Privatization of the Japan National Railway: overview of performance changes

In 1987, the Japanese National Railway (JNR) was privatized and separated into six JR passenger rail companies and one nationwide JR freight rail company. The main purpose of this paper is to outline how JNR's privatization came about and to examine the JRs' performances in the ten years after privatization. Distinguishing features of the JNR privatization are as follows: horizontal separation (or regional subdivision); passenger-freight separation; vertical integration (or operation and infrastructure integration); lump-sum subsidy for low density JRs; establishment of an Intermediary Institution; and allowance of non-rail business. The JRs have improved performance in many areas, such as financial status, overall service quality, labor productivity, and operating costs. Accident rates did not increase after privatization. Although fares had been increasing almost yearly before privatization, fares did not increase for nine years afterwards. However, many challenges remain, such as the liquidation of JMR's long-term debts, the sale of the remaining JR stock, financial difficulties among the three islands JRs due to a decrease in fund revenues, and the nagging lack of competitiveness at JR Freight. In general, however, the privatization process has led to increased productivity and efficiency.