In 1964, the Japanese National Railways (JNR) was on a roll. The public but largely unsubsidized company had just finished seven years uninterrupted profits. In addition, in 1964, she opened the Shinkansen (meaning new main line) between Tokyo and Osaka in time for the Summer Olympics. This exposed an international audience to the latest Japanese technology in the form of the world’s fastest trains with top speeds of 130 miles per hour and average speeds of up to 86 miles per hour. These quickly became the envy of other countries, even leading the United States Congress to to pass a law promotion of high speed trains in 1965.

Click here to download the four-page PDF of this guidance note.

Today, the employees and tourists ride shinkansen the length of Japan’s main island, Honshu as well as on the outer islands of Hokkaido and Kyushu. However, the shinkansen has a dark side. Like Darth Vader, who started out as a sweet little boy who loved speed but whose life was corrupted by a power-hungry politician, the shinkansen was twisted by politicians and ended up doing more harm than good to the Japanese economy.

Family resemblance? The E4 series train on the right often runs on the Joetsu and Nagano Shinkansens, two of the most expensive and least used high-speed rail lines in Japan. Photo by Nanashinodensyaku.

Little profit and a lot of loss

To help finance the first shinkansen, now known as the Tokaido Shinkansen, JNR borrowed $ 80 million from the World Bank in 1961 and proudly finished repaying that loan in 1982. On this basis, it is commonly believed that the Tokaido line paid for all of its capital expenditures. But did he do it?

The 320-mile line was originally set to cost 200 billion yen, but it ended up costing almost double – around $ 17 billion today. This cost was less than it could have been because in 1940 JNR had purchased the right-of-way, dug some of the tunnels and leveled part of the route for the purpose of building a high speed line. The World Bank’s $ 80 million loan was less than 9% of the total cost, with the remainder coming from the sale of Japanese government bonds and loans, especially through the postal banking system.

While the line carried a lot of passengers, it is not clear how JNR could have repaid all of these loans since 1963 was the last year in history that he made a profit. In 1972, he was losing (in today’s currency) more than 10 billion yen (about $ 100 million) a year. To offset these losses, JNR has repeatedly increased its passenger fares, which has only accelerated the shift from rail to car transport.

JNR’s losses had several causes, but they all boiled down to politics. First, JNR operated railways on four of Japan’s islands, but only regularly earned money on the main island where more than 80 percent of the Japanese live. Japanese politicians have prevented him from shutting down losing money lines on the outer islands. Second, politicians have also blocked JNR from profiting from increases in worker productivity, forcing him to keep more than twice as many employees on his payroll as needed. Third, the prestige of the Tokaido Shinkansen has led politicians across the country to demand that JNR build Shinkansen lines in their prefectures and most of these lines have not covered their operating costs, let alone their operating costs. investment.

Particularly notorious was the Joetsu Shinkansen, which ends in the city of Niigata on the north coast of Japan. Built through mountainous territory, the line costs much more to build than the Tokaido line but only carries a quarter of passengers. Built at the request of Kakuei Tanaka, member of the Japanese Diet, the line ends in Niigata, the hometown of Tanaka, whose metropolitan area has only about one million inhabitants. Tanaka was prime minister of Japan for two and a half years before he was forced to resign in disgrace and tried and convicted for corruption, accepting bribes and transferring government construction contracts to his prefecture.

The original shinkansen was not called a “bullet train” because it looked like a bullet; instead, it was shaped like a bullet to reflect the name bullet train, which had been coined in 1940 long before trains were conceived. Later trains had a duckbill shape to reduce noise when trains entered the tunnels. Photo by Nadate.

By 1986, JNR and its associated construction companies had accumulated over 5,000 billion yen in debt for the construction of the Joetsu and other shinkansen lines. JNR also had more than 25 trillion yen in debt due to decades of lost money operating its trains. Along with a few other relatively minor debts, these totaled 32,100 billion yen or, in today’s dollars, about $ 550 billion. On top of that, he had 5,000 billion yen in unfunded pension bonds.

Read the rest of this article on The Antiplanifier.

Randal O’Toole ([email protected]) is a senior researcher at the Cato Institute analyzing land use planning and transport policies and the author of American nightmare: How the government is undermining the dream of home ownership.

Photo: screenshot of Randal O’Toole’s report