000 km of rail- This lasted until 1987 when JNR was (with little government subsidy) to ways (including 1,800 km of split into several private companies. build new tracks or introduce qua- Shinkansen) operated by the six re- The initial construction of railways druple-tracks to increase passenger ca- gional passenger companies (JRs) that owed much to British technologies, in- pacities. once formed the Japanese National cluding the narrow-gauge (1,067mm) The ridership alone does not fully re- Railways (JNR), 600 km of subways in tracks. But the standard gauge flect the importance of the private rail- 9 cities, 2,900 km of railways operated (1,435mm) was preferred for subways way companies in the development of by 15 major private railway companies and private railways in urban areas urban areas. They are also engaged in in large cities, and 3,400 km of railways built later. The Shinkansen runs on a wide variety of activities including operated by about 100 local private rail- standard-gauge tracks. Some conven- housing projects and management of way companies in rural areas (includ- tional narrow-gauge tracks were later department stores and supermarkets ing tracks abandoned by JNR). converted to standard-gauge tracks al- along their railways. In fact, the pri- Japan has 5,500 km of motorways, lowing Shinkansen through trains to vate railway companies are dedicated 500 km of urban motorways, 47,000 km run on them. primarily to regional development of national roads, and a total of 1 mil- As explained above, Japanese railways projects including railway operation.

Figure 2 International comparison of modal split (1990) – Passenger traffic

Sources: Government statistics of each county

The single unique aspect of the motorway construction in Japan is the pooled toll system. The pooled tolls are used to build the national motorway network. Construction of motorways is financed primarily by government loans, and the loans are repaid over a predetermined period (30 years in prin- ciple) using the toll revenues. The national subsidy only represents about 3% of the annual expenditure on motorways, The construction cost of the first motorway completed 30 years ago has already been paid by tolls, and the tolls from that part of the motorway network are being used to expand the network. Some large cities in Japan have their own network of motorways. The users of these urban motorways must pay tolls determined in the same way as the inter-city network. They are fairly high I Tokyo International Airport Courtesy: Kotsu Shimbun and also play some role as a "congestion This is endorsed by the fact that the Japan's network has increased to 5,500 tax". In the case of Tokyo, the largest railway business represents only 50% km over 30 years. The plan calls for drawback of its road system is that loop on average of their total income. For ex- building 14,000 km of motorways in to- motorways are yet to be completed. Ve- ample, a new housing project was com- tal, and approximately 250 km are be- hicles originating outside Tokyo and go- pleted by one of the private railway ing completed each year recently. The ing to places other than Tokyo are often companies in southwestern Tokyo and plan is being executed on a geographi- forced to drive through the city centre is now home to more than 400,000 cal basis so that anyone can reach the for lack of adequate bypasses. people. nearest interchange within 1 hour in all parts of the country. Most large cities Civil aviation Roads are now connected by motorways. When jets were introduced to Japan's Roads in Japan were undeveloped Motorways only represent 0.5% of the skies in the 1960s, civil aviation de- until fairly recently. There were total roads in Japan in length, but their prived the railways of long-distance enough roads in terms of quantity, but contribution ratio is as high as 10% in travellers. One of the busiest domestic quality was very poor due to the natural terms of vehicle-km. air routes in the world today is between and social environments mentioned earlier. A World Bank delegation visit- ing Japan in the mid-1950s about loans for building motorways was often quoted as saying Japan was full of roads-to-be. Two measures were taken to correct the situation: the Fuel Tax introduced in 1954 as a source of funds to improve roads using 5-year rolling plans; and the toll system on motorways to build a nationwide motorway network. These measures were effective, but the overall quality of Japanese roads is still low compared to the West. Congestion is common in large cities and the roads are often vulnerable to natural disas- ters. Environmental issues are also a concern. Motorways are important in competing in the traffic market. Since the first motorway was completed in 1964, I Truck congestion Courtesy: Kotsu Shimbun

Tokyo and Sapporo. However, as faster nity. Consequently, it is unable to meet railway companies. trains are introduced, they are often the demand from foreign airlines. JNR was privatised in 1987 and was preferred by some passengers to air Civil aviation was strictly controlled divided into six passenger railway com- travel. during the post-World War II recon- panies and one freight railway com- Five-year plans were introduced in struction period to protect the industry pany (commonly referred to as JRs). 1967 to improve the airport network. in infant stages. The number of airlines On the occasion of privatisation, ru- Airlines are required to pay landing was limited to three in 1967 and their ral JNR lines operating with deficits fees and the Jet Fuel Tax as sources of route rights were fixed. However, as (3,200 km in total) were abandoned funds for airport improvements. But the aviation market has expanded after before privatisation. At the same the ear-marked funds are insufficient partial deregulation in 1987, they com- time, the number of employees was and small national subsidies, slightly pete with each other on more routes. reduced (from 276,000 to 215,000). larger than the amounts for But airports in major cities are operat- The new JRs were excused the huge motorways, are provided by the coun- ing at full capacity and further deregu- debts that JNR had accumulated. (Of try. More recently, a self-accountability lation is unlikely to allow new entrants. the ¥37.1 trillion deficit, the new JRs system has been introduced when The airline companies are subject to inherited ¥14.5 trillion directly be- building airports in large cities. The price regulations which enables them to longing to the inherited facilities at New Tokyo International Airport produce profits from domestic services their book values, and all other liabili- (Narita) was built and is operated by a and to cross-subsidise part of these ties were handed over to a settlement public corporation under this system. profits to their international opera- company, remaining to fall on taxpay- The Kansai International Airport in tions. Nevertheless, the government ers.) These remedies substantially re- Osaka, scheduled for completion in has taken some steps towards gradual duced the burden on the JRs. 1994, will be run by a stock corporation deregulation. Fortunately, the booming Japanese partly owned by the private sector. To economy after the privatisation had a minimize environmental problems, 3. Investments in railways positive effect in terms of demand. The Japanese airports are under strict regu- single most important effect was the lations in terms of operating hours. The Investment by JRs and other improved morale of both labour and Kansai International Airport will be private railway companies management. Their market-oriented the first airport in Japan operating Investment is creating controversial business efforts are worth attention. around the clock because it is built off- problems in the Japanese railways For example, although they placed ma- shore. The work to build additional from the standpoint of the traffic mar- jor emphasis on rapid trains between runways at Narita has been suspended ket as a whole. The first problem is re- large cities, they also introduced fre- due to conflict with the local commu- lated to the investment policy between quent services between medium-size cities in local areas using a small number of cars per train. This greatly Figure 3 Contribution levels of different modes of passenger transport in Tokyo helped to boost the railways. The JRs have not raised their fares during the past 6 years following privatisation. The other private railways have raised their fares twice in the same period. Nevertheless, the JRs have restricted their investments other than in safety improvements and introduction of new cars. They, in general, are operating under a policy that limits their investments in the infrastructure to such an extent that they are within the range of normal depreciation. It is only natural for the relatively-young, reborn JRs to be cautious about large investment in capital equipment. However, in this regard, one cannot neglect the fact that the continued investment by the former JNR in building quadruple-tracks, especially in the To- kyo area, since the 1960s is proving extremely useful today. The lines in large cities, especially Tokyo, are the largest contributors to the railway companies. The brisk financial situation of the JRs

today owes much to the capacities of access for competition. In other words, Company does not have its own tracks the infrastructure that JNR created in it was designed to facilitate easier fi- and pays fees to operate on the tracks the past so as to be ready for an in- nancing to reduce the risk for railway owned by the JR passenger companies. crease in passengers and to be able to companies and to spread the burdens of For this reason, the interests of the two develop new demands. Ironically, it capital costs over a longer period. At parties could possibly conflict and the was these long-range investments the same time, it also ensures equal freight company may have difficulty in that were criticised as pressing the footing for competition with road trans- getting the necessary access when it former JNR financially. At present, port and civil aviation which already wants to increase services. In addition, new Shinkansen lines are under con- benefit from the separation of infra- since the Shinkansen trains run on struction as national projects. How- structure from operation. standard-gauge tracks, some existing ever, the cost sharing between govern- With the skyrocketing costs of con- narrow-gauge tracks might be aban- ment, local authorities and JRs has struction and purchasing land, new doned when new Shinkansen lines are not yet been finalised. railway infrastructures are now usu- installed in the future. This means the The non-JR private railway compa- ally built by the third sector through freight company's network will be cut to nies in large cities are now investing in joint funding with government, munici- pieces putting the company in a diffi- quadruple-track train operations to re- palities and private sectors and are cult position in competing with road duce congestion and provide more com- then operated by the JRs and other pri- transport. The government is drafting fortable rides for long-distance com- vate railway companies. a new policy as part of its environmen- muters whose numbers are increasing tal, energy, and congestion-prevention constantly. Their recent investments Total adjustment of investment measures, whereby freight transport are more than twice the depreciation on The second problem in railway in- will be shifted from trucks to trains, but average, quite contrary to the JRs' investment is related to the relations with this does not necessarily ensure coordi- vestment policy. In fact, the private the infrastructure of other modes of nation with the construction of new companies quoted the increased capital transport. As discussed earlier, 5-year Shinkansen lines. cost as the main reason for raising fares rolling plans are used for road, airport, Furthermore, government allocation last time. The present rules governing and harbor construction projects, and of investment funds among various railway fares (full-cost pricing regula- they are implemented with earmarked public works—hence among Minis- tions) lack consideration of investment. sources of funds. The railways do not tries—is often criticised as stereotyped have such a continuous plan and only and too fixed, and corrective actions are Separation of infrastructure from have limited and temporary sources of needed. Here again, overall adjustment operation funds. In other words, the railways do is essential and all modes of transport One way of solving the investment not have a system for investment coor- must be given due consideration. The problem of railways is the separation of dinate in any way with the investment lack of the necessary adjustment is due infrastructure from operation. Such in infrastructure by other modes of in part to the organisation of the Japa- separations have been seen in indi- transport. nese government. That is to say, roads vidual cases in the past, but the first Before privatisation, JNR's plans are built and maintained within the ju- systematic separation of infrastructure were the railway plans of Japan; when risdiction of the Ministry of Construc- from operation was the Japan Railway JNR was divided into JRs, the overall tion whereas railways, air traffic, road Construction Public Corporation estab- perspective in planning was lost. In traffic and harbors come under the lished in 1964. It is a group of railway 1991, the Railway Development Fund Ministry of Transport. All are to be con- engineers with a fund procurement was created to integrate all subsidies trolled by another ministry, the Na- function that constructs new railways for railway improvements, but it is a tional Land Agency, but it does not with government loans and then either special public body which only has a have practical authority over the sells or leases them to railway compa- limited role in planning. needed adjustment. I nies on long-term installment plans. One problem resulting from the lack Part of the Shinkansen was built by of integrated planning is related to the this system. In addition, when the networking of freight transport. Since former JNR was divided into the JRs, the privatisation into several JRs, the the Shinkansen Holding Corporation newly-formed Japan Freight Railway was formed and all the Shinkansen lines were handed over to the new corporation which leased sections of the Yataro Fujii Shinkansen lines to the regional JRs. However, the leased sections were later Mr. Fujii graduated from the Faculty of Economics, Keio University in 1959. He is a professor of the sold to the JRs to prepare for listing on Faculty of business and Commerce of Keio University and has served as Faculty Dean. the Tokyo Stock Exchange. A renowned scholar of transportation economics and public utility projects, Mr. Fujii is playing an The separation of infrastructure from important role in drafting policies for the Japanese government as a specialist member of the Coun- operation in Japan was designed to pro- cil for Transport Policy and the Council for Civil Aviation (Ministry of Transport), the Road Council mote investment, not to provide open (Ministry of Construction) and of the Electric Utility Industry Council (Ministry of International Trade and Industry) and the Council for Statistics (Management and Coordination Agency).