Bills Constitute Largest Reform Since End of Occupation : Japan Acts to Privatize Rail System

The Japanese Cabinet has approved five bills for submission to Parliament that would denationalize the debt-ridden Japan National Railways, the nation’s second-largest employer, and break it up into seven private firms.

The bills constitute the largest reform undertaken by the Japanese government since the end in 1952 of the U.S. military occupation that followed World War II. They include plans to dispose of $207.2 billion in accumulated debt, to persuade 20,000 workers to accept early retirement and to find new jobs for 41,000 others.

Returning the railways to private hands will also deprive politicians of a traditional pork barrel--building rail lines through their constituencies.

Coincidentally, the reforms will split up Kokuro, the National Railway Workers Union, which has 220,000 members and has been one of the most powerful props of the Socialist and Communist parties. On Friday, when the Cabinet acted, both parties vowed to fight enactment of the bills.

However, passage of the bills is regarded as a foregone conclusion because of the ruling Liberal Democratic Party’s majority in Parliament--but probably not in the current session, which ends May 22.

The plan calls for establishment on April 1, 1987, of six passenger rail companies and a freight company. Of the 276,000 workers that JNR expects to have on its payroll at that time, only 215,000 will be employed by the new firms.

The government plans to retire 20,000 workers early and transfer 41,000 others to companies affiliated with JNR, to central and local government bodies and to private industry. However, the seven new firms will have to provide jobs for 32,000 workers who were classified as redundant last summer by a JNR reform commission.

Thousands of workers will be reassigned to jobs far from where they now live. In all, counting dependents, about 800,000 people would be affected.

Assume Long-Term Debt

Three of the new firms will assume $63.3 billion of JNR’s long-term debt, and a special liquidation corporation will be charged with disposing of the remaining $143.9 billion. The liquidation corporation is expected to sell off land valued at more than $28 billion, but at least $92.8 billion of the debt, which dates back to 1964, is expected to be paid with taxpayers’ money.

Even the smallest of the new companies, the Shikoku Railway, is expected to employ 5,000 workers and have sales of $238.9 million a year. The largest, the Tokyo area’s East Japan Railway, is expected to employ 89,000 workers and have sales of $7.8 billion.

At the instruction of Prime Minister Yasuhiro Nakasone, the proposed legislation allows the new firms to engage in non-railway business, and that is expected to eventually enable them to operate in the black. Among new fields that will be opened to them are real estate development, hotels and department stores, parcel delivery service and telecommunications.

Appeals from small businessmen persuaded the ruling party to add a last-minute qualifier giving the transportation minister power to reject any new business regarded as a competitive threat to others.

Initially, the new companies would have the status of “special corporations.” The government would hold all the shares until operations are firm, then all the shares would be sold to the public.

Unlike the case of last year’s privatization of Nippon Telegraph & Telephone, the country’s largest employer with 320,000 workers, there will be no restrictions on foreigners buying stock in the new corporation.

With 13,367 miles of track, including four high-speed “bullet” lines, JNR has annual sales of $16.7 billion. JNR is noted for its bullet trains and on-time service, but it is said to have the worst labor-management relations of any enterprise in Japan. Lines in remote areas, forced on it by Parliament over the years, have produced operating deficits of up to $9.3 billion a year.