Managing Unprofitable Passenger Rail Operations in Japan - Lessons from the Experience in Sweden -

Abstract

Japan was the first country to implement a ground-breaking reform in the railway sector in 1987 when it broke up the Japanese National Railways (JNR) into six vertically integrated railway companies. Mainly because of the recent population decrease in local areas, many local rail lines face severe declines in passenger numbers. JR Hokkaido, where railway management has been particularly difficult, announced in November 2016 that about 1200 km of lines cannot be sustained only through the revenues from the businesses and the interest of the Management Stabilization Funds. When it comes to upholding unprofitable public transport, Sweden implemented a radical reform in 1988 by means of vertical separation and decentralisation and then gradually introduced competitive tendering to procure unprofitable passenger rail services. In order to tackle current challenges in the Japanese railway sector, it could be beneficial to draw lessons from the experience in Sweden. As the railways provide several different benefits to the society, it seems rational that those beneficiaries provide certain finances accordingly to sustain the unprofitable railway operations. Also, in order to introduce a system to provide the subsidy, it seems necessary to make each account of the railway company transparent.