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Rail freight in Japan - track access

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Shigeki Oxawa is Associate Professor at the Department of Integrated Informatics, Daido University and part-time Lecturer in Transport Economics at Hosei University. He is a transport economist with a strong interest in transport policy. He is currently an academic visitor at Leeds University (April 2016-March 2017) working in the area of intermodal transport (with a focus on rail freight transport) and in turn track access charges.

Abstract: In the national railway revolution in Japan, the passenger division was divided into 6 companies by regions. They operate trains and own/manage the rail track (vertical integration system). On the other hand, vertical separation was introduced into freight companies, therefore, freight companies have to access rail track owned/managed by passenger companies. The Japanese regulator regards track access transactions between passenger companies and freight companies as private business.
In the vertical separation system, freight companies cannot get access to the slots required and efficient allocation of rail track cannot be achieved. The vertical separation is a very significant issue in railway policy and freight transport policy in Japan. In the presentation, causes and possible solutions to the issue will be shown.


Shigeki is Associate Professor at the Department of Integrated Informatics, Daido University and part-time Lecturer in Transport Economics at Hosei University. He is a transport economist with a strong interest in transport policy. He is currently an academic visitor at Leeds University (April 2016-March 2017) working in the area of intermodal transport (with a focus on rail freight transport) and in turn track access charges. He has 20 years of experience in research and teaching.

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Rail freight in Japan - track access

  1. 1. Rail freight problem in Japan - Difficulty accessing for rail track - Shigeki Ozawa 1 ITS Research Seminar (1st December 2016)
  2. 2. Agenda ■ Separation and Privatization of Japanese National Railways(JNR) ■ Current Sate of Rail freight transport in Japan ■ Problems of Rail freight transport in Japan(sorting out the problems) ■ Rail freight problems caused by track access (problems in Railway industry) + ■ My current study 2
  3. 3. Separation and Privatization of JNR 3
  4. 4. ■Development of mortorization ■Inefficient operation as Public body ■Labor dispute (strike, sabotage) 1960’s ~ ■High fee (repeated fee increase: 1974, 76, 78~82, 84~86) ■Bad service (rolling stock, delivery service, attitutes of empoyees etc.) Big deficit as serious social problem 1970’s ~ 1987 Separation and Privatisation of JNR c.f. UK Railway privatisation in 1997 Background of Separation and Privatization of JNR 4
  5. 5. Japanese National Railways (JNR) ・ Hokkaido Railway Company ・ East Japan Railway Company ・ Central Japan Railway Company ・ West Japan Railway Company ・ Shikoku Railway Company ・ Kyushu Railway Company ・ Japan Freight Railway Company Separation and Privatization of JNR Separation by region 5
  6. 6. FreightCompany PassengerAPassengerCompanyF PassengerAPassengerCompanyE PassengerAPassengerCompanyD PassengerAPassengerCompanyC PassengerAPassengerCompanyB PassengerAPassengerCompanyA access Network Rail TOCA TOCB TOCC FOCA FOCB …. …. access access Rail Track Rail Track JNR BRB Comparison of National Railway Separation/Privatization 6 PassengerTrainA PassengerTrainB FreightTrainA ….. ….. PassengerTrainC FreightTrainB PassengerTrainA PassengerTrainB FreightTrainA ….. ….. PassengerTrainC FreightTrainB
  7. 7. Current state of rail freight in Japan 7
  8. 8. Rail Freight Network Rail Freight Network Length 83,473km 8 UK Railway Network Length 16,423km (source:IBRD)
  9. 9. High Density Area TokyoOsaka Nagoya Fukuoka Sapporo 9 1,000km
  10. 10. Domestic Freight Volume in Japan 10 0 100 000 200 000 300 000 400 000 500 000 600 000 700 000 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Air Truck Rail Ship Million Ton-km
  11. 11. ton over Truck Ship Rail Modal share by distance in Japan 11
  12. 12. Rail freight Transport Volume Comparison between Japan and UK ⇒ Freight trains in Japan are operated on long distance ⇒ Coal trains in U.K. are operated on short distance Freight moved(billion ton-km)Freight lifted (million ton) 22.221.1 44.1 110.5 Coal (43.5) 12
  13. 13. Goods transported by rail freight Intermodal 68% Intermodal 29% Petroleum products 21% Coal 29% Construction 18% Metals 8% Oil and Pertoleum 5% International 3% Other 8% Cement 2% Lime stone 2% Metallic minerals 1% Coal 1% Chemical drugs 1% Other 4% Sorted by ton Sorted by ton-km 13
  14. 14. Rail freight problems in Japan (Overall sorting out the problems) 14
  15. 15. Needs for Rail freight and actual condition 15 Government have tried to shift truck to rail - Subsidy for rail facilities, new transport with rail freight - Interest subsidy for rail facilities - Preferential tax treatment for rail facilities However government actions don’t achieve the shift ■ Truck driver shortage ■ Environment problem ■ Traffic congestion ■ Traffic accident (especially dangerous goods transport) The policies don’t work (They are in trouble) Background External cost happen
  16. 16. Problem outsideof railway Disadvantage of rail freight as compared with truck Causes ○Characteristic of rail freight transport ・Higher rate in case of small amount and short distance ・Train operation in specified time and section (difficulty making flexible response) ・Difficulty for recovering traffic incident ・Necessity for corporation with truck transport ○Poor infrastructure (handling station, access road to handling station, freight yard, evacuation track, handing machine) ○Inadequate container or swap body(not to meet needs (capacity, figure, damage avoidance) of shippers ○Regulation(entry/exit, fare, truck transport) ○Original rule and Common practice in railway (lot, unit, separated fare) ○Train operation by monopoly (Barrier for efficiency and cost reduction) ○Competitive relationship between rail freight company and forwarding company (poor sales power) ○High employment cost and large number of labor ○International Border (inconsistent of standard, system, regulation and low) Problem areas □Higher track access charge □Unstable rule to make track access charge low □Difficulty to prove trains to meet shipper’s demand (Passenger trains have a high priority) □Lack of Incentive for improving efficiency Problem areas □Higher rate □Longer transit time (lead time) □Worse transport qualities (damaged shipment) □Lack of trains to meet shipper’s demand(time zone, section) □Unstable train operation (delay, poor response to recover after rail incident) Causes ○High access charge for freight train (unbalance between freight train and passenger train) ○Fixed slots (time table) Absent of adjustment and arbitration system ○ Adversarial relationship between train operators or between train operators and infrastructure manager ○No competitor in rail freight haulage market Problem insideof railway Problem between train operators or between train operator and infra-manager Possibility of shifting to rail freight Non/poor shift from truck to rail freight □Small amount transport □Short distance transport □Adhock transport demand □Characteristic of freight No possibility of shifting to rail freight Summary of the points for not developing rail freight transport Problems of road transport -Barriers to increase road Transport- ■Traffic regulation -Noise regulation -Environmental regulation (Exhaust gas regulation) -Congestion regulation ■Charging for highway ■Bottle neck -Geological condition -Weather ■Shortage of driver Red.:especially happed in Europe Purple.:especially happed in Japan Railway industry issue Intermodal issue 16
  17. 17. 17 Problem inside of railway Problem between train operators or between train operator and infra-manager Problem areas □Higher track access charge □Unstable rule to make track access charge low □Difficulty to prove trains to meet shipper’s demand (Passenger trains have a high priority) □Lack of incentive for improving efficiency Purple.:especially happed in Japan
  18. 18. 18 Problem inside of railway Problem between train operators or between train operator and infra-manager Causes ○High access charge for freight train(unbalance between freight train and passenger train) ○Fixed slots (time table) - lack of adjustment and arbitration system ○Adversarial relationship between train operators or between train operator and infrastructure manager(rail track owner) ○No competitor in rail freight haulage market
  19. 19. Parcel Companies (e.g. YAMATO, SAGAWA) want to increase rail freight transport especially between Tokyo and Fukuoka (ca. 1,000km) Over 1000km transport……… - Truck driver shortage - Carriage Cost - Affordance of transport time (2 days-later deliver is allowed over 1000km move) Developed Parcel service in Japan - within 1000km area, we can send parcel by next-day delivery with cheaper price However they cannot do it, because of capacity constrain (Freight company can not increase the number of freight trains) Rail freight demand increase in parcel industry 19
  20. 20. Passenger companies refuse the request from freight company ↑ Because passenger company don’t want to give up their capacity to freight company and wants to do railtrack maintenance work on their convenience schedule (⇒Passenger company seeks for their profit maximization) Gap between passenger company’s profit maximization and social benefit maximization ⇒Market failure ⇒Need for government intervention Passenger company’s behaviors 20
  21. 21. Rail freight problem regarding track access in Japan (problems inside rail industry) 21
  22. 22. Track access rule(condition) ■Track access charge : incremental cost (=MC) ■Rail track is owned/managed by passenger companies ■Passenger companies and freight company are competitor for using same rail ■Rail track use is regarded as commercial transaction (Government don’t want to touch the use) Freight company cannot take slots required Capacity (slot) is not allocated efficiently - High willingness to pay is ignored - It is impossible to make policy with access charge and slot allocation (lack of opportunity to take slot) Government intervention is required for efficient capacity allocation 22
  23. 23. Passenger Train Freight Train Rail Truck managed and owned by Passenger Company Access pay access charge Government don’t touch the problem regarding truck access (Government regard the access as commercial transaction) Commercial transaction between passenger company and freight company 23
  24. 24. Passenger Train Freight Train Rail Truck managed and owned by Passenger Company Access pay access charge Government don’t touch the problem regarding truck access (Government regard the access as commercial transaction) Commercial transaction between passenger company and freight company Reject ! Freight trans can not be increased, despite of big demand × 24
  25. 25. Freight company is in disadvantageous position………. ■ there is no “appeal” system (no arbitration body) ■ Rail track is essential capital for freight company (Hold-up problem) ■ Passenger companies ask freight company to pay much access charge if freight company get much profit (lack of incentive to maximize profit) ■ Freight company has fear of “tit-for-tat” from passenger companies Freight company’s standing 25
  26. 26. Rail Track Owner Passenger companies (Private company) Network Rail (Public Body) Relationship between Freight company and Rail Track Owner Competition (for using same rail rack) Complementary Freight train Access Charge MC MC (Passenger: MC+/-) Response for conflict Government(ORR) solves conflict Government don’t want to touch Rail track issues Freight company is in disadvantageous position 26 Track access Comparison between Japan and UK
  27. 27. Needs for government intervention (Limit of market mechanism ) - Access charge can’t achieve efficient slot allocation- ■ Difficulty to set access charge by Social Marginal Cost (SMC) - Difficulty to calculate SMC (SMC changes by time and place) - Information asymmetry between government and rail track owner ■Limit of auction -Needs for many auctions (one train concerns many other trains because railway is network) - Information asymmetry between incumbent operator and new comers - Endowment effect, IKEA effect (incumbent has much higher WTP) 27
  28. 28. 28 Needs for government intervention (Limit of market mechanism ) - Access charge can’t achieve efficient slot allocation- ■Limit of transaction between operators - Supply monopoly happen due to no substitute - Slots are captured for the purpose of speculation - Slots are captured for the purpose of obstruction for competitor - Information asymmetry between seller and buyer - Transaction cost happen - Endowment effect, IKEA effect (incumbent has much higher WTP) - WTP difference depend on scale of operators
  29. 29. Sorting out problems (as Conclusion) ■Access charge is set by MC, but freight company can’t take slot required - Passenger companies have high priority to use rail track - Market mechanism does not work in rail track use in Japan - Freight company’ position is weak (Hold-up problem etc.) ■There is no opportunity to appeal for government and no arbitration body (Government don’t want to touch rail capacity problems) ● Efficient slot allocation is not achieved ● Current cconditions prevent new entry 29 ■ Rail freight (freight company) could be victim of passenger rail prosperity - Government intervention is needed to develop rail freight in Japan ■ Lack of combination between railway policy and intermodal policy - Railway reform has not been completed yet
  30. 30. Current Study 30
  31. 31. Meaning of study British rail freight policy ORR has been trying to achieve efficient slot allocation ↓ Until now, slot allocation and access charge in main line have been treated in academic area. However, slot allocation in freight terminal has not been treated ↓ With studying slot allocation in freight terminal, we can see and consider “true/actual” efficient slot allocation of freight train and rail freight policy Motivation of current study Considering that Japanese government don’t concern with slot allocation of freight trains………. I would like to know: - how ORR try to achieve efficient slot allocation - how ORR take care for freight trains in slot allocation - what kind of help does ORR provide for freight trains 31

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