Chapter 2. Problems With Changes of International Society

　 　 As explained in Chapter l, the transportation industry has been playing an important role in the development of international exchange for Japan. In this chapter, we will analyze various problems which need to be overcome for smooth development of international exchange.

Section 1. Problems relating to international exchange of people

1. Problems relating to international airports
　 　 Since Japan is an island country located at the eastern edge of Asia continent, its international exchange of people largely depends on air transportation. As explained in Chapter 1, international exchange of people has been rapidly growing for which development of air transportation should not be disregarded. [Fig. 38]
　 　 It is predicted that international exchanges of Japanese will be more active in the future along with development of international mutual relations and with the strengthened interest of people toward leisure time amusements. Under such circumstances, improvement of the international aviation network including international physical distribution and accelerated construction or improvement of international airports as the base of the network so as to provide better convenience for users.
　 　 In Japan, the international aviation network has been formed principally in international airports located in the two metropolitan areas of Tokyo and Osaka. The limitation of capacity at the New Tokyo International Airport (Narita) has gradually become a more serious problem with the increase of demand of passenger transport. Also in Osaka International Airport (Itami), the number of aircraft movements is restricted in consideration of environmental problems and the capacity of international aviation has been more restrained.
　 　 To cope with such problems, the Ministry of Transport has been endeavoring to put priority on the execution of the 6th Five-year Airport Development Plan (1991-1995 FY.) for construction of a new runway at Narita Airport and on earlier opening of the Kansai International Airport. Furthermore, the Ministry has been trying to attain construction/improvement of local hub airports and to accelerate internationalization of other local airports in order to cope with the increase of demand of international air transport in local areas. [Fig. 39]
　 　 As the result of such efforts, international scheduled flight operation landing at and departing from local hub airports and other local airports has been greatly increasing. At the same time, the Kansai International Airport was opened in Sept. 1994 which should contributes to the improvement of the international aviation network of Kansai and other areas. However, there are problems as follows yet to be solved for the smooth handling of the increasing amount of international exchange of people in the future.
(1) Provision of enough capacity of facilities to meet the demand of international aviation
　 　 About two-thirds of international flight passengers Japan are using Narita Airport which is functioning not only as the airport for Metropolitan area but also the main entrepot of Japan. However, the number of aircraft movements is already exceeding 120 thousand per annum and the current facility has almost reached its limit. Hence it is not able to respond to the requirement of new entries of overseas airlines nor to accept an increase of number of flights. Moreover, with future increase of the demand of international aviation, it will be more difficult to improve the international aviation network responding to the needs of passengers. So it is urgently needed to take measures promptly to improve such a situation.
　 　 The Kansai International Airport, opened in September 1994, is expected to contribute to relieve the limitation of capacity of international flights particularly in the Kansai area. However, the demand of international aviation in Asia is rapidly increasing both in transport between Asia (including Japan) and other areas, and in transport between countries/areas in Asia, reflecting the remarkable growth of economy in Asia, and the demand is expected to continue to increase hereafter. [Fig. 40,Fig. 41]
　 　 Accordingly, it is expected that the demand of Japanese international aviation will continue to increase in the middle term, and it is hence feared that airport capacity in Japan will not be sufficient in the future to respond to such demand, if no countermeasure is taken.
　 　 It is an essential condition for the development of economy and improvement of people's life in Japan to assure smooth international transportation of passengers and cargo adequately in accordance with the increasing demand of international aviation in Japan under the circumstances of the fast development of internationalization and making international interchange much more important. It is of concern that if Japan fails to assure sufficient capacity of international airports to satisfy the demand, it may become a bottle-neck impeding the future development of Japan. Hence it is necessary to promote steadily the construction of basic equipments and to provide enough airport capacity in Japan to respond to the predicted size of demand adequately.
　 　 In neighborhood Asian countries/areas, projects of construction or improvement of large scale international airports have already been progressively underway as a measure to prevent the impediment factor for the development of their own economies or in expectation that this will have the effect of triggering the development of their economies [Table 4]. It is required for Japan to observe such progress of construction of international airports in Asia and also to construct or improve international airports in Japan in response to the increase of demand in Japan.
(2) Full play of function of international hub airports
　 　 In addition to the subject of improvement of airports, some problems in utilizing existing airports have been pointed out as such that in recent years a certain number of Japanese passengers have come to travel to Europe or U.S.A. via international hub airports located in neighborhood countries/areas.
　 　 Such a case is seen with not only Japanese passengers departing from Tokyo or Osaka but also local Japanese passengers under circumstances of development of internationalization of local airports in Japan, which contribute to the enhancement of local communities. However, it is pointed that if such a trend be further strengthened in the future, aviation routes connecting airports in Japan and international hub airports located in neighbourhood countries/areas should become a spoke route of neighbourhood international hub airports and as a consequence the accumulation of function to the vicinity of international hub airports in Japan will be lowered. The difference of air fares between airlines in each countries may be the principal cause of such cases, but at the same time the convenience of changing flights for further trips at certain airports is deemed to be the generating factor. From this point of view, opening of the Kansai International Airport in September 1994 contributes to increase capacity of international air transport, to realize 24 hrs. operation of the airport and to improve the convenience of changing domestic and international flight to a large extent, and as a consequence it will greatly improve the aforementioned problem observed in airport facilities. [Table 5,Table 6]
　 　 It is desirable to fully utilize the Kansai International Airport from the point of view of effective use of social capital also. Even though current operation of international civil aviation using the Airport is considerably smaller than the initial expectation before the opening, it is expected to improve service of international aviation lines responding to demand to attain further improvement of convenience for passengers and to improve the international aviation network.
2. Problems relating to Japanese airlines
(1) Increasing difficulty of management
　 　 Japanese airlines are facing difficulty in their management under circumstances of more fierce competition between domestic and overseas airlines in the Japanese air transport market.
　 　 Improvement of productivity through the introduction of larger sized aircraft etc. has almost reached to its limit and the difference of cost competitiveness of Japanese airlines with overseas airlines is increasing under the condition of a stronger yen. [Fig. 42] In addition, failure to achieve full rationalization so far causes a larger ratio of fixed cost such as labour cost in total cost of management, which results in an unsteady situation of management and easily generates a deficit by fluctuation of demand.
　 　 Furthermore, investment to facilities and equipment relating to the three main projects of airport construction and the burden of rental charge cause the heavy burden to the management of such companies, and severer competition among domestic and overseas airlines is expected by relief of restriction of airport capacity contributed to by the opening of Kansai International Airport.
　 　 Nonetheless, it is necessary to attain a sufficient service of Japanese airlines from the point of view of provision of stable air transport service for people, maintaining the availability of means of transport in case of emergency and the technique of air transport, and securing employment opportunity for Japanese crews.
(2) Measure to respond to the trend of consumer preference towards lower fares
　 　 Recently users' price consciousness has been rapidly growing and cheaper and better services are more strongly required. Such a trend of preference toward cheaper fares is getting stronger under the circumstances of continued recession after the collapse of the overheated "Bubble" economy. [Fig. 43]
　 　 As for air fares of international flights, the considerable discrepancy between approved fares and actual fares of "cheap air tickets" offered by means of sales of shares of allocated group tickets to individual persons is causing them to become more popular due to the increasing price consciousness of users and demand of private travel, which generates unclear or unfair feelings of users on air fares. As regards "cheap air tickets", the charge of handle changes or cancel procedures is unclear and also various problems are increasing such as the trouble caused by inconvenience of the time schedule of flights fixed at midnight or early morning.
　 　 As for a countermeasure responding to such a problem, "New System of International Air Fares" was introduced in April 1994 providing measures to improve the unclear fare system so that users can use tickets with confidence, and it is deemed to be important to popularize this system hereafter.
3. Problems related to sightseeing
(1) Levelling off of foreigners visit to Japan
　 　 It is an important subject to increase foreigners' visits to Japan to accelerate international understanding on the Japanese economy and society and to establish friendly relations with foreign countries.
　 　 However, the number of foreigners visiting Japan in 1993 was 3,410 thousand which was equivalent to only 29% of 11,930 thousand Japanese who traveled overseas, and in comparison with other countries, the number of foreign visitors is smaller than not only developed countries in Europe or North America but also neighborhood countries/areas where sight-seeing facilities are still developing. [Fig. 44]
　 　 Particularly the number of visitors from USA in the past decade have stayed almost static at 530 thousand in 1993 compared to 510 thousand in 1984 and it is of serious concern from the point of view of acceleration of mutual understanding between both countries with increasingly growing intense trade friction.
　 　 The situation of the ever high level of prices in Japan and also the stronger Yen cause the cost of accommodation, transportation and eating/drinking in Japan to be much higher than the international standard and such conditions are deemed to be the principal factors of the levelling off of the number of foreigners visiting Japan [Fig. 45]. In addition, the unsatisfactory diffusion of image of sightseeing in Japan and also the language barrier makes a sole trip in Japan difficult and these circumstances are also deemed to be impeding an increase.
　 　 Nonetheless, it is necessary to attain effective acceleration of foreign visitors to Japan through taking advantage of such plus factors as the recent trend in a remarkable increase of Asian travellers, the expansion of the international convention market and growing global interest to study the Japanese language.
(2) Realization of safe and comfortable overseas trip
　 　 Overseas sightseeing trip contributes to not only accelerate mutual international understanding, nurture people's feelings of internationalization and improve the situation of balance of international payment of Japan but also fulfilment of people's life.
　 　 More Japanese are visiting overseas as the result of progress of the stronger Yen recently and further active overseas travel is expected to be continued.
　 　 According to the result of a questionnaire survey conducted by Japan Transport Economics Research Center, the most frequently indicated factor to enjoy a comfortable and easy overseas sightseeing trip were "lower cost of travel", "approval of long vacation" and "improvement of safety measures" and accordingly it is necessary to provide administrative measures responding to these indications. [Fig. 46]
　 　 It is hence necessary to plan and develop inexpensive and fully enjoyable travel packages and also to examine the improvement of system of leave in companies and in schools.
　 　 As for travel safety, unexpected troubles are more frequently happening recently which are mostly attributed to lack of necessary information on the place of visit or to the language barrier. It is therefore necessary to improve various supporting systems such as provision of a system to offer information for travellers and to travel safely and comfortably.
(3) Leveling off of domestic sightseers
　 　 As a result of the strong Yen, Japanese overseas sightseeing trips have become more frequent. On the other hand, domestic sightseeing trips have been leveling off recently. Among travellers, those who acquire a comparatively longer leave tend to head for overseas instead of somewhere in Japan and it is feared that domestic sightseeing may become fall into a depression.
　 　 Japan Transport Economics Research Center conducted a questionnaire survey at Narita Airport for Japanese travellers visiting overseas in July 1994, for the purpose of analyzing factors which have generate the shift from domestic trips to overseas. According to the responses to the questionnaire, it was found that the most frequently indicated factors of choosing an overseas trip instead of a domestic trip were; "cost of overseas trip is comparatively lower than domestic one", "overseas sightseeing resources are more attractive than domestic ones" and "domestic trip is always possible" [Fig 47(a)]. As for reasons for dissatisfaction for domestic trips, factors such as "road is congested", "crowded by too many people" and "expensive cost of accommodation and transportation" were the most frequently indicated. [Fig. 47(b)]
　 　 Considering these indications factors of "expansive cost of trip", "lowered attractiveness of shightseeing resources" and "congestion at sightseeing site owing to concentration of demand" are deemed to be the principal factors affecting domestic sightseeing trips in Japan.

Section 2. Problems relating to international physical distribution

1. Problems relating to international ports
(1) Construction of container terminals to handle cargo from overseas responding to structural changes in physical distribution
　 　 Containerization is rapidly developing in international maritime cargo and particularly containerization of imported cargo shows a remarkable growth. Also shipping companies are progressively introducing container carriers with much larger capacity. Accordingly it has become much more important for ports to provide adequate facilities responding to such structural changes in physical distribution.
(a) Measure to increase in imported container cargo
　 　 Container terminals to handle cargo from overseas in Japan have been mainly constructed for exported container cargo and hence the space available at present is insufficient.
　 　 Since imported container cargo stays for comparatively longer periods at terminal areas and also is processed for distribution or sorted as for stock control purpose in the terminal, its sharp increase results not only in a shortage of container yards and facilities related to distribution but also generates a significant decline in efficiency of container handling due to multilayer container storage.
(b) Necessity to respond to increasing introduction of larger sized container carriers
　 　 In recent years, container carriers are rapidly shifting to a larger size and that of the 60,000-ton-class with maximum load capacity of over 4,000 TEU have been introduced in main lines such as North America and Europe.
　 　 Thus, the water depth at the quay wall of major ports and harbors in the world are beginning to shift from 10m-12m to 14m-15m, and Japan has to dredge ports and harbors to accomodate larger-sized container carriers.
　 　 Moreover, it is necessary to install large gantry cranes with higher efficiency and to expand the space of container yards to respond to the introduction of larger sized ships which leads to an increase in the volume of cargo handling per ship.
(2) Level of service as regards software in ports
　 　 The fees of main ports in Japan are comparatively higher than those of main ports in the world due to the higher cost of labor, land space and other factors and furthermore owing to the strong Yen in recent years. [Fig. 48]
　 　 In addition, although cargo is generally handled 24 hours a day for 365 days in a year in the main ports in the world, handling operation tends to be completely or partially suspended on Sundays and the working hours of cargo handling on business days also tend to be limited in Japan.
　 　 Furthermore, since entry and exit of cargo into or from a container terminal is concentrated to a particular period of time in a day because of the limited service hours of terminal gates and the time schedule of consignees, traffic jams on access roads to such terminals occur and consequently the total efficiency of physical distribution is lowered. [Table 7]
(3) Declines in the international competitiveness of Japanese ports
　 　 In recent years, neighboring Asian countries and areas are constructing international ports to meet the increasing demand for cargo transport generated by rapid economic growth.
　 　 Especially ports in Singapore, Hong Kong and Kaosiung etc. have improve facilities including international container terminals and provide a higher level of service, such as full time operation throughout the year and lower port fees, and are successfully playing active roles as hub ports for ASEAN countries and areas or China by taking full advantage of their location. It is found that a certain amount of cargo arriving at or departing from Japan are exported to or imported from Europe or U.S.A. through these ports without using major ports in Japan.
　 　 Furthermore, these neighborhood countries and areas in Asia are progressive constructing much larger container terminals aiming at the expansion of hub port capacity. [Table 8]
　 　 Therefore, it is of concern that if levels of service in aspects of hardware and software are not improved, the number of main liners that arrive in Japanese ports and harbors may decline and as a consequence it may become a factor to impede assurance of smooth international physical distribution in Japan.
2. Problems relating to international airports as strategic base for international physical distribution
(1) Construction and improvement of cargo handling facilities at airports responding to increase of international air cargoes
　 　 As explained in Chapter 1, the volume of international air cargo handling shows a drastic hike, and particularly, the volume growth of imported air cargoes is much larger than that of ex ported.
　 　 More than 80% of international air cargo arriving at or departing from Japan is handled at Narita Airport, and especially at present, imported cargo is increasing owing to the sharp rise in the yen which causes severe congestion. As a consequence, consignees and distributors are increasingly complaining about the poor capacity of cargo handling facilities. [Fig. 49]
　 　 As for international air cargo, the amount, mainly of imported cargo, is expected to continuously increase, and hence it is important to improve cargo handling facilities, centering on imported cargo warehouses, for smoother handling of air cargo, at the same time paying attention to user convenience. It is also important to promote utilization of Kansai International Airport etc. in order to improve the current over-concentrated situation of Narita Air port.
　 　 Furthermore, as for Narita Airport there are increasing complaints on services as regards software such as time loss caused by double custom clearance system at Narita and Baraki and also on too expensive charges to use cargo handling facilities. [Fig. 49]
(2) Level of service regarding software
　 　 The charge for international lines at major airports in Japan is higher than international standards owing to higher costs of airport construction etc., and the stronger yen is recently accelerating this trend.
　 　 In addition, although world major airports progressively move towards 24 hour operation, operation hours in Japanese major airports have been restricted to prevent environmental pollution.
　 　 Under such circumstances, the Kansai International Airport that opened in September 1994 is operating for 24hours. Thus, its full utilization is to be greatly expected.
3. Improvement of total efficiency of physical distribution as a whole including domestic transport
　 　 To achieve smooth international physical distribution, it is important to improve the total efficiency and to lower the physical distribution cost as a whole, not only of international transport but also of domestic transport.
(1) Improvement of access to ports and harbors, and to airports
　 　 It is necessary for smoother physical distribution to construct and improve access facilities connecting ports and harbors and airports with domestic production and consumption areas in addition to improvement of facilities and services in physical distribution bases such as ports and harbors, and airports. Hence, it is necessary to comprehensively promote not only projects to construct and improve airports and ports and harbors but also those for access facilities at the same time.
(2) Lowering of domestic physical distribution costs
　 　 Even though the physical distribution cost in Japan may not be simply compared with international standards because of the price level gap and difference of transport trade practice between Japan and overseas, it has been pointed out that the costs in Japan are relatively higher than those in USA etc.
　 　 Such gaps of the physical distribution costs between Japan and overseas are deemed to be caused by factors in Japan such as higher charges to use the physical distribution related facilities, restrictions on introducing jumbo sized trailers, the differences of trade practice in cost bearing for loading and unloading, and it has also been pointed by a certain source that regulations governing physical distribution in Japan impede efficient physical distribution and generate cost increase.
　 　 Hence from the viewpoint of further improving the efficiency of physical distribution, it is necessary to not only construct the social capital related to physical distribution and improve trade practice but also revise the existing regulations as appropriate, at the same time paying attention to the assurance of safety which is essential to the transport administration, and also paying full notice on stabilization of management of small and medium-sized enterprises comprising the majority of transport companies.
(3) Accelerated application of information systems
　 　 Owing to accelerated application of information systems, it is extremely important for operation related cargo transport to improve efficiency, to achieve labor saving and to shorten the required time.
　 　 In major ports and harbors in Japan, SHIPNETS or S.C. Net (refer to p-40) have already started operation, but their utilization is limited. Their links with other on-line systems of operation related cargo are now being considered. The situation in Japan is, however, rather behind compared with USA or Singapore.
4. Problems related to oceangoing shipping companies in Japan
　 　 Oceangoing shipping has greatly contributed to activate international physical distribution of Japan with overseas countries/areas. Particularly, the Japanese merchant fleet operated by Japanese oceangoing shipping companies has been playing an important role in international physical distribution through its high quality and stable service. Nonetheless, Japanese oceangoing shipping companies are facing hard times in recent years due to the strong yen and the emergence of other Asian shipping companies. Also structural changes of the industry are seen as the number of Japanese flag vessels, the core of the Japanese merchant fleet, declines.
(1) Severer business environment
(a) Deterioration in the business performance due to the higher yen
　 　 As Japanese oceangoing shipping companies have a higher share of operating income in dollars which exceeds the share of dollars of their operating costs, the hike of the yen structurally leads to their profit decline. [Fig. 50] Hence Japanese companies are seriously affected by the strong Yen continued from 1993 and facing a severe business environment again. Especially, as the current hike of the yen occured after various possible measures were introduced following the yen appreciation as a result of the Plaza Accord in 1985, possible areas to take additional measures are limited for all companies. Furthermore, rapid economic expansion in Japan cannot be expected even though it is recently showing signs of recovery, and the amount of exported cargo from Japan is estimated to decline due to the increasing trend to transfer production bases overseas. Hence the current business environment for the industry is much more severe.
(b) Severer international competition due to the emergence of other Asia shipping companies
　 　 Along with economic growth in recent years, the volume of cargo transport arriving at and departing from Asia is also remarkably increasing. Under the circumstances, shipping companies in Asia are rapidly growing thanks to their low cost operation. Comparing Japanese shipping companies with other Asian companies, the gap of operation costs including crew costs, is widening owing mainly to the stronger Yen [Fig. 5l], and on the other hand, the gap of service is comparatively narrowing. As a result, Japanese shipping companies are facing a very disadvantageous situation in competition with other Asian shipping companies when customers tend to prefer lower transport charges reflecting the long lasting recession. [Fig. 52]
(c) Sluggish cargo transport fare
　 　 In main regular lines such as the North America and Europe, cargo transport fare is sluggish owing to severer competition due to the emergence of Asian shipping companies. As a result, shipping companies impeded by the stronger Yen are facing a severe business environment. Thus, such agreements as TSA and EATA have been concluded for consultation among major shipping companies to ensure a continuous stable supply of liner service. Each company is, however, progressively constructing larger vessels as well as replacing its existing vessels, and therefore, it is expected to cause overtonnage. It is feared that as the consequence transport fares may decline further.
　 　 As for trampers such as tankers and bulk carriers, the market is sluggish in general owing to overtonnage in the world which causes serious affects on the performance of Japanese companies.
(2) Structural changes in Japanese merchant fleet
　 　 Japanese flag vessels contribute to maintain smooth international physical distribution, and are deemed to be the core of the Japanese merchant fleet from the viewpoint of assuring a stable supply of transport capacity, to maintain navigation skills and to ensure stable employment opportunity for Japanese seamen. However, international competitiveness of Japanese flag vessels has been lowered by the growing gap of labor costs of crews between Japan and overseas and also by the stronger Yen. As a result, flagging-out (decline in the number of Japanese flag vessels owing to transfer of nationality to overseas) is proceeding. At the same time, the number of Japanese seaman has been decreasing and their average age is becoming older. [Fig. 53,Fig. 54]