Conflict between commercialism and public transport policy purpose: unique feature of policy dispute in Japan

Abstract

In Japan, a liberalization policy was implemented over railways and buses in 2000 and 2002 respectively. Under that policy, quantity regulations for railways and buses were abolished, withdrawal regulations were eased, although fare regulations were maintained. However, even after this liberalization, institutional design remains considerably different between Japan and EU countries. An argument for competitive tendering is missing in Japan as 87.5% of rail passenger transport in the three major metropolitan areas is provided by profitable private railway companies that enjoy high social evaluation in respect to managerial efficiency, quality of transport services, and the adequacy of are levels and systems. The major private railway companies in the big cities have built their present status by 1) being blessed with favourable transport markets, 2) developing commercialism in their investment activities, 3) pursing efficient management, and 4) engaging in business diversification. The Japan Railways group companies (former Japanese National Railways) and Tokyo Metro co., which is in the midst of privatization, are now copying the style of corporate management of major private railway companies. The problem for public transport policy in Japan is its inability to cover some "market failure" issues occurring in big cities and rural areas under the existing institutional design. After the liberalization, new trials appeared where third sector companies were founded to retain unprofitable railway lines in local cities. New bus transport services were also introduced under a newly established cooperative relationship between local authorities and residents and so on. Paradoxically, as a result of liberalization, a change began to appear in the common sense of Japanese people that commercialism is rather natural to the management of public transport. Especially in metropolitan areas, many market failures issues are left behind such as the incompatibility of a continued commercialism with providing comfortable commutation services. In Japan, private railways have, so far, performed their transport operations without governmental subsidy, except for some unprofitable services in local cities or rural areas. Although rail commutation transport in big cities is no exception, it has become very difficult for private railways to engage in large-scale investment activities to expand their capacity which is indispensable to realize comfortable commutation services. Since private railway companies may not receive public assistance of the government, vertical separation of ownership (not operation) is more and more used in order to allow for public spending in the construction of new commutation railway lines (infrastructure).