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Since FY 1964 when JNR recorded deficits on a one-year basis, the financial position of the JNR deteriorated steadily every year (Fig 18). By the end of FY 1986, the net loss carried over amounted to 15.5 trillion yen and long-term debts reached 25.1 trillion yen.
The JNR played a pivotal role in promoting the economic development of Japan, improving the people's standard of living, accelerating regional development, and as such provided numerous benefits to the Japanese people. However, the deteriorating financial position of JNR, if left unresolved, would not only impede the management of its railway services, but it would also contribute to the accumulation of colossal amounts of long-term debts which might be incurred from JNR's operation would have the potential of exponentially increasing the financial burden of the people. The JNR reform was launched in response to this situation. In order to revitalize the railways in Japan, the decision was made to divide and privatize the JNR.
The Supervisory Committee for JNR Reconstruction was established mainly
to formulate measures for radically improving the JNR operations. The committee
submitted "Advice on JNR Reform" to the Prime Minister on July 1985, which provided
the basis for the JNR reform. The views expressed in that report are as follows:
(1) The Necessity for Reforming the JNR Operations
In view of the fact that the railway is expected to continue to provide
middle-distance passenger transport between urban areas and to carry large volumes
of freight, the JNR operations must be reformed and transformed into a new business
body that can survive fierce competition in the transportation market.
(2) The Necessity for Dividing and Privatizing the JNR
a. It is necessary to privatize the JNR in order to overcome structural problems
inherent to public corporations, such as bureaucratic management and the inability
to resist external pressures.
b. In order to overcome problems inherent to an organization with an operation
area that covers the entire nation, it is necessary to divide the JNR into appropriate
operational units that can be better managed. The freight business should be
separated and operated independently from the passenger transport business.
(3) Policy for Settling the Long-term Debts
New companies will bear some of the long-term debt within the limitations
in which companies can balance revenues and expenditures and can ensure healthy
management into the future. The rest of the long-term debt will remain with
the former JNR. After the former JNR has made every possible effort to repay
such debts with profits gained by selling its assets including the JNR-owned
lands, payment of the outstanding debt will be made through the taxpayers' burden.
The government should study and establish long-term and comprehensive measures
for settling the long-term debt with the taxpayers' consent.
Based on the advisory submitted by the Supervisory Committee for the JNR
Reconstruction, eight JNR reform-related laws were enacted and the JNR was divided
and privatized on April 1, 1987.
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