Managing unprofitable passenger rail operations in Japan - Lessons from the experience in Sweden

Abstract Japan implemented a ground-breaking reform in the railway sector in 1987 when it broke up the Japanese National Railways (JNR) into six vertically integrated railway companies. Mainly because of the recent population decrease in local areas, many local rail lines face severe declines in passenger numbers. When it comes to upholding unprofitable public transport, Sweden implemented a radical reform in 1988 by means of vertical separation and decentralisation, and then gradually introduced competitive tendering to procure unprofitable passenger rail services. In this paper, the situation in Japan, and primarily Hokkaido, is presented in some more detail, as well as the situation in Sweden. The study of railway operation and management in the two countries leads to a couple of lessons and implications for sustaining unprofitable but socially beneficial passenger railways. Among the addressed key issues are: 1) establishing the appropriate governance structure that facilitates reaching a better, agreed balance between national government and regional governments; 2) stipulating a standard to select the appropriate transport mode; 3) bearing of the financial responsibility for sustaining specific lines based on an analysis of the benefitting parties.