JNR(Japan National Railways) Reform *No part of these slides may be reproduced in any form with out permission.
Timeline of JNR Reform 1872 1964 The first railway Opened (UK s cooperation) The first HSR Opened (Tokaido Shinkansen) Public operation 1987 JNR Reformation (Division and Privatization) Now Total length : 27,655 km (HSR : 2,765 km) Railway Company : 204 JR east JR central Private operation JR central
Transportation Condition of JNR Passenger transportation volume hit the peak because of road improvement and motorization. Freight transportation volume also decreased because of changing industrial structure and motorization. [bn person-km] Transportation Volume of JNR [bn ton-km] Freight Passenger 1965 1975 [FY] 1985
Financial Condition of JNR JNR recorded a loss in 1964, when it was its first year of continuous financial deficit. Especially it recorded over 1 trillion yen every year in the 1980s and was heavily subsidized ( 600 bn = US$6 bn*, in 1985), which did not even cover the interest. 6 4 2 0-2 -4-6 -8-10 -12-14 -16 [trillion yen] Worsening Business Performance Current Expense Current Revenue 1960 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 Accumulated Deficits 1965 1975 1985 [FY] *Exchange Rate US$1 = 100
Cause of Financial Collapse of JNR Various external and internal factors caused these problems. JNR Reform was the solution to them. External Factor Rapid development of other modes of transport Car, Airplane, etc. Internal Factors Problems inherent in the public corporation system a)the interference from outside, the lack of autonomous management b) the unnatural labor-management relations c) the limited scope of business Problems inherent in huge, monolithic, nationwide organizations d) the stereotyped practice of management e) the irrational dependency on profitable branches of JNR and on profitable urban lines f) the lack of competition consciousness
Division of Railway Business Passenger railway was divided into 6 companies by region. Freight railway was decided to be exclusively operated by JR Freight. JR Hokkaido Sapporo JR Freight JR East JR West Osaka Tokyo Nagoya JR Kyushu Takamatsu Fukuoka JR Shikoku JR Central
Allocation of Long-term Debts 11.6 trillion (=US$116 billion*) was allocated to JR East, JR Central, JR West, JR Freight and Shinkansen Holding Corp. whose amount was as much as not harming good management. Remaining 25.5 trillion (=US$255 billion*) was allocated to JNR Settlement Corp. with the revenues of selling of lands unnecessary to railway business and JR stocks. JNR 37.1trillion (US$ 371 billion*) Railway Business Facilities of Shinkansen (Bullet Train) Other rights and obligations JR East JR Central JR West JR Freight JR Hokkaido JR Shikoku JR Kyushu Shinkansen Holding Corporation JNR Settlement Corporation 4.2trillion (US$ 42 billion*) 0.5trillion (US$ 5 billion*) 1.1trillion (US$ 11 billion*) 0.1trillion (US$ 1 billion*) No debts were allocated to these three JRs. 5.7trillion (US$ 57 billion*) 25.5trillion (US$ 255 billion*) *Exchange Rate US$1 = 100
Deregulation JNR s business was limited to railway in principle. JRs business was not limited for the purpose of maintaining their independence of business Legal Personality Legal Status of JNR and JRs JNR JRs in 1987 Public Entity Special Companies (Civil Code and Commercial Code are also applicable.) (mostly same as governmental entities) Scope of Business Limited to railway operation and related activities Any businesses are allowed with the governmental approval Governmental Regulations Budgets are approved by the National Diet All directors are appointed by the Government Annual accounts are submitted to the Diet Governmental approvals are required: to issue new shares and long-term financing; to appoint their managing directors; and for their Annual Business Plans 3 major JRs (JR East, JR Central and JR West) have been exempted from the application.
Management stability fund It was decided that JR Hokkaido, JR Shikoku and JR Kyushu did not take over the long-term debts. In order to cover operating losses, it was decided to establish Management stability fund, which has been providing proper management revenues to these JRs every year. Management stability fund [ 1.28 trillion ] (US$ 128 billion*) JR Hokkaido [ 682.2 billion ] (US$ 6.822 billion*) JR Kyushu [ 387.7 billion ] (US$ 3.887 billion*) JR Shikoku [ 208.2 billion ] (US$ 2.082 billion*) *Exchange Rate US$1 = 100
Reduction of Personnel JNR had more than 460,000 of employees in 1965. With a series of restructuring, it became 277,000 in 1986 the year before the privatization. Among these employees, 201,000 were employed by JRs; 76,000 were employed by governmental entities and private companies with the assistance of outplacement. People Number of Employees JNR Reform FY
Transportation Condition of JRs JRs Transportation volume has been increasing. This is because fares have not raised (one exception of JR Hokkaido, JR Shikoku and JR Kyushu) and their services have been improved. Transportation Volume [bn person-km] million personkm 260 260,000 250 250,000 JNR Reform JRs [bn ton-km] million ton-km 50 50,000 45 45,000 240 240,000 230 230,000 220 220,000 210 210,000 200 200,000 Passenger Freight 40 40,000 35 35,000 30 30,000 25 25,000 190 190,000 20 20,000 180 180,000 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 15 15,000 1975 1985 1995 2005
Financial Condition of JRs Financial condition went dramatically better than the expectation of the Government of Japan. JNR was subsidized 600 bn (=US$ 6 bn*) a year (in 1985) but posted large deficits. However, JRs reached 630 bn (=US$ 6.3 bn*) of profits and paid 260 bn (US$ 2.6 bn*) of taxes to the Government in 2012. billion yen [Billion yen] 1,000 Reform *Exchange Rate US$1 = 100 500 0 500 Remain in the black without Government subsidies 2012 (year) 1,000 1,500 Pay a lot of Income Tax 2,000 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 1964 1965 1975 1985 1995 2005 FY
Reduction of Accidents After the JNR reform, the number of accidents has been steadily reduced JNR Reform FY