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Sunday, Dec. 5, 2010


A Tokyo subway merger?

This year saw author, social critic and Tokyo Vice Gov. Naoki Inose call for uniting Tokyo's two subway systems, Tokyo Metro and the city-run Toei subway. The two sides have entered talks but are still far from agreement.

Why does Tokyo have two parallel subway systems in the first place? The present Tokyo Metro dates back to 1941, when prewar subway lines — presumably safe from bombing raids — were consolidated in the name of wartime security. The Toei system, on the other hand, started in 1960 to meet infrastructure needs during Japan's period of high economic growth.

Due to its late start, the Toei system has less profitable lines that were also more expensive to build. Although it has been in the black on a yearly basis since 2006, its long-term debts exceed a trillion yen. Toei remains the "little brother," with four lines and 2.3 million passengers a day versus Tokyo Metro's nine lines and 6.3 million passengers.

Under a 2004 law, Tokyo Metro, jointly owned by the Japanese government and the Tokyo Metropolitan Government, is to be completely privatized, perhaps making more difficult a merger. Aside from legal considerations, the national side doesn't want its potential selloff windfall of ¥300 billion to ¥400 billion spoiled by taking on the Toei's debt burden.

On Oct. 26, a panel of experts reported that combined profits of the two systems would drop by ¥5 billion a year in a merger (due to lowered Toei fares and loss of the premium now charged when transferring between the two systems). Inose argues that the loss would be offset by staffing cuts, shared facilities, increased passengers due to lower fares and increased ad revenues.

Although Mr. Inose's arguments seem overoptimistic, he does raise interesting questions of how profits from passenger fares should be put to use now that there are no plans for constructing new lines. Already his initiative has had some effect. On Nov. 17 the president of Tokyo Metro announced the possibility of decreasing the fare for passengers transferring between the systems and of remodeling stations to make transfers between the two more convenient.

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