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1. Present evaluation ten years after the JNR reform
(1) Purpose of the JNR reform : regenerating JNR operations
The JNR reform aimed to transform JNR, which was on the verge of collapse,
into a business entity that can survive fierce competition and to regenerate
JNR operations so as to work in a responsible manner. To realize this objective,
the single nation-wide management structure under the corporation system was
reviewed. Then JNR was split and privatized. The passenger section was divided
into six companies by region, and the freight section turned into a single nation-wide
business entity that operates on lines owned by the passenger companies with
a fee.
JR East, JR West, JR Tokai and JR Freight received a part of the long-term
debts commensurate with their book values. Other debts were supposed to be repaid
by with revenues gained from selling land and stocks owned by the Settlement
Corporation. The amount of debts that are to remain unsettled eventually, it
has been decided, will be borne by the public.
(2) Positive points : maintenance of the level of fares, improvements in
transportation services, reduced taxpayer burden, reduction of the number of
employees
Fares have basically been kept at the same levels as before the privatization
of the Japanese National Railways so as to be competitive in the transportation
market. Improvements in transportation services include achievements
such as faster transportation speeds and better customer service. However, improvements
have not kept pace with congestion and other problems. Further efforts are required
to solve these problems.
Regarding taxpayer burden, tax payments by Japan Railway companies continue
to exceed the government subsidies they receive. In this respect, JNR reform
has helped the government improve its fiscal performance, serving to ease the
burden on taxpayers.
The number of employees was reduced from 387,000 at the end of fiscal year
1982, when the plans to divide and privatize JNR was made public, to 199,000
at the end of fiscal year 1987 upon the inauguration of the JR companies, and
further to 189,000 at the end of fiscal year 1995, contributing to an improvement
in productivity.
(3) Evaluation of the JR companies : establishment of sound management foundation
is the common goal.
Each JR company should achieve the objective of the JNR reform, i.e. full-fledged
privatization as soon as possible with further efforts to increase revenue and
reduce expenditure regarding railway services. It is also necessary to further
strengthen the management foundation Jay diversifying business operations.
(A) JR East, JR West and JR Tokai : development of facilities for easing
congestion and improvement of other less developed fields are hoped for
The three companies are encouraged to ease congestion and improve less developed
fields. As in the cases of JR East and JR West, it is necessary for JR Tokai
to prepare for being listed on the stock exchange.
(B) JR Hokkaido and other two JR companies : it is urgently required to
cope with the reduction in management profit of the Management Stabilization
Funds
JR Hokkaido, JR Shikoku and JR Kyushu (hereinafter referred to as "JR Hokkaido"
and the other two JR companies) have seen a significant increase in productivity
(.Fig 14). However, their management
situations remain tough mainly due to a reduction in management profit of the
Management Stabilization Funds caused by low interest rates. It is therefore
necessary to make further efforts to increase revenue and rationalize management
so as to realize full-fledged privatization.
(C) JR Freight : strengthening of the management foundation is urgently
needed
JR Freight has been faced with tough management situations, recording ordinary
losses for three consecutive years from FY1993. However, the company is beginning
to specialize in fields where the characteristics of railway freight can demonstrate
itself ; it has been expanding the share of containers and speeding up freight
transport since the age of JNR. In future, it is necessary to become thoroughly
streamlined and develop transport products that are more competitive. The company
also needs to sharpen its competitive edge by establishing closer cooperative
relations with express companies so as to strengthen its management foundation.
2. Problems remaining to be solved
(1) Settlement of long-term debts and other liabilities
(A) State of long-term debts and other liabilities : amounted to \27. 6
trillion at the beginning of fiscal 1996
The Settlement Corporation earned 11.3 trillion yen for the nine years between
FY1987 and FY1995 but spent 13.3 trillion yen on interest payments and others
during the same nine-year period. As a result, the balance of long-term debts
and other liabilities rose from 25.5 trillion yen upon the inauguration of the
JR companies to 27.6 trillion yen.
The assets at the beginning of fiscal 1996 includes some 3 trillion yen
of land, JRS Stocks (0.3 trillion yen at face value), and about 1.9 trillion
yen of credit to the Railway Development Fund.
(B) Factors contributing to the expansion of debts : burden of interest
rates and mutual pensions
(a) Burden of payments on interest and mutual pensions The Settlement Corporation
is tackling the problem of the burden of payments on interest and mutual pensions
(hereinafter referred to as interest and other burdens). The amount of interest
incurred every year stands at 1.3-1.5 trillion yen. The balance of debts decreased
only in FY1990 and FY1993 (Fig.
15, Fig. 16).
At the beginning of fiscal 1996, the liabilities with interest of the Settlement
Corporation amounted to 18.4 trillion yen with the average interest rate at
4.95% (Table 4).
(b) Burden of mutual pension fund
The Settlement Corporation shoulders a total of 700 billion yen as a special
burden concerning the Japan Railway Mutual Pension Fund. Upon integrating the
railway mutual pension into the welfare pension, the corporation plans to bear
an additional 0.8 trillion yen of liabilities in transferring money at the beginning
of fiscal 1997.
(C) Attempt to reduce debts : sales of assets and financial support
(a) Revenue from selling assets
Sales of assets such as land and stocks have not been proceeding smoothly
due to unfavorable effect of the market.
(b) Subsidies
The subsidies have totalled about 1.6 trillion yen for ten years until FY1996
(Fig. 17).
(c) Government loans without interest
The liabilities of the Settlement Corporation include loans without interest
from the general account. However, in light of the tough situation, the terms
of loans have been changed.
(D) Limitation of the present scheme : as the remaining assets decrease,
accumulation of liabilities is inevitable.
In light of the fact that the assets are decreasing, substantial reduction
in liabilities is not expected. Moreover, accumulation of liabilities is inevitable
even if the self-sponsored funds are used.
(E) Necessity of establishing measures for full-scale settlement
A delay in the full-scale settlement of liabilities will increase the financial
burden on the people. To avoid this, it is necessary to urgently establish measures
for full-scale settlement. Specific measures that can win the understanding
of the people will be wholeheartedly examined.
(2) Strengthening of the management foundation of JR Hokkaido, JR Shikoku,
JR Kyushu and JR Freight for full-fledged privatization To realize full-fledged
privatization, which is the ultimate goal of the JNR reform, following JR East,
JR West and JR Tokai, it is necessary to cope with the above-mentioned situations
by making utmost efforts to be competitive and addressing the following problems.
(A) Problems of JR Hokkaido, JR Shikoku and JR Kyushu : securing of funds
for capital investment and of management profit of the Management Stabilization
Funds
(a) Securing of funds for capital investment
Investment is needed for upgrading transportation services such as speeding
up trains because competition is intensifying with other transportation means
within the geographical domains of the three companies. However, because the
management situation of the three companies is as it is, the funds on hand are
not enough. How to deal with this problem is, a major challenge.
(b) Securing of management profit of the Management Stabilization Funds
Despite their utmost efforts, the management situation of the three companies
is deteriorating because the management profit of the Management Stabilization
Funds is decreasing due to low interest rates in recent years. Therefore it
is necessary to establish measures to secure such profit of the funds for full-fledged
privatization.
(B) Addressing problems of JR Freight : clarifying steps toward full-fledged
privatization Based on the recognition that it is necessary to clarify steps
toward full-fledged privatization, the "Roundtable on Examination of Basic Problems
for Complete Privatization of JR Freight" was held on October 11 under the direction
of the Minister of Transport. Experts and people concerned have begun to discuss
all the basic problems concerning the management of the company.
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