Skift Take

Average train delays of 36 seconds every year? Who could complain about that kind of service? The Japanese icon JR East is one of the subjects in Skift's recent sixth anniversary book, For the Long Haul, Lessons on Business Longevity, whose chapters we are excerpting for you here in the coming weeks.

The distinctive snub-nosed train decelerates and pulls into the station. Arranged along the platform, uniformed attendants bow to greet it. Passengers stream out, toting bags and briefcases and elaborately wrapped gifts as the attendants signal with a few pointed fingers that cleaning is about to begin. They wipe every surface, smooth a fresh paper cover onto every headrest, spin every seat to face the right direction, and remove every scrap of rubbish so that the train is sparkling again — all in a total of seven minutes. New passengers stream in, white-gloved conductors conduct their own theatrical call-and-response routine, a high-pitched bell and buzzer sound, the cleaning attendants bow again, and the train rolls off.

This mundane-yet-remarkable scene occurs at least 100 times a day at Tokyo Station alone, accompanying each new shinkansen (“bullet train”) departure. The absolute control is staggering. In a year, there is only an average delay of 36 seconds. In transporting a total of 10 billion shinkansen passengers across Japan in 50 years, there has never been a fatal accident or serious injury. The shinkansen has been Japan’s emblem of modernity since the 1960s, and is symbolic of the efficiency, safety, service, and high design of the country’s train system as a whole.

Few international travelers forget their first encounter with the Japanese rail. From its unbelievable punctuality, to the immaculate plush seats, to children as young as five riding the subway alone to school, to the distinct electronic melodies that denote each station, to the gourmet eki-ben boxed meals available at platform kiosks, to the terrifying and sublime experience that is Shinjuku Station at rush hour: train travel is just different, and better, here.

Read About the Secrets to Business Longevity in Skift’s New Book, For the Long Haul

Today, Japan’s railways carry more than 9 billion passengers per year, more than anywhere else on Earth, coming and going from more than 9,000 stations, along 27,000 kilometers of track that connect the nation. There are 200-plus railway operators in Japan, but none is more iconic than JR East, the country’s largest private railway company. Beyond simply shuttling people back and forth, JR East is a fundamental part of the face Japan presents to the world, and the business is managed as such. “JR certainly has become a symbol for Japan as a nation,” says W. David Marx, a renowned scholar of Japanese cultural history and author of the recent book on its fashion history, Ametora.

A Complex History

JR East only just celebrated its 30th anniversary, but as part of the larger JR Group that emerged from the Japanese National Railway, it can be connected to the much longer heritage and history of Japanese trains.

In 1872, Japan’s first steam railway opened between Tokyo and Yokohama. Colorful ukiyo-e prints from the time illustrate the train as symbol of a rapidly changing nation, foreshadowing how prominently it would figure in the national imagination over the coming century. Only a few years earlier, the Meiji Emperor had ended an official policy of 250 years of isolation and embarked upon a breakneck modernization campaign to ensure Japan could survive the threat of Western expansionist powers. The emperor and other leaders of the Meiji Restoration urged “throwing open the doors to foreign technology” in order to make Japan a global power on its own terms.

In the case of the railways, that meant bringing in British financing and engineers to build the first locomotives, but quickly training local workforces to extend lines across the country. Iron gauge was laid over rice paddies, around temples, through mountains, across islands, and under the busy thoroughfares of growing cities — by 1927, subway lines began service in Tokyo (starting with the Ginza and Ueno-Asakusa lines).

During its early years, the railway was owned and operated by a tangle of government and private entities, but by 1949, during the U.S. occupation, most major private railways were reorganized into Japanese National Railways (JNR). JNR set about rebuilding and reconnecting a nation shattered by war, and later radically reshaping the nation’s sense of time and space during the “economic miracle” of the 1950s and 60s.

The launch of the shinkansen in 1964, just in time for the Tokyo Olympics, turned areas like Chiba and Saitama into commuter cities overnight, as salarymen could live there for cheaper rents and realistically commute into offices in Tokyo. Ever since, the shinkansen and subways have been featured prominently in films, TV, literature, manga, and pop culture, and obsessive “train fandom” culture illustrates how embedded they are in the Japanese psyche.

However, 1970 was the final year that JNR ran at a profit. From then on, it was in the red, due to the rising competition of automobiles and airlines, as well as disruptive labor disputes and politically pressured investment in unprofitable new constructions. In 1987, $33 billion (¥37 trillion) in debt, it was privatized and split up into the seven distinct regional companies of the new JR Group: JR East, JR West, JR Central, JR Shikoku, JR Kyushu, JR Hokkaido, and JR Freight.

JR East Today

Based in Tokyo, JR East is the largest and most recognizable of the JR Group companies, indicative of Japanese train travel as a whole. It’s also considered an economic success story, having gone public on the Tokyo Stock Exchange in 1993, and earning $2.5 billion in profits last year with an annual growth rate of 13 percent. (As a quick comparison, America’s beleaguered rail company Amtrak required a $2 billion government bailout last year to stay afloat.) JR East operates all the shinkansen north of Tokyo (effectively half of the country), as well as overnight trains, long-distance trains, and dozens of regional and commuter lines in rural and urban areas, including many in Tokyo that are treated as essential parts of the urban public transit system (like the Yamanote line). For many locals as well as travelers, JR East is the only JR Group company they regularly interact with, embedding it as a systemic brand for transportation.

JR East shares the same logo as the other JR Group companies, created by Nippon Design Center in 1987, but in a distinctive evergreen color. “JR East is known for being relatively adventurous in terms of advertising,” says Ian Lynam, graphic designer and faculty professor at Tokyo’s Temple University and scholar of typographic history, referencing their popular “skiing ostrich” TV campaign from 2003, and recent forays into coarse Risograph aesthetics mimicking “what the hip indie kids do.” Yet the combination of changing campaigns and the company’s fundamental ubiquity means that their identity is subtle, more about what their values accomplish than what a logo communicates.

Prime among these would be a dedication to “service” that’s more profound than just polite station attendants (though there are plenty). It’s about building trust, adapting to needs, and providing lasting value. For the past few years, after a slight increase in non-fatal accidents across JR Group trains (excluding shinkansen lines), the JR East official company mission statement has highlighted “Pursuing Extreme Safety” as a top priority, and re-dedicating efforts to not only invest in infrastructure safety upgrades, but to prevent human error. This is made visible in the decades-old spectacle of the point-and-call system that travelers immediately recognize, and is being supplemented by new training and reporting protocols for staff.

They’ve also tackled specific high-profile hazards, such as people committing suicide by jumping in front of trains. Japan has long had one of the highest suicide rates among developed nations, with trains being one horrifying method, leading railways to experiment with various forms of deterrence. JR East was the first to install blue LED lights on the platforms of its Yamanote Line in 2009, and soon other lines and companies followed. Over the first four years, they saw an 84 percent decrease in suicides at stations with these lights (researchers are still not sure why they work, but they appear to). In an uncertain world, particularly after the Great East Japan earthquake and tsunami of March 2011, the company’s overt and obsessive focus on safety is reassuring.

Speed and efficiency are the other key components of service that JR East embodies, so well-maintained that they’re only noticeable on the rare occasions there is a glitch. Says Marx, who has lived in Tokyo for 14 years: “When the trains don’t run on time, especially during morning commutes, all hell breaks loose. The city is built on JR’s punctuality so there’s amazing pressure for them to keep it going.”

These could all be seen as extensions of omotenashi, the value of hospitality and care that is ingrained in Japanese society. But it’s one thing for a family, or even a traditional ryokan, to host a few guests. JR East hosts 18.5 million guests daily. At rush hour, commuters become sardines, just like they do in most cities. But much of the time, the experience is comfortable, even delightful.

Ever since Japan deregulated its airline industry in 1996, it was predicted that airline discounts and new low-cost carriers would decimate the railway’s market share of domestic travel. That has continually failed to happen, despite flights that are often cheaper and shorter than their train equivalents.

A one-way trip between Tokyo and Osaka is 2.5 hours by shinkansen and costs around $130, while that flight on a low-cost carrier is less than half that (as low as one hour and $40). But most passengers on this, and other key routes, prefer the train for convenient in-city stations (compared to airports), smoother security and departure/arrival procedures, and the fact that even an economy seat on a train is far more spacious and comfortable than those on budget airlines. Some regions are starting to see encroachment, such as the train between Tokyo and Kanazawa which now has a 42 percent share of travelers compared to low-cost carriers, but JR East and JR West are jointly constructing a new, more direct shinkansen link to recapture those passengers. Until considerations of cost far outweigh experience and service, it seems air travel won’t unseat domestic train travel just yet.

This relates to JR East’s other great coup: the ability to balance serving very different sets of customers (and investors) at once, and in effect, having a split personality as both an everyday utility for commuters and a memorable travel experience for tourists both foreign and domestic.

For international travelers, the greater JR Group offers the JR Pass, an incredibly popular discount pass that allows seven days of train travel across all the JR systems. It’s only available to foreign-passport holders, must be reserved prior to arrival in the country, and has been effectively marketed as a must-have for first-time visitors. There are also multi-language help desks in many stations (Mandarin is an increasingly popular option), and plans to further help foreign visitors navigate the train system in time for the 2020 Olympics. Some stations now even boast halal ekiben boxed meals. This new wave of internationalization could be seen as a radical adaptation in a country that is so proud of its own traditions (and which continues to have very restrictive immigration policies).

Even more crucial to JR East is domestic tourism. In the 1970s, Japanese National Railways launched the “Discover Japan” campaign, inventing the concept of furusato (hometown) tourism — hip young urbanites hitting the rails to explore small towns and rural areas. One can see echoes of this in JR East’s new “Rediscover the Region” campaign, launched in 2016, which is meant to drive tourism to smaller cities and the countryside where economic growth has stagnated. Starting in 2011, the “Get Back Let’s Go, Tohoku” campaign was designed to help pump tourist dollars into Tohoku region, recently devastated by the Fukushima quake and tsunami.

These campaigns often extend to product development as well, including the popular new Oyatsu TIMES, a series of snacks from different regions of Japan, with nostalgic packaging to mimic a local newspaper that has information on the locale and tips on travel. Bored urbanites might pick up the snack at a station kiosk for their commute home and come away with a plan for their next vacation.

Another way to drive tourism and refresh the company’s image is the Joyful Trains series, colorful and quirky trains with themes like modern art, Pokémon, and a handful of still-operating old-fashioned steam trains. This embrace of pop culture and nostalgia shows JR East’s flexibility to try new things, mixing high and low.

On the higher end, there is also the brand-new, ultra-luxury Shiki-Shima train unveiled in May, which runs from Ueno station to northeast Japan, with stops in vineyards and ancient resort towns along the way. Designed by former Ferrari designer Ken Okuyama, it boasts food by Japan’s first Michelin-starred chef, a piano lounge, and ticket prices starting at $3,000 (it’s currently sold out through next spring).

These initiatives point to JR East’s desire to innovate in the product category, but also the entire travel experience, radiating out to lifestyle in general. For most of its existence, JR East has been focused on railway business, with lifestyle services as a support, but in a recent interview, CEO Tetsuro Tomita noted, “Going forward, we must aim for an era in which the lifestyle service business drives the growth of the railway business.”

Though passenger ticket sales still account for 70 percent of JR East’s revenue, Tomita clearly foresees a future in which that may need to change. Therefore, the company is ramping up development in its other business sectors, which include train stations (they run the highest-volume transit hub in the country, Tokyo’s Shinjuku Station); exporting trains and engineering overseas; retail operations; restaurants and food products; hotels; travel agencies; credit cards; and large-scale real estate and urban development projects. New initiatives include the recently opened JR Shinjuku Miraina Tower, and the buzzed-about New Shinagawa Station that will launch in time for the 2020 Olympics, and transform a former rail-yard into a new destination district for southern Tokyo.

Adapting to a Changing Landscape

Investing in new business areas is only one way JR East is trying to secure the future of the company against challenges to come. In some industries, a product may become obsolete, or a brand may go out of style, but people will need transportation in and around Tokyo for some time (not to mention shops, restaurants, and other lifestyle spaces). It seems JR East’s biggest tests will come in the form of how many people, and in what regions, and other uncertain shifts of the literal landscape.

Climate change is of course a concern worldwide, but particularly in Japan, the government and corporate sectors are carefully planning for rising sea levels, severe weather, and other disruptions. The country is perhaps uniquely well-equipped for this, based on its long history of natural disasters like earthquakes and tsunami, but events like the 2011 Great East Japan Earthquake and subsequent tsunami and nuclear meltdown in Fukushima proved that even the best preparation is sometimes not enough.

On the day of the earthquake, JR East’s train lines suffered damage at 4,400 locations (with another 850 locations hurt a few weeks later during a major aftershock); total economic losses from the disaster due to interrupted service and massive reconstruction were estimated at $550 million. It’s clear that JR East, like any national infrastructure, is at risk from future climate change or other, less predictable natural disasters.

One of the biggest changes facing Japan in particular as a whole is its aging population, which will impact every aspect of the economy and culture.

Due to national longevity, along with declining birth rates and little inbound immigration due to highly constrained immigration rules, the “aging of society” (as JR East’s annual report puts it) has been a predicted concern for some time. Current projections estimate that the population will fall to 100 million by 2050 (in comparison with 126 million today), with 40 percent over the age of 65. In terms of train travel, one necessary change that JR East is tackling is improving train and station accessibility for the elderly and those with disabilities.

These and many other upgrades are planned to be in place by the 2020 Tokyo Olympics (for which JR East is an official partner), which is seen as a major test and turning point for Japan. Though tourism has been increasing over the past many years (19.7 million overseas tourists visited in 2015, up 47 percent from the year prior), the government wants to hit a target of 40 million by 2020 and 60 million by 2030.

“Promotion of tourism is one of the most important policies of Abenomics,” says Masahiko Takei, consul and infrastructure specialist at the consulate general of Japan in Los Angeles, referring to Prime Minister Shinzo Abe’s economic policies.

This goal can be seen as another way to compensate for an aging populace. As Japan’s population gets older, and shrinks overall, fewer people will be riding trains, so hopefully if fewer old people, and eventually a smaller Japanese population, are riding trains, they could be supplemented by foreign customers. But even with an influx of tourists, the reshaping of the economy and labor force will have an impact. It’s striking to note that many JR East employees are middle-aged and older to begin with, and a considerable percentage will soon start retiring. In their latest annual report, CEO Tomita has one slightly bleak suggestion: “I believe we can use robots to clean railway stations and provide customers with guidance information. In particular, robots are an effective way of compensating for manpower shortages and increasing productivity.”

Of any country in the world, Japan seems uniquely prepared to safely experiment with artificial intelligence and automated transport. Some are even bullish about Japan’s ability to innovate around the aging issue. “There are a lot of challenges for us, but Japan could be a pioneer to overcome a super aging society,” says Takei. After all, he points out: “It might be the same in the United States in the future.”

Beyond the demographic shift, there is also a geographic one: the shift of population from the countryside to cities that has happened for decades, and may now be accelerating. Though speed has always been one of the highest achievements of the Japanese rail, there is a growing ambivalence about its consequences.

By 2027, JR Central’s new Maglev train is set to begin operating between Tokyo and Nagoya, making the journey in just 40 minutes (less than half the current speed by shinkansen). Osaka will be next. This will be faster for commuters, but also mean that cities in between may get skipped over as desirable commuter home bases (why live in the Bronx if you could live in the Hudson River Valley and commute for the same price and time?). Similar concerns have arisen in the conversation around Elon Musk’s proposed Hyperloop trains in the United States.

Then again, there may be great opportunity to revive rural towns due to the so-called “I-Turn” phenomenon, in which millennials fed up with city life are moving to small rural towns with the hope of opening bakeries, organic farms, and other LOHAS (“lifestyles of health and sustainability,” as the slang term runs) endeavors. “Small towns are now actively trying to lure in young people, by offering free residence, or even subsidizing them with some startup funding,” says Hideki Hara, director of the Japan Foundation in Los Angeles. JR East and the other JR Group companies have vigorously supported this trend, with travel discounts and other programs — which is perhaps striking if one imagines how unlikely it would be for Amtrak to support entrepreneurs moving to Detroit to start their own organic restaurants.

It’s good business to keep up transit between urban and rural areas, given how many rural lines are in economic trouble. But it also reveals one final aspect of JR East’s company philosophy that is not to be underestimated: its very real sense of responsibility to its region and the nation.

As stated by CEO Tomita in this year’s annual report, “The very existence of the JR East Group depends on the health of the east Japan area and of Japan as a whole.” This awareness of the interdependence of the company and community is necessary for JR East’s survival as a business, but also feels authentic to the public. Directly or indirectly, there’s a perception that JR Group ultimately makes decisions driven by its sense of duty (giri), not profit. Due to this authenticity, they’ve earned the ability to tap into the repository of emotions, nostalgia, and patriotism around trains.

“Growing up in the countryside, the train is something that feeds our imagination, because you know it’s connected to the big cities,” says Hara, describing the nostalgia felt by many in his generation. “Unlike a plane — when it’s gone, it’s gone — with the train, you have the rails and so forth, so you can visualize the path to bigger opportunities.” Trains have been part of Japan’s narrative of national progress for so long that they became highly personal in the process as well. “People feel it close to their hearts,” Hara adds.

JR East serves as a catalyst for these emotions, even during seemingly routine operations, in ways that most brands can only dream of. In early 2016, JR East retired several 250-series train cars from the Nambu line for export to Jakarta. On the last trip of one train prior to retirement, the conductor made a farewell announcement that ended, “We sincerely hope that you take all of your happy memories of being on this train home with you for safekeeping as well.” Passengers took to Twitter to express how moved they were by the speech, which quickly went viral.

One passenger tweeted, “I cried out loud.”

Samantha Culp is a writer, producer, and strategist based in Los Angeles after a decade in greater China.


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Tags: japan

Photo credit: One of JR East's snub-nosed trains who serve millions of passengers a day across Japan. Flickr

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