Taxi Driver Online

Japan's taxi drivers feel squeeze

TOKYO — You arrive at Narita International Airport after a long flight across the Pacific, exhausted and eager to get to your hotel in downtown Tokyo 40 miles away. The taxis waiting outside look inviting.

Available taxis appeal after a long trip to Tokyo, but convenience over bus or train can be costly, about 123% more than New York prices.
By Toru Yamanaka, AFP/Getty

They gleam. Their interiors are spotless. Their seats are decorated with doilies and sheathed in plastic. The drivers wear immaculate uniforms and sometimes little caps. Their manners are impeccable. You're tempted to skip the bus or the train and take one of those taxis into town. (Related city guide: Tokyo, with transportation tips)

But unless you're a pampered CEO traveling on a bloated expense account, do not succumb to temptation: A one-way taxi ride from Narita to Hilton Tokyo in the city's Shinjuku district will set you back more than $200.

Three years ago, Japan deregulated its taxi industry, promising consumer-friendly competition. The results so far have been dismal for passengers. Japanese taxis remain the world's most expensive. But taxi drivers aren't reaping any benefits, either; they get poorer each year.

"Deregulation worked in the telephone industry and the railroad industry, but it doesn't work in the taxi industry," says Seiji Abe, a professor at Osaka's Kansai University who has studied taxi deregulation, Japanese-style.

The half-hearted experiment with taxi deregulation suggests the limitations and difficulties the Japanese government faces as it tries to expose sheltered industries to genuine competition. Consider:

• Despite the discounting allowed under deregulation, passengers still pay nearly $29 for a 6.2-mile daytime taxi ride in Tokyo — 123% more than in New York ($13) and 147% more than in Paris (almost $12). Those comparisons include tips; there's no tipping in Japan.

• Drivers, who absorb the discounts, have seen their incomes shrivel 27% since 1991 and nearly 6% since deregulation was introduced. They earned an average of about $29,800 in 2003, 42% less than the average Japanese man. Some taxi drivers bring home less than Japanese welfare recipients, Abe says.

The business has continued to collapse. Taxi revenue in Japan has fallen 23% since peaking in 1991 at nearly $26.1 billion.

"We are all fighting over the same pie, and it is shrinking," says Yasuhiro Machitori, general secretary of the Japanese taxi driver's union, Zenjiko.

Deregulation isn't the main reason for the taxi industry's troubles or the drivers' vanishing earnings.

During Japan's bubble years in the 1980s and into the early '90s, free-spending Japanese companies footed the bill when employees caroused with customers and colleagues after hours in pubs and hostess bars — and again when the salary-men rode taxis home. In those days, the graveyard shift was the most lucrative for a taxi driver. But when the bubble burst, employers cut their entertainment subsidies, and the good times ended. Japan's economy has been struggling ever since.

Taxi deregulation was supposed to reduce fares and improve service enough to bring passengers back. It hasn't happened yet.

Deregulation caused problems

After years of timid experiments, the Japanese government in February 2002 reluctantly allowed taxi companies to add as many taxis as they wanted, doing away with the Transportation Ministry's heavy-handed attempts to stifle competition by limiting the number of cabs on the streets. Taxi operators were allowed to cut fares modestly from levels set by the ministry and to apply for even deeper cuts.

The response so far has been underwhelming. Taxi companies, complacent after decades of government coddling, have resisted entering into fare wars. A survey of 1,000 Japanese taxi companies last year by the Nihon Keizai newspaper found that fewer than 17% had cut fares since 2002; the percentage ranged from 1% in Tokai in central Japan to 16% in Tokyo to 83% in Osaka.

However, some taxi companies responded by:

• Putting additional taxis on the streets. Nationwide, Japan has added 10,000 taxis since deregulation and now has about 260,000.

• Trying gimmicks. In perhaps the most extreme example, a taxi company in Kanagawa Prefecture near Tokyo painted Hello Kitty characters on the side of its cabs, equipped them with Hello Kitty umbrellas, ponchos and tissues, and serenaded passengers with songs from the cartoon show, The Japan Times reported.

• Offering deep discounts on long trips — 50% off fares of more than 5,000 yen, about $47, in some cases.

• Cutting fares modestly on short trips. Before deregulation, the meter usually started at 660 yen or about $6.25, and stayed there for the first 2 kilometers. In Tokyo it usually still does. But in more competitive markets, such as the Kansai region (Osaka, Kyoto and Kobe), taxi companies have been cutting the starting fare.

Yoshinao Kikutani, 48, an independent taxi driver in Kyoto, recently undercut his competitors by lowering his starting fare to 570 yen from the prevailing 580. He says other drivers sometimes give him dirty looks when he pulls up at taxi stands and see his posted fare.

But Osaka taxi companies are already tiring of the competition. Some have asked the government to re-regulate the industry, notes Yoshiyuki Takahara, a reporter for the trade journal Transport World.

No one expects the government to undo deregulation. "It would be very difficult to re-regulate," says Masako Kuwata, a Transportation Ministry official who oversees the taxi industry.

In competitive markets such as Osaka, drivers complain that they bear the pain of deregulation. Taxi companies rent taxis to drivers. The more cabs they can put on the street, the more money they can make. Drivers just get more competition, and the discounts come out of their pockets. "It's only the drivers who suffer," union leader Machitori says.

Abe at Kansai University agrees. He says taxi deregulation was a mistake, because the burden falls so heavily on drivers who were already struggling to survive.

Abe suggests tinkering instead. For example, he says, the government should find ways to ease traffic congestion in Japanese cities, perhaps by designating taxi-only lanes, to shorten trips and lower fares. Perhaps drivers should be allowed to tack on surcharges if they help with a passenger's luggage, he says.

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