Shinkansen: Transforming Japan

Shinkansen – The pride of Japan and the symbol of Japanese post-war recovery. But how does the High Speed Rail impact local economy? A look into Kyushu Shinkansen.

On October 1st 1964, just two weeks before the Tokyo Olympics, the first ever Shinkansen departed from Tokyo to Osaka, operating at speeds of 220 kmph and cutting down time by almost half, to 3 hrs and 45 mins. Due to its continuous success and improvements, today, a business executive from Tokyo can reach Osaka in just 2 hrs and 20 mins, which in a couple of decades is expected to go down to 67 mins with the opening of Chuo Shinkansen – to be developed as the first MagLev Shinkansen. And while it may seem that the Shinkansen project is all about achieving high speed, on the contrary it was never so. In the years post world war, the economic boom in Japan brought more and more people to its cities, and therefore in an effort to de-congest cities, both in terms of people and economic activity, the Japanese government took the initiative of building the first ever High Speed Rail* line from Tokyo to Osaka, known as the Tokaido Shinkansen. But did Shinkansen stand on its expectations?

* High Speed Rail (HSR) is often refered for existing lines that can operate at speeds of 200 kmph and modern lines operating at speeds of 250 kmph.

While it can be argued, as with the chicken and egg problem, whether the rail (and in general the transportation infrastructure) follows the growth or does the growth follow the rail, however the literature has well established the impacts the transportation infrastructure can create in stimulating the economy. In particular for HSR, the reduction in travel time can have short term impacts in form of reduced commute, thereby affecting industrial productivity, while the long run impacts manifest in form of increased labor market and consequently increased market competition, thereby affecting the overall economic productivity. These impacts can also be studied at macro level in terms of output and productivity, meso level impacts in form of labor market changes, and micro impacts in form of land-use changes.

Nerd Alert: To establish the economic impacts of Shinkansen, Hiramatsu studied Kyushu Shinkansen built on the Kyushu island (bottom left in the the first figure) connecting Fukuoka to Kagoshima via Kumamoto, and an upcoming line on the same island connecting Fukuoka with Nagasaki via Saga (see the figure above). While Fukuoka is the center of economic activity in the island, Kagoshima and Nagasaki also have relatively large economic scales. The economic impacts were studied in terms of change in population, jobs and production value – at a micro level for each prefecture, at meso level for the Kyushu island, and at the macro level for Japan. To have a comprehensive understanding of the economic impacts, Hiramatsu studied two scenarios – one with the currently present Fukuoka-Kagoshima route, and the other, along with the upcoming Fukuoka-Nagasaki route. The above mentioned economic impacts were realized using multi-regional Computational General Equilibrium (CGE), which is essentially a model that predicts the behavior of the economy subject to changes in economic structure or policy.

Percentage change in population, jobs and production value proportional to the intensity of the color. The darker the color the higher is the percentage change due to the Shinkansen line. Note, lines are only made for illustration purpose, they do not truly represent true path of the line.

The figure above presents the micro level impacts, i.e. percentage change in population, jobs and production value for the prefectures on Kyushu island, due to Fukuoka-Kagoshima and Fukuoka-Nagasaki Shinkansen lines. From the figures above, it is quite evident that prefectures that directly serve Shinkansen observe increment in population, indicating agglomeration instead of de-congestion. As for the jobs and production value, both increased in prefectures having Shinkansen connection, thus indicating a possibility of widening the economic disparity between the regions. For the entire Kyushu island though, an increase 0.46% in production value was observed, while for Japan, this value amounted to 0.07%. Note, this just from two Shinkansen lines on one of the islands of Japan. Scaling up for a total of 7 Shinkansen lines throughout Japan can have significant impacts on economy of Japan.

As a conclusion, while the transportation infrastructure has the potential to de-congest cities and bring down economic disparity between regions, it is equally possible for the situation to exacerbate, with further agglomeration of people and jobs at the economic hubs. Developing transportation corridors over wider geographic area reduces possibilities of agglomeration of economy, as was observed with development of Fukuoka-Nagasaki line along with Fukuoka-Kagoshima line, benefiting Nagasaki and Saga prefectures (NW prefectures on Kyushu island), which earlier were disadvantaged with only Fukuoka-Kagoshima line operating on the island. And while completely eliminating economic disparity is impossible, equitable development of transportation infrastructure, connecting economic hubs with tier-2 or tier-3 cities and tourist destinations can bring about larger benefits in the region.

PS: Although, today, only a handful of nations have HSR, namely Shinkansen in Japan, MagLevs in China, TGV in France, Talgo in Spain, Italy, Germany, South Korea, UK, Turkey and a few more, however, inspired from the success of HSR, new HSR projects have been announced in some countries, India included. In another blog, I will look potential HSR lines in India and their impacts on the economy.

Notes for Nerds: This blog article is largely based upon research work by Professor Hiramatsu – Hiramatsu (2018a). He performed a similar analysis specifically for the tourism industry – Hiramatsu (2018b). For more on impacts of transport infrastructure on economy, read – Sasaki et al. (1997), Han et al. (2012), Chen & Haynes (2017), Ke et al. (2017), Dia (2018).

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