WITH vast screens lighting up its exterior, Shibuya Scramble Square is the latest glitzy addition to Tokyo’s skyline. At 230m, the 47-storey tower is the tallest building in the Shibuya district of the city. It is also the latest symbol of East Japan Railway’s (JR East) evolving business model.
JR East worked alongside Tokyu Corporation and Tokyo Metro to develop the skyscraper, which opened on November 1 to great fanfare on a typically busy Friday night in the Japanese capital. Locals and tourists patiently queued outside to sample the new restaurants, hotel facilities, shops and bars. Some were even lucky enough to get a 360-degree birds-eye-view of the city from the Shibuya Sky viewing platform, the largest such facility in Japan.
For JR East the building is a key addition to its growing portfolio of property and commercial developments, which now account for a significant chunk of the railway’s annual revenue.
At the end of March 2019, JR East owned 169 shopping centres and leased 380,000m² of office floor space while its hotels have a total of 7420 rooms. Total revenue from Retail and Services was Yen 521.9bn ($US 4.8bn) for the fiscal year which ended on March 31, while Real Estate and Hotel activity brought in Yen 349bn.
These numbers are testament to the success of the railway’s Station Renaissance programme, which was launched in 2002. Along with the railway’s smartcard payment platform Suica and IT services, which generated Yen 54.7bn in revenue in fiscal 2018-19, this section of the business accounts for approximately 30% of the railway’s total revenue of Yen 2.95 trillion.
This is a significant shift from the situation at the railway’s founding in 1987 when non-transport revenue accounted for only around 10% of total income of Yen 2 trillion. And it is a trend that looks set to continue.
Speaking to IRJ in Tokyo Mr Hitoshi Saimyo, JR East’s senior executive officer in charge of international affairs as well as the incoming UITP president for Asia Pacific, says the railway expects Lifestyle and IT, and Suica services to account for 40% of total revenue by around 2027 and the culmination of the Move-Up 2027 strategic plan.
However, Move-Up 2027 is more than simply JR East’s capital investment programme for the next 10 years. It is a response to the major social changes taking place in the country.
“We know that the railway market, partly because of the declining population, will not continue to grow substantially in the future”Hitoshi Saimyo, senior executive officer JR East
Japan’s decreasing birth rate and an ageing population - around a third of Japanese are over the age of 60 - is a major national concern. There is also a growing anxiety among Japanese about their work-life balance and overall quality of life. Exposure to new values through social and economic globalisation are changing traditional views. There is similarly an understanding that new technological innovations such as Artificial Intelligence and the Internet of Things will alter the way people interact with their surroundings.
“We know that the railway market, partly because of the declining population, will not continue to grow substantially in the future,” Saimyo says.
To achieve the 60:40 revenue target, JR East is striving to create an environment where it is easier to use railways and stations, increasing the opportunity to extract more revenue from both railway and non-railway users. Shibuya Scramble Square epitomises this approach.
Shibuya station is used by 2.8 million people per day and is the second busiest in the world behind only neighbouring Shinjuku, which is used by 3.5 million. The new building sits adjacent to the station and on the previous site of Tokyu Railway tracks which have been relocated underground. As well as commercial areas, which are home to 213 business, 49 of which are opening in the district for the first time, the tower has 73,000m² of office space on floors 17 to 45. Other nearby real estate developments which have or are on the verge of opening also emphasise the importance of the station as a hub for economic activity in the revitalised area.
As well as Shibuya Scramble Square, JR East is developing what it describes as a new Gateway City adjacent to Shinagawa station in the south of Tokyo. Work to relocate Yamanote Line tracks at the site to provide space for seven new buildings, which will be constructed here and at the site of a former yard, was completed on the weekend of November 16-17. The new urban centre is expected to open around 2024.
The site is adjacent to the new Takanawa Gateway station, which has been selected as a Tokyo Olympic 2020 Live Site venue and is set to open next spring. In addition, JR East is working on the Takeshiba Water Development Project adjacent to Hamamatsu-cho station on the Yamanote Line and the terminus of the Tokyo monorail to Haneda International Airport.
“Originally there was a small hotel, we had company housing and a factory there for producing tickets,” Saimyo says. “We are now going to build a new hotel, commercial facilities and a theatre. We have already started construction and this is another big project for us. It is going to be very convenient from Haneda.”
JR East is also expanding Tokyo station by adding further underground commercial spaces while outside of the capital, and in cities where the population is in decline, the emphasis is on creating communities that are more sustainable for local authorities. For example, in Akita and Niigata in northern Honshu, work is underway to relocate local authority offices and facilities in government-owned property at or close to stations.
“We talk in Japan about the concept of compact cities, in that way you can lower the cost of public services by having everything close to each other,” Saimyo says. “It also allows for the revitalisation around the centre of the city and this is what we are doing in regional areas.”
In total JR East expects to invest Yen 3.75 trillion in the first five years of the plan to 2022, including Yen 1.44 trillion for development projects that support the growth agenda. Safety and technological innovation, which Saimyo says are always the railway’s primary focus, will receive Yen 400bn while railway infrastructure maintenance will receive Yen 1.9 trillion.
Inevitably there are some big-ticket rail infrastructure projects included in Move-Up 2027. Among them is improved rail access to Haneda. Currently served by the Keikyu Line to Shinagawa and the Tokyo Monorail, Saimyo says that JR East is responding to the airport’s upgrade and capacity expansion plans, which includes adding more international flights, by building a new rail connection.
Under JR East plans, a new 12.4km line will be built comprising a 7.4km extension of the East Yamanote Line from Tamachi station using the existing Oshio Line freight route and a new 5km link from Tokyo Freight Terminal, which will run partially underground, to a new station at the airport.
“We know that demand for transport to and from Haneda is only going to increase,” Saimyo says. “Before JR East was established, there was a plan to have a freight line to the Tokyo Bay area, it was not completed but the infrastructure is fundamentally there, so we want to use that to create a new access line to Haneda. From the area around Tokyo Bay, we will be able to create a new railway that has three access directions to Haneda.
“It is going to take a while to construct so we might not be able to complete this in the 2027 framework. We have already started doing an assessment study but we have just started this project.”
Significant work is also taking place to expand the use and application of JR East’s Suica smartcard platform.
Suica is already usable as a charge card for payment of goods at an increasing number of stores throughout Tokyo and on transport services in cities throughout Japan. JR East is looking to expand use to Shinkansen services next year. In addition, following the establishment of a new organisation in April 2019 dedicated to Mobility as a Service (MaaS) operations, and with Suica increasingly ubiquitous, the railway hopes the platform will facilitate future MaaS applications.
Saimyo says unlike other cities where the lead is often taken by credit card companies, the fact that Suica is owned by JR East gives it a fundamental advantage when looking to incorporate new services.
“Suica can play a central role in MaaS,” he says. “This is something we are going to proceed with very quickly and we believe we can inspire many business organisations to become involved. We have just started this phase and our main focus currently is to increase the number of participants who use our services and will join us in this future MaaS network.”
Other rail specific projects include the rollout of the new Alfa-X shinkansen train, trials of which began in May with development set to continue for the next 10 years, and expanding the use of automatic train operation (ATO).
JR East announced plans in October to launch ATO on the Joban Line by the end of March 2021. ATO equipment will be fitted to series E233 EMUs which operate on stopping services between Ayase and Toride on the 30km line. The ATO equipment will accelerate and decelerate and stop the train at fixed positions. The objective is to prevent trains from exceeding the permitted line speed and reduce collisions, as well as improve service reliability.
The introduction of ATO is part of a wider objective to improve safety and will be followed by the installation of platform screen doors at the line’s 14 stations. Saimyo says that with Tokyo Metro’s Chiyoda Line, which already uses ATO, sharing tracks with Joban Line services from Ayase to Toride, it has been straightforward to extend use of the technology. “From a technical point of view installing ATO is not much of an issue,” he says. “It is a matter of following every step of the process and implementing it correctly. As the Joban Line is the first to use the technology to operate trains, there will probably be new issues and challenges that we will have to deal with. But we think it is a wonderful opportunity for us to learn as we go.”
The railway is also exploring the development of ATO for main line services. Experimentation with the technology began in 2017 and is continuing.
“Drivers generally don’t have negative feelings about losing employment. Instead they have great expectations of the new jobs in which they will be employed in the future.”Hitoshi Saimyo
ATO will inevitably result in a significant reduction in train driver responsibilities. JR East is no different from any other railway facing the challenge of balancing the possibilities of automatic operation with altering the role of the driver. Saimyo says that a train driver is currently considered a very high-level occupation but as responsibilities and actions are taken away, this will change, and JR East will look to reassign these individuals to more challenging jobs.
He compares the situation to the installation of automatic ticket gates at stations 30 years ago and the elimination of people employed to punch tickets.
“It is very, very difficult to fire someone because you don’t need them anymore, but it actually inspired us to find new areas for them to work,” Saimyo says. “But as a result of attrition we didn’t necessarily hire new people. We were able to lower our personnel costs and add to our overall revenue.
“As we move to driverless operation, we believe a similar thing will happen. It is a really good thing considering that the overall population of Japan is decreasing, the number of people that remain will be asked to do perhaps more demanding but fulfilling work. The drivers generally don’t have negative feelings about losing employment. Instead they have great expectations of the new jobs in which they will be employed in the future.”
While JR East employee roles evolve, the railway is also reviewing its approach to overall working culture as part of Move-Up 2027. The evaluation is in line with changes encouraged by the government to redress the general work-life balance of the population, such as making it mandatory for employees to take five days paid leave per year.
“We want staff to feel less of a burden as they try to balance a family and work. We also have more flexible working hours, and that is very easy to do when you are doing office work.”Hitoshi Saimyo
JR East is by no means among the worst offenders for obliging employees to work long hours - employees take an average of 17.8 days holiday per year. However, Saimyo says the company needs to change. “We have to adapt because we don’t want to lose talented personnel to other companies and industries,” he says.
The railway is increasingly incorporating IoT technologies into the workplace and improving the working environment. It is also aiming to improve the situation for employees taking care of elderly relatives or women to continue working after they marry and have children. “Even if they do have a family and take some time off, we want them to come back to work,” Saimyo says. “We want them to feel less of a burden as they try to balance a family and work. We have tele working options now, so people can work from home. We also have more flexible working hours, and that is very easy to do when you are doing office work.”
For workers in the field where shift patterns are more the norm, and where the perception is that there is less flexibility, Saimyo says increasingly the company is enabling people to arrange their shifts so they better suit their individual lifestyles.
Saimyo says that the changes are in the early stages and have initially come from the top. However, the railway is increasingly engaging with its employees to scoop up their ideas and opinions of how they would like to work in the future. “We think the motivation of our employees is rising because they have been heard,” he says.
Saimyo admits that he maintains a traditional way of thinking about work but looking around at the younger members of staff in the room, he says that the railway must be aware of the expectations of the new generation. Indeed, it is likely that this generation will be filling many of the leadership roles at JR East by the conclusion of Move-Up 2027, at which point, the company we know today will be quite different.
Typhoons cripple Japanese rail services
THE dramatic pictures of 10 Hokuriku high-speed trains underwater were some of the defining images of the devastating impact of Typhoon Hagibis on October 12, the culmination of Japan’s 2019 typhoon season which was the worst in living memory.
East Japan Railway (JR East) president, Mr Yuji Fukasawa, subsequently announced on November 6 that the railway, owner of eight of the trains, would scrap the vehicles. Damage to the electrical and electronic equipment was deemed too great to repair to ensure the safe running of the trains. JR West owns the other two sets.
The 10 damaged trains represent one-third of the Hokuriku fleet, which led the two railways to cancel about 20% of services. While they will order replacements, JR East has already redeployed Joetsu Shinkansen trains to the Hokuriku line to operate two shuttles per day between Tokyo and Takasaki. According to Nikkei, it now plans to divert five series E7 trains on order for the Joetsu Shinkansen to the Hokuriku Shinkansen when they are delivered next year. This will provide sufficient trains to restore a full Hokuriku service, which Fukasawa promised by the end of the current financial year on March 31 2020.
The trains have an estimated value of Yen 14.8bn ($US 135.6m) with the JR East trains valued at Yen 11.8bn and the JR West trains at Yen 3bn. While the two railways hope to be able to recover some components, they intend to post the losses along with reduced revenue in the current financial year.
“I have been involved in the railway business for 35 years and never before have I seen that kind of flooding,”Hitoshi Saimyo
JR East told IRJ on November 1 that the two typhoons swept away six bridges and around 70 areas were damaged by mudslides including track becoming engulfed with mud and soil. Fallen trees on tracks or catching equipment or lines were also reported across the network.
As well as the Hokiruku Shinkansen, services on JR East’s 1067mm-gauge network, were suspended on 52 lines and partially suspended on a further 36 lines. The 53.1km Chuo Line from central Tokyo to Takao, close to Mount Fuji, suffered extensive damage from mudslides but was successfully reopened on October 28. As IRJ went to press services remained suspended or partially suspended on six lines.
Saimyo says JR East and other Japanese railways took precautions against the typhoon by suspending services and relocating trains. Since introducing the new policies in 2018, the railway has instituted the emergency measures three times. And while there have been some positives, Saimyo admits there are also challenges and work will take place both internally and with external parties to improve the response.
However, Saimyo admits that with the nature of typhoons changing, mitigating their impact is set to become even more of a challenge.
“I have been involved in the railway business for 35 years and never before have I seen that kind of flooding,” Saimyo says.