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Restructuring of Japan National Railways

Aims, Schemes & Achievements

PLANNING POLICY & MANAGEMENT OF TRANSPORT AND URBAN

INFRASTRUCTURE

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MAQSOOD Rizwan (46854)QURESHI Obaid Hassan (46859)HUSSAIN Raja Rizwan (46850)

Department of Civil EngineeringThe University of Tokyo

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Railway Transport in Japan

Public Railways – 25% of Passenger Traffic and 5% of Freight Traffic

About 100 Private Integrated Companies (10%

of Passenger Traffic)

1981 – Beginning of Working out Plan of Railway Restructuring

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History of Japan National Railway – JNR (1)

Prior to World War-II the railways in Japan were operated as part of Ministry of Railways.

In 1949, JNR was organized as a “Public Corporation” to provide more autonomy to JNR’s management. However, key decisions including decisions regarding fares, investment planning and wages remained outside the control of management.

Overtime, JNR became highly susceptable to political influence.

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History of Japan National Railway – JNR (2)

The Railway became to lose market share to competing private railways and to the other modes as early as the late 1950s.

In 1964, JNR had its first operating loss, a loss which continued to increase in subsequent years.

By 1985, JNR was generating losses at the rate of $20 Billion annually.

By 1987, accumulated debt was more than $300 Billion.

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History of Japan National Railway – JNR (3)

Between 1969 and 1980, government attempted four times to catalyze the internal re-organization and economic reforms of JNR, but in vain.

In 1981, a high level independent commission was appointed by government to address country’s fiscal crises, which in 1982 recommended that JNR be reconstructed and that a second commission be organized to complete the effort.

Second commission started work in 1983.

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History of Japan National Railway – JNR (4)

After four years of planning and consensus building, in April 1987, JNR was dissolved as a Public Corporation and replaced with seven Joint Stock companies – the JRs.

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Aims of Restructuring ofPublic Railways (1)

Reduction of Giant and Growing Debt–Transformation of the Railway from a Major Source of Fiscal Deficits to a Generator of Fiscal Contribution

Downsizing of Excessive Staff

Minimization of Conflict with Trade Unions–

Deterioration of Quality of Services

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Aims of Restructuring ofPublic Railways (2)

To Over-come Bureaucratic, Non-flexible Management Structure – Weak Response to Customers Needs

Maintain the Value of JNR’s Assets and to Continue to Support Advanced Transport Technology and the Corresponding High Quality Services

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Schemes of Restructuring (1)

In 1987, Six (6) Vertically Integrated Passenger Companies (JRs) were created, each with its own Market

- JR Hokkaido

- JR East

- JR Central

- JR West

- JR Shikoku

- JR Kyushu

One National Freight Company (JR Freight)

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Schemes of Restructuring (2)

A Public Corporation was created which holds all the shares of JRs, manages and carries out program to facilitate re-employment of dismissed railway workers

Management Structure was made more flexible

Staff was reduced

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Achievements of Restructuring

Three Passenger Companies have become profitable; about 70 percent of their stocks are sold by the state

Other three passenger companies are still loss making but, as a whole railways are profitable

Labour Productivity Increased 150 percent

Better Service Quality

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Comments (1)

The governmental interference has been lighter after privatization as far as approval for fare and fare regulations are concerned resulting in a rising gradient. This should be checked in public interests.

As for investment and financing, government intervention has lessened since privatization. In the future with full privatization, JRs will enjoy more freedom.

So far, no specific further restructuring seems to be required in the case of regional passenger companies but freight rail services might be reorganized because of recent concerns about competition with trucks.

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Comments (2)

After the restructuring, involvement of politicians, government officials and unions has reduced thus resulting in better performance.

Number of strikes between the labour unions and managing committees have reduced.

Due to the Shortening of hierarchy in JR, decision making time has reduced thus providing an over all efficiency.

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Comments (3)

One important and distinguishing effect of the privatization of the JNR is that competition has worked actively in many ways.

The subway system operated by the local government has not been affected by the privatization of JNR since its network does not significantly overlap with JR lines.

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Concluding Remarks

The privatization process has indeed proved to be a constructive force in mobilizing the stagnant non-profit JNR into a profitable JR, but the thing which should be borne in mind is that privatization is not the eternal solution to all the problems faced by the government. Rather various policies should be laid out providing incentives to the organizations and creating competitive environment to promote actual and potential competition in the market and even with in the organization itself by using incentive regulations.

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