3. Age of High Efficiency Networks
(from the 1950s ~ today)

1) Arrival of the Motorization Age

Automobiles proliferated quickly as the Japanese economy recovered from defeat and the standard of living improved. Only 130,000 vehicles were registered at the end of World War II, but the number increased rapidly, reaching 500,000 vehicles by 1951, then doubling to one million in 1953, and doubling again to two million in 1957. The Age of Motorization had finally arrived in Japan.
However, the road system in Japan remained insufficient to support the ongoing rapid motorization. Ralph J. Watkins, an economist invited by the Japanese Government to conduct research on the Meishin Expressway, wrote in his 1956 report, “The roads of Japan are incredibly bad. No other industrial nation has so completely neglected its highway system.”
Indeed, Japan’s road system in those days was truly terrible. Only 23% of the first-class arterial national highway system was paved. Only two-thirds of national Highway Route 1, supposedly the major arterial highway connecting Tokyo with Osaka, was paved. The Japanese Government at that time accepted Mr. Watkins’ proposals and immediately put them into practice. Thus, road improvement in Japan moved into high gear, propelling the nation into the high economic growth era of later years.

The state of roads in the mid 1950s was "incredibly bad" as Watkins wrote in his report.

TApril 1968 Vehicles running from Okazaki IC to Komaki IC after the opening ceremony of Tomei Expressway (Photo:Mainichi Shimbun)

2) The Five-Year Road Development Program, Toll Road System, and Tax Revenue System with Earmarks for Roads

Without a long history of horse-drawn carriages, the roads in Japan were severely underdeveloped. What was worse, road development was inevitably slow because the development of railways was given priority over the development of roads. Under these circumstances, the Five-Year Road Development Program was launched so that road development could be fully accelerated.
Since the public works budget, under the general revenue scheme, was insufficient in meeting the ever-increasing road traffic demand, two new financing systems were introduced: the toll road system and the tax revenue system with earmarks for roads. These systems allowed for a significant number of road projects to be undertaken in a short period of time.
The former “Act on Special Measures concerning Road Construction and Improvement”, which was enacted in 1952, introduced the toll toad system and enabled the national and municipal governments to borrow sufficient funds to develop roads. After the new roads were complete, the borrowed money would be repaid using the toll revenue from the roads.
The toll road system was used primarily for national expressway projects. In 1956, the Japan Highway Public Corporation (JH) was founded, so that expressways would be efficiently managed and financial resources from the private sector could be widely utilized.
With its founding, toll road development was now led by JH instead of the National Government. Although the mechanisms of the toll road system are similar to that of current PPP projects, the former included an ingenious system that enabled them to carry out unprofitable road projects if the road was recognized as necessary from an economic vantage point. The National Government reduced the business risk of unprofitable road projects by guaranteeing the loan and by paying a fixed rate of interest. In addition, the Government utilized the pool system, in which revenues and expenditures were balanced throughout the integral road network. This system enabled them to develop not only profitable urban roads but also unprofitable regional roads across the country.
In 1953, the “Act on State’s Tentative Financial Measures for Road Construction Projects” was enacted and thus ushered in a new tax revenue system with earmarks for roads. This system, based on the “beneficiary-pays” principle, earmarked the revenue from fuel tax and other automobile-related taxes for road projects. This measure secured stable financial resources for the long-term development of roads, including the 1st Five-Year Road Development Program and the subsequent 11 programs that followed.
The toll road system and the tax revenue system with earmarks for roads supported the development of the nationwide road network for more than 50 years. During those years, all major roads were paved and more than 10,000km of expressways were developed all across the country.
However, there were increasing calls for a change in both of the financial revenue systems since the road network in Japan had reached an adequate level of development. There were various critiques and opinions about road development, including the belief that roads were developed profligately and sometimes redundantly, spending a large amount of both borrowed money and the national budget. At the same time, the repayment and management costs were not being sufficiently preserved due to the high-cost structure of JH’s toll road system. As a result, JH was privatized and reorganized into the Japan Expressway and Debt Repayment Agency (JEDRA) and 6 other Expressway Companies. The main purposes of this change were to ensure the repayment of the massive road debt that had reached 40 trillion yen, to streamline the administrative authority, and to provide various services for road users by utilizing experience from the private sector.
There was also increasing criticism of the tax revenue system with earmarks for roads. Critics argued that fixed expenditures from the abundant financial resources resulted in unnecessary road development. In 2009, the tax revenue system with earmarks for roads was abandoned and the Government decided to pay for road expenditures using funds from the general revenue.

Note: 1) Reserve fund (¥150 billion) is included. 2) Reserve fund (¥100 billion) is included. 3) Reserve fund (¥500 billion) is included. 4) Reserve fund ¥700 billion) is included. 5) Adjustment cost (¥1,300 billion) is included. 6) Adjustment cost (¥1,300 billion) is included. 7) Adjustment cost (¥1,400 billion) is included. 8) Adjustment cost (¥5,000 billion) is included. 9) Reserve fund (¥11.2 billion for Okinawa) is included in the total of the 6th plan.