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automobiles and operated with increasing losses until the late 1960s. Although the environment
around railroad systems was changing rapidly, the JNR could not respond to the changes; i.e.,
it could not restructure its business and improve productivity; therefore, it reached an impasse
in the 1980s. The main reason for this was that the JNR was not cost-conscious and did not
take into account many regional circumstances. As a result, it was privatized in 1987, and
divided into six regional passenger companies and a single freight company. Although all of the
stock for these companies was still owned by the national government at that time, a certain
number of shares in the East Japan Railway Company (EJR) were released to private investors
in 1993 and that of the West Japan Railway Company was released in 1996. Most companies
have been operating in the black and have substantially improved their services.
The EJR operates intercity and commuter trains in the eastern part of the main island of
Japan; its operating area includes the Tokyo metropolitan area. It runs over 12,000 scheduled
trains every day on its 7,500 kilometers (4,460 miles) of tracks, serving more than 16 million
passengers daily. 3 The EJR consistently generates earnings that are among the highest of all
Japanese companies. Its operating revenues and operating income have been Y1.9 billion
($15.3 million4 ) and Y400 million ($3.3 million), respectively, over the last five years.5
Since the founding of the EJR, it has broadened its range of business, and is now
involved in travel, retail, hotels, real estate, credit cards, and other side-businesses. Although
the revenue share of the side-businesses rose from five percent in 1987, to eight percent in
1995, it is still far below that of the large private railroads.
The EJR operates 72 shopping malls through 46 subsidiaries, whose sales amounted to
about V840 billion ($7 million) in 1995, making the EJR group the sixth largest retailer in
Japan. 6 These shopping malls all include station facilities in the same building, and for that
reason, they are called "Station Buildings." A station building is based on the same concept of
3 East Japan Railway Company, Annual Report '96, 1996, p. 10. (in Japanese)
4 The exchange rate used is Y120 = $1.00, the rate prevailing at the beginning of 1997. This rate will be used
hereafter, unless otherwise specified.
5 Ministry of Transport, Rail FactBook '96, 1996, p. 73. (in Japanese)
6 East Japan Railway Company, Guidebook for Affiliated Enterprises, 1997. (in Japanese)