Japan’s infrastructure, most of which was built during the period of high economic growth from the early 1960s to the early 1970s, is decaying and extensive repairs are required to prevent disasters like the December collapse of a section of the Sasago Tunnel on the Chuo Expressway. But finding the necessary funds to carry out this task presents a huge challenge.
The government must quickly work out plans on how to proceed with reconstruction. In doing so, it should carefully listen to the opinions of the general public and businesses as the rebuilding will directly affect them.
Under the law that transformed Japan Highway Public Corp. and three other expressway public corporations into six private expressway companies in 2005, the six companies are supposed to collect expressway tolls through 2050, then make the expressways toll-free after that. But the problem is that the expressway tolls won’t cover the funds needed for rebuilding decaying sections and bridges of the expressways. It is estimated that rebuilding will cost ¥7 trillion to ¥12.5 trillion.
In an attempt to raise reconstruction funds, an experts’ panel of the infrastructure and transport ministry has proposed that the expressway companies be allowed to continue to collect tolls for 10 to 15 years after 2050.
Because the poor state of the economy will make it impossible to sharply raise expressway fees anytime soon to generate the funds, the proposal appears reasonable. It would also help maintain a proportional fairness between current and future generations in shouldering the costs of rebuilding the nation’s expressways.
The expressway companies should not spare any efforts at cost reduction. They must strive to keep existing expressways in good condition by improving their inspection and repair processes. They also must work out the best timing for rebuilding expressway sections and bridges.
In the short term, the expressway companies must decide what to do with the current discount plan for expressway tolls. The Finance Ministry has decided to cut funding for the plan. Thus Western, Central and Eastern Nippon Expressway companies as well as Honshu-Shikoku Bridge Expressway Co. together will only be able to use ¥500 billion to fund the discounts in fiscal 2014, down from the ¥900 billion in fiscal 2013.
Eliminating the discounts would likely lead to fewer expressway users, which would also cause toll revenues to fall. Therefore, the expressway companies should use their limited funds in the most rational possible manner and try to simplify their toll systems.
The flawed privatization law, which was gutted under the pressure of the infrastructure and transport ministry, lacks a strong mechanism to reduce the ¥44 trillion in debt accumulated by the expressway public corporations. An asset-holding and debt-servicing administrative body effectively owns the expressways and leases them to the six expressway companies. These companies should be made to buy back the expressways and take over the remaining debt so that they will have a strong incentive to eliminate wasteful spending.