the backdrop to privatisation in japanthe backdrop to privatisation in japan — successful...

2 Japan Railway & Transport Review / June 1994

SPECIAL FEATURE – RESTRUCTURING RAILWAYS

Copyright © 1994 EJRCF. All rights reserved.

The Backdrop to Privatisation in Japan— Successful "Surgical Operation" on Japanese Railways

1.IntroductionJapan has 158 railway companies,

excluding monorails, new transit sys-tems and cable railways. Eighteen ofthese companies are freight railway op-erators.

Japanese railways are strikingly dif-ferent from their American and Euro-pean counterparts in some areas. First,in Japan, the focus of railway transportis on passenger transport rather thanfreight. Second, railways have cap-tured a relatively high share of passen-ger transport. Although railway sharein terms of passenger-km of total pas-senger transport dropped in Japan byhalf from 45% in 1965 to 21% in 1990,the figure is still by far higher than the6% in the United Kingdom, 6% informer West Germany, 10% in Franceand 1% in the USA (Table 1).

Although Japan at first lagged be-

hind the USA and Europe in the field ofautomobile transport, its rapid switchto the car starting in the late 1960s leadto the abandonment of local railwayroutes totalling 340 kilometers from1970 to 1979. However, private rail-ways that have maintained sound op-erations continue to be a major meansof transport for commuters in the threemajor metropolitan areas centeredaround Tokyo, Nagoya and Osaka.Looking at transportation between cit-ies, six Japanese Railways (JR) Grouppassenger railways which were set upi n 1 9 8 7 b y t h e d i v i s i o n a n dprivatisation of the Japanese NationalRailways (JNR) play an important role,competing with other means of trans-port like airlines and bus services con-necting cities.

The greater part of Japan is moun-tainous, with some flat land along thePacific coast where many densely-popu-

lated cities are concentrated to form thePacific-coast megalopolis. This corridoris suitable for railway transport asproved by the Tokaido ShinkansenSuperexpress, and the densely-popu-lated Tokyo, Nagoya and Osaka dis-tricts are big markets for railways. TheJapanese transport market actuallyfavours railways.

However, JNR plunged into financialdifficulties from the 1970s through the1980s and was on the verge of bank-ruptcy. In 1987, the Japanese govern-ment divided the company into sevenprivate companies to reorganize thecountry's largest single railway net-work. How did JNR, which had playedan important role in transport betweenand inside large cities recover from thedifficulties? It was reborn and regainedpublic confidence as seven companies ofthe Japanese Railways (JR) Group.This article explains the background

Yukihide Okano

Figure 1 Financial Performance of the JNR

Japan Railway & Transport Review / June 1994 3Copyright © 1994 EJRCF. All rights reserved.

and recovery and illustrates the rail-way management lessons learned fromthe reform of the national railways.

2. Recovery through divisionand privatisation

JNR maintained a surplus from1957 until it went into the red at thesettlement of accounts in fiscal 1964.After that, the company continued op-erating in the red, and its accumu-lated loss and debts caused by the lossexpanded rapidly (Fig. 1). Duringthis period, the Japanese governmentdid not make up the loss but sus-pended part of JNR's long-term debtin 1976 and 1980 as part of a financialrehabilitation project. These moveshad no effect at all, and the rehabili-tation ended in failure.

JNR's long-term debt hit ¥ 23,561 bil-

lion at the end of fiscal 1985. Underpressure to control and eliminate the fi-nancial burden generated by JNR, thegovernment decided to restructure thenational railways.

Some scholars criticized the govern-ment, insisting that the huge JNR accu-mulated debt would not have been in-curred if the government had written itevery 2 or 3 years like the British andGerman governments. However, from adifferent point of view, this gigantic vis-ible debt underscored the need to re-form JNR. If the government had fre-quently written off the accumulateddebt, the Japanese would have neverthought it necessary to reform thestate-owned railways.

The success of private railways,which was limited to large metropoli-tan areas, also pointed the way to re-form JNR. Private railways operating

in densely-populated metropolitan ar-eas ran at a surplus and met the trans-port demand such areas. In this re-gard, they served as the big stimulusfor reform.

The purpose of the reforms was to en-able JNR to operate independentlywithout a loss or relying on governmentsubsidies. In 1982, the Second Ad HocCommission on Administrative Reform,an advisory body to the prime minister,submitted a report urging the govern-ment to liquidate JNR's accumulateddebt and reorganise and privatise JNR.Based on the report recommendation,Supervisory Committee for JNR Recon-struction was set up in June 1983 todiscuss and draft a plan for division andprivatisation of JNR. The committeesubmitted a final report in July1985 to the prime minister entitled"A View on JNR's Reform—Paving

Table 1 Trends in Transport Volume by Transport Facilities in Selected Countries (Passenger Transport)

(Unit: 100 million passenger-km)

Sources: Railway Statistics '93 (Japan Transport Economics Research Centre)

Notes: 1. Figures for Japan are for the fiscal year (April to March), while figures for other countries are for the calendar year (January to December).

2. Figures for airlines contain both regular and irregular services. Figures for passenger ships after 1975 also include irregular services.

3. Railways for the UK include national railways, subways in London and other railways.

4. Passenger vehicles for West Germany represent private passenger cars.

5. Figures in parentheses represent shares.

6. Figures are rounded to the nearest whole number, meaning that the sum total is not always equal to the figure in the Total column.




the Way for Railways in the Fu-ture".

The basic premise of the Ad HocCommission's recommendation was toapply measures similar to those used inrelief of private companies falling intofinancial trouble with debts under theCorporate Reorganisation Law*1. Thisrecommendation created a nationalcontroversy. At first many people werestrongly opposed to privatisation ofJNR, but later, a large majorityrecognised that JNR could not preventpolitical intervention and achieve inde-pendent and efficient management if itcontinued as a state-owned corporation.JNR's privatisation was seen as un-avoidable by the time the SupervisoryCommittee for JNR Reconstruction wasestablished.

Subsequently, the focus of discussionshifted from whether JNR should be di-vided or not, and if so, how to divide it,how to cut the number of employees,a n d a c t u a l m e a s u r e s f o r i t sreorganisation. The people most op-posed to division of JNR were the

labour unions and residents in rural ar-eas. The labour unions were afraid oflosing their power because their na-tional organisation would be cut intopieces by division of JNR; local resi-dents worried that unprofitable locallines supported by government subsidymight be abolished.

Two methods of dividing JNR wereexamined: splitting it into a passengertransport company and a freighttransport company, or dividing it intoseveral local railway companies. In ei-ther case, a sharp reduction in employ-ees was seen as unavoidable. The gov-ernment asked central and local gov-ernmental agencies and large compa-nies to accept JNR employees whowould lose their jobs, and transferredemployees who would not agree tomove to other companies to the Japa-nese National Railway SettlementCorporation, a liquidation companyset up to take over the JNR long-termdebt and assets needed for railway op-erations. As a result, the number ofJNR employees dropped from 280,000

at the beginning of fiscal 1985 to200,000.

Various proposals were made con-cerning division of JNR's passengertransport business, ranging from divi-sion into two or three companies to es-tablishment of many district local rail-way companies. Finally, the govern-ment adopted a plan to divide it into sixregional companies by splitting thecountry into six districts; three districtsin Honshu (the main island), andHokkaido, Shikoku and Kyushu.

JNR's nationwide freight transportbusiness which was of questionableprofitability was taken over by one newfreight transport company called JapanFreight Railway Co. which was sup-posed to pay the six JR passengertransport companies costs for usingtracks other than tracks exclusively forfreight use.

It was also decided that a shinkansenHolding Corporation would be set up tomanage all the shinkansen lines includ-ing the most profitable TokaidoShinkansen and other newer lines.

Table 2 Management Resources of JR Group Companies

Note: Figures are rounded to the nearest whole number, meaning that the sum total is not always equal to the figure in the Total column.

Management Resources of Japan Freight Railway


This holding corporation was supposedto collect rental fees for Shinkansentracks from JR companies operatingthese lines, based on their sales, tomainta in pro f i tab i l i ty o f theShinkansen.

The criterion for dividing JNR's pas-senger transport business was ensur-ing that each JR passenger transportcompany could start operations with abalance between income and outflow.To meet this criterion, both profitableand unprofitable lines should have beenallocated to each JR company. As a re-sult, the allocation of service area toeach company was not based on naturalgeographical districts*2. Research wasconducted on trips made using JNR'srailroad network, and the service areaswere divided to ensure that a high per-centage of trips would be completedwithin one service area. Thus, a plan toestablish six service areas was adopted.

Since differences in earnings betweenthe six companies could be expected towiden, part of JNR's long-term debtwas assigned to the three companies onHonshu expected to generate sufficientearnings, while funds for managementstability were provided for the remain-ing three companies based in the otherthree islands. These companies wereexpected to show losses that could notbe made up by earnings. This move wasdesigned to improve the managementefficiency of the companies expected toshow losses and stimulate their incen-tives. In this regard, it was better thanthe previous measures by which thegovernment covered the losses after thecompanies actually fell into the red.

In April 1987, JNR made a freshstart as six JR passenger railways andone freight railway (Table 2). Initially,the mass media was pessimistic aboutthe JR prospects. The majority ofscholars specializing in transport eco-n o m i c s w e r e o p p o s e d t o t h e

government's plan to divide andprivatise JNR, and only a few agreedwith it. However, the JRs' subsequentbusiness results have been much bet-ter than expected.

Note *1 When the JNR Fare Revision Bill was

discussed in the Diet in 1972, I at-

tended a meeting of the Standing Com-

mittee on Transportation, House of

Representatives as an expert witness

and emphasized that JNR should be

reconstructed as soon as possible by

applying the ideas in the Corporate

Reorganisation Law.

Note *2 In the United Kingdom, about 120 pri-

vate railways were reorganized into four

groups in a similar manner in 1920.

3. Success of JNR's reformsI predicted that railway operations in

Japan would change drastically as a re-sult of reform of JNR, but my opinionwas criticized by those who believedJNR's management system based ongovernment support would neverchange. However, the JR's business re-s u l t s a f t e r t h e d i v i s i o n a n dprivatisation have exceeded even myexpectations.

Initially the Supervision Committeefor JNR Reconstruction made very con-servative estimates of the JR's businessresults after the reform. Table 3 showsthe comparisons between estimatedtransport volume and earnings and ac-tual results of the transport divisions ofthe six JRs. The committee's modestexpectations can be clearly seen. It esti-mated that transport volume by each ofthe six JRs would remain flat or dropslightly and that fares would have to beraised by a few percent annually after1987 to guarantee earnings. However,it should be noted that contrary to theestimate, actual transport volume ex-panded. Annual average growth of

Table 3 Estimated and Actual Results in Transport Volume and Operating

Revenue by Six JR Passenger Transport Companies

(Unit: Transport volume in 100 million passenger-km, passenger revenue in

¥100 million)

Table 4 Trends in Business Results of Seven JR Companies (¥100 million)

Source: Transport, Vol. 42, No. 10, October 1993, Ministry of Transport.

Figures for fiscal 1992 were added by the author.




transport volume by JR increasedsharply from 0.6% during the 5 yearsbefore privatisation from 1982 to 1986to 4.5% during the 5 years after theprivatisation from 1987 to 1991.

What deserves special mention isthat the JRs broke the record of 215.6billion passenger-km, set in 1974 byJ N R , o n l y 2 y e a r s a f t e r t h eprivatisation. The business boom in Ja-pan from the late 1980s through theearly 1990s certainly contributed to in-creased transport demand, but itshould also be noted that JR madegreat efforts to encourage use of railservices. The JR reconstruction wasideal, because the expansion in trans-port volume allowed increased earningswithout raising fares.

The volume of freight carried by Ja-pan Freight Railway Co. also increased.Freight transport fell from 30 billiontonne-km to 20 billion tonne-km duringthe 5 years from 1982 to 1986, but in-creased by an average of 6.1% annuallyfrom 20 billion tonne-km to 26.7 billiontonne-km during the 5 years after theprivatisation from 1987 to 1991. No-one expected this recovery in freight

transport, although the business boomdid contribute.

The increase in transport volumehelped improve the JRs' profits andearnings. Combined profits and earn-ings for the six JR passenger transportoperators and Japan Freight Railwayare shown in Table 4. Operating profitexpanded steadily with an increase inbusiness income. Pretax profits in fis-cal 1991 and 1992 and net income aftertax in fiscal 1992 dropped, despite anincrease in operating profit. This situa-tion was the result of an increase in in-terest payments by three JR compa-nies: East Japan Railway Co., CentralJapan Railway Co. and West JapanRailway Co., because their purchase ofthe Tohoku, Joetsu, Tokai and SanyoShinkansen tracks, which they hadrented from the Shinkansen HoldingCorporation, was made by borrowing *3.

An outline of the settlement of ac-counts by the seven JRs is shown inTable 5. As can be seen in the table,Hokkaido Railway Co., Shikoku Rail-way Co. and Kyushu Railway Co. man-aged to record profits in pretax profitand loss, because their operating losses

were covered by the management sta-bility fund.

Note *3 The Shinkansen tracks were trans-

ferred to the three JRs at a replace-

ment cost of ¥ 9.177 trillion calculated

at the time of the transfer in October

1991.

4.Public stock offeringJR stocks were held by the govern-

ment (JNR Settlement Corporation)when the JNR was privatised andreorganised in April 1987; the govern-ment initially planned to go public andlist the JRs on the Tokyo Stock Ex-change (TSE) in 1991 when they wereexpected to satisfy the TSE's require-ments for listing. However, the planwas not carried out as scheduled.

The first obstacle was the slump instock market. Since the Tokyo stockmarket began falling from its peak atthe end of 1989 when it recorded anew high, and continued to be slug-gish in 1991 and 1992, introduction ofa large number of JR stocks mighthave had a bad influence on the mar-

Table 5 Settlement of JR Accounts

Settlement of JR Accounts in FY91 and FY92 (¥100 million)

(Note) Any fractional sum of less than ¥100 million was discarded.


ket.The second obstacle was how to

handle the shinkansen tracks held bythe shinkansen Holding Corporationand leased to three JRs. Central JapanRailway Co. which depended heavily onearnings from the Tokaido Shinkansenwas facing problems caused by theshinkansen lease system. Under thissystem, the company could not keep in-ternal reserves, and its nominal profitkept increasing because depreciationcosts could not be included in expendi-ture. In addition, since the assets andliabilities of JR East, JR Central, andJR West might have been greatly influ-enced by the treatment of theshinkansen, each of the three compa-nies bought the Shinkansen operatingin its service area before offering theirstock for public subscription.

JR East's 2 million stocks (half of itsissued stocks) were eventually sold andlisted on the TSE in October 1993.Stocks of JR Central and JR West willbe listed soon. The privatising processwill be completed in name and realitywhen all JR stocks held by the govern-ment are sold.

5.Why did JNR's reformssucceed?

As mentioned in above, the condi-tions in the Japanese transport marketwere far from disadvantageous to rail-ways. Traditionally, Japanese trustand make full use of railway transportservices. As shown in Table 2, the vol-ume of passenger transport by Japa-nese railways dramatically outstripsthat of European railways—Japaneserailways did not lose their customers.JNR fell into difficulties because itfailed to respond to the industrial struc-ture after World War II, changes in thelocation of industry, concentration ofpopulation in large cities, migration ofpopulation between districts as shownby the expansion of sparsely-populatedareas, changes in the transport marketthrough improvement of roads and theshift to the automobile.

However, it is unfair to place all theblame on JNR's management. In areasthat are rapidly losing population,railways had lost their relative advan-tage as a means of transportation for along time. The JNR management rec-

ognized this, but was not allowed toabandon unprofitable lines for politicalreasons. In addition, the governmentcompleted construction of railways thatwere clearly unprofitable and forcedJNR to operate them. Increased trainfares were not allowed for fear of politi-cal fallout.

Thus, JNR could not avoid govern-ment intervention in its managementbecause it was a state-owned company.While political intervention restrictedJNR's decision making, the JNR man-agement became blase about its mo-nopoly of the Japanese transport mar-ket and came to take a narrow outlook.It did not respond to the more-competi-tive market by working out new man-agement strategies, but instead tried tosecure JNR's comparative advantage inthe market by using government regu-lations, taxation and subsidy to controlthe growth of competitive means oftransport.

This attitude by the JNR manage-ment was partly unavoidable becausedual regulations on monopolies andpublic corporations were imposed onJNR, and the management had virtu-ally no autonomy. In addition, since thegovernment had the power to appointthe JNR president, it was useless to ex-pect the JNR management to take ag-gressive measures to break the fettersof the monopoly regulations and workout new management strategies.

In 1971, the Council for TransportPolicy decided on a co-ordinated trans-port scheme aimed at restoring thecompetitiveness of the JNR freighttransport business which was the maincause of the deficit. The major pillars ofthe scheme were introduction of aweight tax for trucks and massive in-vestment in modernisation of freighttransport. However, these measureshad no effect, and payment of the inter-est on loans for investment was left be-hind.

In November 1975, the National Rail-way Workers' Union went on strike for8 days over the right to strike—thelongest strike in its history. Contrary toinitial expectations, the 8-day freighttransport strike did not disrupt indus-trial activity nor everyday life at all.This shocked the JNR managementand union but made people doubt theimportance of JNR and take a more

critical stance on JNR.It was not that no-one in JNR was

critical of the present state of JNR nortried to improve it, and the JNR staffwere competent. However, in a bureau-cratic organisation where conservatismreigned, the minority opinion never be-came influential. Although manage-ment and cost-reduction policies aimedat increasing income were proposed,the conventionalism inside JNR pre-vented them from being achieved.

The reorganisation gave the JRs anopportunity to exert potential manage-ment skills through external pressure.It allowed the JR group of companies todo what they wanted do previously butcould not within the framework of JNR.Such revitalisation was the most impor-tant key to the reform of JNR.

Some people thought it natural thatthe reforms have succeeded because ofthe government's careful measuressuch as abandonment of unprofitablelocal lines before privatisation, transferof JNR's long-term debt to the JNRSettlement Corporation and a reduc-tion in excess labour. However, thesemeasures were not sufficient conditionsfor the success in the reforms but wereonly necessary conditions. Otherwise,so many people would not have beenconcerned about the future of the JRsbefore the privatisation.

There is no doubt that the govern-ment took the measures to ensure thatthe JRs would go into the black in thefirst year, but it should be admittedf r a n k l y t h a t t h e c o r p o r a t erevitalisation, backed by the businessboom at the time, helped the JRs con-tinue to boost the transport volume an-nually after the second year and keepthe balance in the black without thefare increase scheduled by the govern-ment.

6.Problems to be solvedSix years have passed since the

privatisation, but some problems stillremain to be solved to complete the re-forms.

The first problem is how to settle thelong-term debt that was transferred tothe JNR Settlement Corporation. Thelong-term debt totals ¥25.6 trillion, con-sisting of ¥16.4 trillion of JNR long-term debt, the Japan Railway Con-




struction Public Corporation's debtfrom the construction of the SeikanTunnel and the Honshu-ShikokuBridge and pensions and other futureexpenses. It was decided that part ofthe huge debt would be settled by sell-ing JNR real estate such as land andbuildings transferred to the JNRSettlement Corporation and issuingstocks for new JR group passengertransport and freight transport com-panies, with the remaining debt shoul-dered by taxpayers.

JNR Settlement Corporation ex-pected to earn about ¥300 billionthrough sales of land in fiscal 1987, thefirst year after the JNR privatisation.However, since Japan was on the crestof the so-called bubble economy, the

contract price at the first open bid forthe land was unexpectedly high andsale of JNR real estate by open biddingwas criticised for boosting land prices.The corporation was forced to refrainfrom offering land by bids and had tosell the land to local governments forpublic purposes at more "reasonable"prices.

As a result, the income earned by thecorporation through land sales in fiscal1987 was only ¥132.9 billion, which didnot relieve the burden of interest pay-ments and resulted in increased bor-rowing. The price of real estate shouldbe determined by open bid—if the priceis controlled to prevent stimulating theprice of nearby land, the one who ben-efits most is the buyer.

However, the government adoptedthis misguided approach and orderedthe corporation to temporarily stopselling land and control the price. Thegovernment's order delayed the dis-posal of the land and brought downthe selling price. When the bubbleeconomy collapsed, a drop in demandfor land and a sharp fall in prices fur-ther delayed settlement of the debt.Helped along by the government deci-sion to delay sale of the JR stocks in re-sponse to a slowdown in the stock mar-ket, the long-term debt shouldered bythe corporation is actually increasing,contrary to the initial plan. The trendsin the long-term debts held by JRs,Railway Development Fund (formerShinkansen Holding Corporation) andJNR Settlement Corporation is shownin Table 6.

The JRs' long-term debt increased by¥8.9 trillion at the beginning of fiscal1993 due to the purchase of theShinkansen tracks, but the long-termdebt they inherited from JNR droppedby ¥1.3 trillion during the 6 years fromfiscal 1987 when the JRs were set up.

� The 20-ha former Shiodome Freight Yard in central Tokyo awaiting RedevelopmentCourtesy: Japanese National Railways Settlement Corporation

Table 6 Trends in JNR Long-Term Debt


Yukihide Okano

Professor Okano was born in Tokyo in 1929. He read economics at the University of Tokyo, and later

studied at the Post Graduate School of Chicago University. In 1966, he became associate professor

of transport economics at the University of Tokyo, and was promoted to professor 10 years later. He

retired from the University of Tokyo and moved to Soka University in Tokyo in 1990. He is currently

President of the Japan Society of Transportation Economics. As one of the most respected scholars

in transport studies and public economics, he has written many books and plays an important role in

various advisory bodies to the government.

However, both the JRs and the govern-ment still face the big problem of how tosettle the remaining long-term debtwhich totals ¥36 trillion.

The second problem is the futuremanagement of Hokkaido Railway,Shikoku Railway, Kyushu Railway andJapan Freight Railway. As mentionedabove, it was decided that the operatinglosses for these three JRs would be cov-ered by income earned by the manage-ment stability fund provided for them.This relief measure has worked wellfor several years since their establish-ment, but sufficient income to covertheir operating losses may not beearned in the future, because the offi-cial discount rate has been reducedseveral times since 1992, and marketinterest rates are declining. The com-panies are likely to have current bal-ance deficits if their operating lossesincrease with a drop in transport de-mand in a prolonged recession.

On the other hand, Japan FreightRailway faces problems in generatingincome, because there is severe compe-tition in the freight transport market,and demand for freight railway islargely influenced by business condi-tions. In addition, it is getting harder tooperate freight trains due to the lack oftrack capacity caused by an increase inshort-distance passenger train servicesbetween cities by the JRs. Solving theseproblems will be a major challenge forJapan Freight Railway.

The third problem lies in the con-struction of the planned Shinkansenlines. People in local areas stronglywant to have Shinkansen lines. How-ever, since huge construction expensesare incurred, and earnings of existinglocal railways drop after completion ofShinkansen, the JRs are not enthusias-tic about construction. Shinkansen willnot yield profits but will increase theburdens for the JRs, although the cen-tral and local governments will bear aconsiderable amount of the cost ofShinkansen construction. Political in-terference in the management of theJRs must not be tolerated again, be-cause it was the major cause of the dete-rioration of the JNR management. TheJRs are no longer a state-owned rail-way but are a group of private compa-nies. Those who understand this leastmay be politicians.

The fourth problem is labour-man-agement relations. The labour unionscooperated with the JNR managementto promote the reforms. Will a labour-management dispute and a dispute be-tween the labour unions break outagain after the reforms have succeededand JR companies have proved them-selves to be capable of operating inde-pendently? The labour unions will notact as they did before the privatisation,since, unlike public corporations, pri-vate companies can go bankrupt. TheJRs will lose the users they won back iftheir transport services deteriorate dueto a labour-management dispute.

7.ConclusionThe division and privatisation of JNR

h a s b e e n s u c c e s s f u l . T o d a y ,privatisation of railways is beingplanned and promoted worldwide, butwhen the JNR reforms were discussedin Japan, reorganisation of a state-owned railway company into privatecompanies was viewed as a big experi-ment; there had been cases ofnationalisation of private railways fall-ing into financial difficulties.

In parallel with the privatisation ofJNR, some measures were taken to re-construct the management of the rail-way company, such as abandonment ofunprofitable local lines, release of JNRfrom its enormous long-term debt, andreduction of excess labour by 80,000.Although the mass media was pessi-mistic about the future of the JRs, pre-dicting that the reforms would not helprestructure the railway company, theJRs have won back customers, in-creased transport volume and main-tained sound management withoutraising fares for 6 years sinceprivatisation.

Some people insisted that the JRs'success was a foregone conclusion dueto prudent government measures.

However, such opinions ignore thegreatest merit that privatisation revi-talized the JRs by allowing them tomake full use of their management po-tential resources that existed but couldnot be utilized when JNR was a publiccorporation.

The JNR reforms have been an un-expected success, but they have notyet been completed. The JRs have bothpositive and negative problems tohandle. The former includes the list-ing of the remaining stocks of JR Eastand the stocks of JR Central and JRWest. The latter includes the settle-ment of the long-term debt held by theJNR Settlement Corporation. In addi-tion, the three JRs in Hokkaido,Shikoku and Kyushu and JapanFreight Railway have some concernsfor their future management.

Furthermore, another challenge forall the JRs is improving the profitabil-ity of their businesses other than rail-way transport. Each company mustsolve these problems steadily one-by-one.

The government must handle themanagement of 1,804 km of railwaystaken over by 39 private or third-sectorcompanies among 83 unprofitable linestotalling 3,157 km separated from theJNR when it was privatised. Some haveregistered better business results thanthey did when they were operated bythe JNR, but most continue to operatein the red. Handling these railwayswi l l be a ma jor f o cus o f thegovernment's transportation policy inthe near future. �

the backdrop to privatisation in japanthe backdrop to privatisation in japan — successful...

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