Maintaining Performance and Profitability on Japan’s Railways

Mobility has always fascinated me for its sheer depth and breadth, the way it touches all of us and can pave the way for improving social issues such as population changes, employment accessibility, and the climate crisis.

Living in Japan for over 20 years, I’ve been fascinated by transportation here; the incredible technology that keeps bullet trains running so elegantly and efficiently. However, as Japan’s population shifts and changes, regional lines face uncertainty as rural areas depopulate, the nation’s working population declines, and the costs of maintaining these train lines continue to rise.

An Aging and Urbanising Population

Since April this year, the Japanese government designated 65 municipalities in 27 prefectures as depopulated, bringing the total number of villages, towns, and cities as wholly or partially underpopulated to 885, or 51.5% of all 1,718 municipalities nationwide, excluding Tokyo’s 23 wards. The government recognises and continues supporting this issue as Japan’s initial fiscal 2022 budget included ￥520 billion in subsidies for rural communities, up ￥20 billion from the previous year.?

Japan’s population peaked in 2008 at 128 million and has since shrunk to 125.3 million in February this year. The government estimates that figure to slide below 100 million in 2053 before falling to 88 million in 2065.?

A shrinking and aging population presents some complex mobility challenges as driving becomes more difficult for people, increasing their reliance on family and public services. As the cost of living rises and pensions steadily decline, transportation is subsequently treated as an afterthought rather than a cornerstone for social improvement. Improving railway services and accessibility won’t curb depopulation, but it’s certainly an important element for addressing this growing issue.

The changing nature of work is also reshaping Japan’s population as younger generations move to more urban centres in pursuit of greater employment and lifestyle opportunities. The advent of COVID demonstrated that many jobs can be done remotely, further highlighting the need for towns and cities to provide a high quality of life. People need to be incentivised in new and innovative ways since employment is no longer restricted by geographic proximity.

Declining Passenger Numbers

According to Statista, the number of railway passengers in Japan in 2020 declined to 17.67 billion, decreasing from 25.19 billion the previous year. It's clear Japanese railway operators are struggling with challenges to their business model. From reduced profitability during COVID due to limited travellers to longer-term issues like depopulation and growing car ownership – Japan faces significant uncertainty when it comes to local railways.

For the first time since JNR’s privatisation in 1987, a panel of government officials proposed criteria to assess the viability of train lines with low ridership. In July this year, at least 100 sections of JR Group’s 61 railways (excluding JR Central lines) fell under the government panel’s threshold, facing potential shutdown alongside numerous rural lines.?

Last year, JR Hokkaido closed 18 of its stations due to a decrease in passengers. At its peak, JR Hokkaido operated 21 railway lines totalling 3,176.6 kilometres of track. Since then, that figure has fallen below 2,500 kilometres as unprofitable lines have been shut down or spun off.

Keio Corporation’s latest financial results noted that revenues were down in Real Estate, Other Businesses, and Merchandise Sales. The private railway operator manages and develops areas alongside its lines, engaging in station-centred hub development and wider urban development – such as condominiums, hotels, and other real estate opportunities. The company is also looking to enter logistics to expand its B2B capabilities.?

Declining passenger numbers have driven many railway operators to establish revenue streams outside of transportation, becoming more diverse and creative in how they maintain profitability. I’ve seen various train lines divert passengers to shuttle bus networks, all but guaranteeing those railways remain dormant while further adding to Japan’s growing traffic and pollution challenges.?

The shift to buses also raises the issue of aging vehicular bridges, which can’t be repaired or demolished due to dwindling local government budgets. Consequently, some bridges have simply been banned from use, essentially cutting off the districts they connect, which includes any local businesses within the area. These closures have added to the difficulties of securing local employment, further driving residents to relocate to urban centres.?

Costs, Convenience, and Quality of Service?

Railway operators face a balancing act between cost efficiency, quality of service, and feasibility. While investing new technologies into struggling railways could improve efficiency, service, and long-term costs – there’s no guarantee ridership will increase. And as numbers continue to decline and rural areas depopulate, governments and operators don’t want to throw good money after bad without promises of a return.?

Autonomous trains and stations present real opportunities to improve service and costs. We’ve already seen its utilisation in busier regions as these stations provide more robust conditions for stress testing and reliability. However, autonomous technology could also be a saving grace for struggling rural lines looking to reduce costs and entice travellers back onboard.?

A government survey from March 2020 stated that there are 4,564 stations operating in Japan without staff members – approximately half of the country’s railway stations. At least 26 stations in Japan with over 10,000 daily passengers are unmanned. Furthermore, 70% of stations across 14 prefectures including Hokkaido and Kochi are also without staffers.?

The growth in unmanned stations throughout urban and rural Japan is raising concerns about how these stations can cater to disabled passengers, providing ramps for wheelchair-bound riders to close the gap between platforms and train carriages. Currently, these passengers must notify railway operators at least a day prior to travel to ensure a staff member is available to assist. While this represents a small portion of the population, it still highlights how automation can adversely impact passenger experience.?

Much More Than a Station

JR East recognised the need to elevate ridership and support its quieter lines by implementing its ‘Beyond Stations Concept’, transforming stations into connected lifestyle platforms. By improving the placement and function of stations, the project will enrich people’s lives, linking them to products and services. Beyond Stations will offer hybrid online, traditional storefronts, health clinics, indoor farms, and more to provide local communities with technologically advanced lifestyle hubs supported by efficient mobility.?

Beyond Stations has led to the use of Ella, a new robot barista being tested at Tokyo and Yokohama stations. This automated technology is designed to reduce the pressure of labour shortages while improving the profitability of cafes. Robot baristas also align with increasing customer demands for contactless service post-pandemic. Ella provides a safe, cashless, and contactless interface capable of serving 200 cups of coffee per hour. Commuters can even order via an app, so their drinks are ready by arrival at the station.?

Tokyo and Yokohama stations provide strong testing grounds for this new technology, particularly as these locations deal with peak-hour traffic and additional stressors compared to regional lines. If successful, JR East will further this service through AI analysis, offering a coffee subscription service combined with the JRE Passport for added commuter convenience.?

While many rural railways are struggling, Japan continues building new bullet train lines, such as the Chuo Shinkansen that links Tokyo to Nagoya. This year also saw the debut of the Nishi-Kyushu Shinkansen, which added a 66-kilometre track between Takeo Onsen, Saga Prefecture, and Nagasaki Station. While this is the shortest bullet train line in Japan, there are plans to link it to the existing Kyushu Shinkansen.

International Success Stories

To address Japan’s railway challenges, it’s useful to look overseas and understand how other operators are maintaining performance and profits. For example, Germany’s Deutsche Bahn recorded double-digit percentage growth in revenue, exceeding the level achieved in the year before the pandemic. In the 2021 financial year, DB Group revenues rose 18.4 per cent year on year to €47.3 billion.?

Revenues from Deutsche Bahn’s core business grew alongside its cargo and logistics subsidiaries, which was critical for stabilising DB Group’s financial position. Despite the pandemic, Deutsche Bahn invested more than ever in shifting traffic towards rail by providing better products and services for customers and focusing on climate-friendly growth.

Environmental consciousness is much more than a growing expectation amongst customers and regulators; it’s an important resource for ensuring competitiveness, reducing costs, and demonstrating company values. I think rail can be highly sustainable depending on the energy source. In 2017, Byron Bay Railroad Company opened the world’s first solar-powered train to the public. This train sports flexible, curved solar PVs on its roof, relying solely on solar energy to travel its 3 km coastal track. There’s significant potential for Japan to leverage this technology and improve the way it powers mobility.?

Looking to the future, Japanese innovation can help alleviate national mobility issues while bolstering the economy. For example, India’s Mumbai-Ahmedabad High-Speed Rail Project is currently tendering for electrical and signalling systems as well as rolling Shinkansen stock. A total of 24 red E5 Series Shinkansen trainsets will be procured, six of which will be assembled in India. While this is wonderful news for Kawasaki and Hitachi as the only eligible suppliers of Shinkansen rolling stock, it’ll be interesting to see the wider economic effects of exporting this Japanese cultural icon.?

Technology is already playing important role in how Japan addresses declining passenger numbers and rural depopulation. From autonomous stations to robot baristas, these emerging technologies can reduce costs and improve passenger experience – but they’re only one solution to a multi-faceted challenge.