What 50 Years of Bullet Trains Have Done for Japan

A case study in making a small country even smaller

Just wait until you see what they have planned for the 100th anniversary. (Kyodo/Reuters)

Fifty years ago this month, Japan’s bullet trains completed their first trips and were welcomed by hundreds of people who had waited overnight in the terminals. The new high-speed line connected two massive economic hubs, Tokyo and Osaka, cutting the travel time between them from about seven hours to four. The shinkansen, as it’s called in Japanese, has carried roughly 10 billion riders since then, with a pristine record of safety and dependability: There haven’t been any fatal train derailments or collisions, and the average delay is 36 seconds.

The shinkansen has long been a symbol of Japanese efficiency, but its importance in shaping Japan’s economy is much more than symbolic. Most of Japan’s population lives in a surprisingly small number of places—only 20 percent of the country’s land is habitable—and a high-speed train is an elegant solution for shuttling workers from one dense city to another.

The most frequently discussed—and most intuitive—effect of the bullet train is that it allows workers to live in distant, relatively undeveloped areas, and commute to, say, Tokyo in two hours. As The Guardian put it recently, the bullet train has made “an increasingly huge part of the country little more than a bedroom community for the capital.” Another notable effect of bullet trains is the boon to tourism: When far-flung places are easily accessed by rail, tourists are more likely to visit them.

The economic arguments for building high-speed rail systems, though, tend to be made broadly—they focus on growth in aggregate. This, of course, is useful, but given that countries such as China, the U.K., and the U.S. have either built extensive high-speed train systems or are looking into the possibility, a finer-grained approach might be helpful.

That reasoning is the impetus for a new discussion paper co-authored by economists from Dartmouth College, the University of Oslo, and Japan’s Research Institute of Economy, Trade, and Industry. The researchers were curious about the bullet train’s effects not on regional economies, but at the level of the firm. Using data from a credit-reporting company that covers most of Japan’s economic activity—the figures they used were from nearly one million firms—they were able to more crisply visualize the connections that formed between firms and their suppliers after the introduction of a new rail link in 2004.

What they concluded is that one of the bullet train’s key benefits to companies is its ability to unite firms and suppliers. In Japan, the median distance between a firm and its supplier or customer is about 20 miles, and usually, only the most profitable companies can afford to invest in scouting out suppliers across the country. Fast trains can level out that advantage, allowing even small firms to make deals with faraway suppliers and still be assured of quality. In other words, it might be the difference, at least for a Japanese food company, between sourcing eel from Tokyo’s enormous Tsukiji fish market and getting it from the smaller town of Hamamatsu, where it’s a local specialty.

But Japan is under the impression that things need to be moving even more quickly. The construction of the newest version of the bullet train—one that wouldn't connect Tokyo to Nagoya till 2027—is now underway. But at a cost of $47 billion, the infrastructure for this latest train will be a huge strain on whoever ends up stepping forward to fund it. On the level of the consumer, too, bullet trains don’t come cheap—a typical ticket runs for about $130. Companies cover most of these costs for commuters, but everyone else is out of luck. (A Japanese scientist, upon winning the Nobel Prize in 2002, reportedly exclaimed that with his winnings he’d finally be able to buy a bullet-train ticket.)

So, any finding about the bullet train's effects, in the context of Japan, might be more applicable to the past than the future. Since 1964, Japan’s rail system has influenced other countries to invest in similar projects, but now it appears that, thanks to its high costs, the shinkansen is vulnerable to being displaced by a foreign import: Low-cost airlines have been siphoning off a steady stream of younger travelers in recent years.