JR Hokkaido And The Local Community: How Should The Restructuring Plan Be Approached at A Critical Juncture?

Editorial

14:59 JST, May 4, 2026

It has been nearly 40 years since the former Japanese National Railways was split up and privatized in 1987. The issue of restructuring Hokkaido Railway Co., which was expected to face financial difficulties from the outset, is now reaching a major turning point.

To what extent can the local community continue to support the railway network? The company’s plan will serve as a litmus test for determining the outcome.

JR Hokkaido has announced a business restructuring plan centered on a vertical separation method in which the company will operate the train network, while local municipalities along the lines will own the tracks, train cars and other facilities.

The aim is to have local governments bear the costs of maintenance and management, thereby reducing the number of sections operating at a loss of about ¥15 billion.

Such a vertical separation method is common in Europe, and Japan also has many cases in which it has been used to eliminate deficits on local lines.

However, JR Hokkaido’s latest plan targets eight deficit-ridden sections, including the Soya Line and the Senmo Line, covering an unprecedented scale of nearly half of its ordinary lines. The impact on residents in Hokkaido would be huge. Negotiations with local governments over the financial burden are bound to be difficult.

JR Group, established following the privatization of the JNR, consists of seven railway companies: three companies in Honshu, the largest of the four main islands of Japan — East Japan Railway Co., West Japan Railway Co. and Central Japan Railway Co. — and one each on the other main islands of Hokkaido, Shikoku and Kyushu, as well as Japan Freight Railway Co. While the three Honshu companies and Kyushu Railway Co. became listed companies after they had been privatized, JR Hokkaido, Shikoku Railway Co. and the freight company remain under state control.

With their limited numbers of passengers, JR Hokkaido and JR Shikoku are seen as the dark side of the privatization. For the Land, Infrastructure, Transport and Tourism Ministry, restructuring has remained a major challenge. The reality is that the state coffers, from which funds have long been drawn, are now strained, making it increasingly difficult to provide further support.

In fiscal year 2024, all 20 of JR Hokkaido’s sections posted operating losses. The total deficit amounted to ¥58.2 billion, and operating at a loss has become the norm.

In an age of declining population, how much of a financial burden can be tolerated, and how much of the railway network should be maintained? JR Hokkaido and local residents must sincerely face this issue and work together to find solutions.

The lines potentially affected are said to serve as critical infrastructure supporting the transport of goods such as onions. Some argue that their discontinuation would deal a major blow to regional logistics. There are likely regional circumstances unique to the area that cannot be measured solely by profitability or passenger numbers.

In March, the ministry requested that JR Shikoku compiles a vision for the future by fiscal 2030 regarding sections with extremely low passenger numbers. JR East and JR West also face issues with deficits on local lines.

In 2023, the ministry established a mechanism to set up a council through which the government will mediate discussions on restructuring between railway operators and local governments. It is hoped this framework will be utilized to facilitate such discussions.

(From The Yomiuri Shimbun, May 4, 2026)