Why an 89p metro ride is a recipe for ideological conflict

For a basic fare equivalent to just 89p, the fabulously frequent trains of the Tokyo Metro will speed you across the city in pristine, air-conditioned and punctual splendour. Buying a ticket is a no-brainer. But what about buying a share? 

The answer to this involves a much thornier ideological clash than Japan may have bargained for. The government’s ambition to privatise Tokyo Metro will require a forced declaration, in an age of activism, of both the precise investment culture that Japan wants and those whose interests listed business should be run in. 

And all of it centred on trains: Japan’s shiniest and most irresistible techno-fetish and the one thing that must never, ever be allowed to go wrong. Other countries will spend 2024 holding elections; Japan will go for a classic late-capitalist trade-off between profitability and public service, but with national identity as the principal currency.

The issue will arise in a couple of months’ time if all goes to plan. Tokyo Metro is one of the country’s largest-remaining non-financial businesses still entirely in state hands. Privatisation, which will involve both the central government and Tokyo metropolitan government selling parts of their stakes, has been on the finance ministry’s to-do list for almost a decade since it sold Japan Post to the public in 2015. The buoyant Tokyo market, say officials and bankers, presents an unmissable opportunity for a bumper IPO and will break a bit of a drought in large-scale listings on the Tokyo exchange.

Many will see little problem with this, and many more — led by yield-hungry households — will doubtless seize the chance to buy a national treasure. 

Japan has well over 20 private railways, which include the seven JR companies into which Japan National Railways was split when it was privatised in 1987. These networks have, in many cases, been powerful global poster children. Japan’s trains are peerlessly operated and efficient, the networks live in a state of regular reinvestment and, generally, there are profits.

There are Japan-specific reasons for this. The most profitable routes subsidise the less profitable ones. The companies have been trained, through three lean years after the bubble, to become evermore efficient without sacrificing quality and (as that 89p metro ticket suggests) without being able to raise fares very much. The JR companies and other private railways derive a large portion of revenues from the retail and real estate businesses centred around the stations.

But overwhelming all this has been a strict allocation of priority. Japan’s rail privatisation was, in reality, never about delivering for shareholders, but about continuing to deliver both for customers and the national interest. When British Rail was privatised in the mid-1990s, the government was selling a business that was a cross between a glorious historical mirage and a downtrodden punchline; Japan was privatising a system that, in a 2023 academic paper, Taku Tamaki described as an “integral component of the contemporary Japanese identity narrative”.

Absolutely critical to all this has been the acquiescence of shareholders that quality trumps everything. Annual reports list priorities of safety, customer satisfaction, employee happiness and regional development on the front page; shareholders do not get a mention.

The problem facing a privatised Tokyo Metro is that a great deal has changed since the last big rail privatisation (of JR Kyushu in 2016). The Tokyo Stock Exchange is urging unprecedented focus on capital efficiency and shareholder returns; government policy is pushing for the corporate world to be more investor-friendly, activists are taking on ever-bigger targets and making demands on companies that would have been unthinkable a few years ago; Prime Minister Fumio Kishida recently declared, to a large audience of global investors, that Japan is now an “asset management nation” as the country’s immense household wealth is ushered towards public markets.

The fascinating thing, now, will be the fudge. The already privatised rail companies will continue to be given the leeway they always have: no one can be seen calling for anything that would compromise the awesomeness of Japanese railways. But will that leeway be given to the newcomer? In its prospectus and its marketing, Tokyo Metro must, at least superficially, play by the new rules of shareholder primacy and the pledge to focus on returns. The Japanese government must pretend that it is all in favour of that, while actually, along with everyone else, being in favour of an 89p ticket to public transport paradise.

leo.lewis@ft.com