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1. The development of railway services until the JAR reform
(1) Up to the inauguration of Japanese National Railways After its inauguration
in 1872, Japans railway service had placed emphasis on the development of private
railways with the introduction of private capital, until its nationalization
under the Railways Nationalization Law in 1906. In 1949, Japanese National Railways
were established as a public corporation.
(2) JAR during the periods of reconstruction after the War and economic development
During the periods of reconstruction after the War and economic development,
JAR played an central role in the fields of both passenger and freight transports
in Japan. JAR also contributed to absorbing labor as Japan reconstructed itself
after the War.
(3) Deadlock of JAR business
(A) Traffic volume : in a slump against the backdrop of reduced competitiveness
(a) Passenger transport
The volume of passenger traffic increased between the mid-1950s and mid-1970s
as Japans economy expanded. After peaking in FY1974, however, there was a downward
trend and remained in a slump between mid-70s and mid-80s.
Although JNR accounted for about 50% of the total transport between mid-50s
and mid-60s, it has continued to decline since then as the rapid motorization
developed. In FY1986, just before the division and privatization of JNR, the
proportion dropped to 22.6% (Fig.
1).
The proportion of JNR to the total passenger traffic declined in many distance-zones
due to expanded shares of automobiles and air transport. However, in the intermediate
distance-zone of 300-750km, JNR accounted for about 60% in 1986, just before
the division and privatization.
(b) Freight transport
The volume of freight traffic showed a steady upward trend in the latter
half of the 1950s as the Japanese economy continued to grow rapidly. However,
it began to decline after peaking in FY1970, and has been falling significantly
since 'then.
The proportion of JNR to the total freight traffic, standing at about 50%
in 1955, continued to decrease due to an increase in coastal shipping and truck
transportation. It fell to 4.6% in 1986, just before the division and privatization
of JNR (Fig. 2).
Yet, JNR's cargo transport could compete fairly well against other modes
of transport in the fields of mass and long distance transportation. It played
an expected role in the transport of oil, cement, and containers.
(B) Management : rapidly deteriorating against the backdrop of the rigid
fare system and snail-paced rationalization
(a) Revenue and expenditure
In FY1964, JNR recorded a deficit on a one-year basis and in FY1971, it caused
predepreciation losses. Then burdened with growing pensions, the net loss carried
over, amounted to 15.5 trillion yen and the long-term debts reached 25.1 trillion
yen at the end of FY1986 despite the temporary freeze on repayment of the debts
(Fig. 3)(Fig.
4).
(b) Changes in fares
Revision of fares at an appropriate time and in an appropriate way was not
always possible during a period between mid-1960s and mid-1970s, when the management
of JNR was deteriorating, because in those days, JNR, the most typical example
of nationalized enterprises, was always subject to price control. (TO change
the JNR's basic fares, it was necessary to revise the JNR Fare Law.)
Under the circumstances, the JNR Fare Law was partially revised in December
1977, paving the way to raise fares to cover a certain increase in expenses
if the Minister of Transport approves it. Since then, fares were raised almost
every year at a rate higher than that of consumer prices (if the 1965 level
is 100, JNR's fares are 460 compared with 353 of the consumer price index in
1986).
(c) Delayed rationalization of workforce and sluggish productivity
Rationalization of the workforce was delayed. The number of JNR employees
was maintained at the 400 thousand mark between 1949, when JNR was inaugurated,
and 1980. Because the transport capacity was not fully reviewed so as to appropriatly
cope with the trend of transport demand, the productivity of JNR (passenger-kilometer/ton-kilometer
per employee) remained at a low level. Between the mid-60s and mid-80s, the
productivity hovered around half to one-third of that of private railways.
The ratio of personnel expenses to revenue, after soaring between 1966 and
1975, remained at the 80% mark until the mid-80s.
(d) Capital investment
Despite the worsening balance of revenue and expenditure, JNR spent a huge
amount of money (exceeding one trillion yen between 1978 and 1981) in capital
investment every year, driven by the nature inherent in the way of management
of a public corporation.
(e) Rural railway lines
Many lines (rural railway lines) which are extremely unprofitable were increasingly
burdensome for the management of JNR.
(f) Labor strikes
Before the JNR reform, employees often went on strike, losing the confidence
of passengers and consignors in JNR.
(g) Reconstructing measures all four sets of such measures were unsuccessful
To cope with the deteriorating situation of JNR's management, the government
and JNR implemented four sets of reconstructing measures (Fig.
5). However, these measures did not drastically improve the business management,
prompting a radical reform with betterment of the style of management.
The government and JNR accepted recommendations from the Supervisory Committee
for the JNR Reconstruction, saying it would contribute to a smooth transformation
into a new management style. They then carried out emergency measures including
those concerning the workforce, establishment of discipline at the workplaces,
and cutting down on capital investment until April 1987, when the division and
privatization of JNR were carried out.
2. Changes in Railway business : from a national enterprise to a competitive
private company
Since its inauguration in 1872, Japans railway business changed its management
style several times : first, led by private companies ; second, nationalized
; third, JNR was established ; and finally privatized in 1987.
Such a process was the result of the major influences of national industrial
policies and political situations. Yet, JNR has significantly contributed to
the development of the Japanese economy through the construction of nation-wide
railway networks and by absorbing labor.
However, because JNR could not appropriately cope with changes in the transport
structure driven by the development of motorization, the management of JNR continued
to deteriorate until it collapsed.
Under the circumstances, JNR was privatized to revitalize its railway business
in 1987.
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