IR

An Interview with the President

Question 3
Given that taking on the challenge of enhancing profitability is a priority Groupwide task, what concrete measures will the JR East Group take in this regard?
Answer
  • In railway operations, we will leverage an expanded Shinkansen network to create new passenger flows and take on the challenge of capturing demand from visitors to Japan.
  • In the life-style service business, the JR East Group will focus on town development centered on railway stations. At the same time, the IT & Suica business will take on new businesses that use big data and create synergies among respective businesses.

The aim of taking on the challenge of enhancing profitability is to entrench autonomous business management. By unearthing new business opportunities in a variety of fields and maximizing operating revenues, we will sustain growth as a private company. Establishing such foundations will fulfill our corporate social responsibility as a company responsible for railways, which form part of society’s infrastructure, and realize our commitment to being regionally rooted.

Currently, JR East’s transportation revenues are approximately ¥1,800 billion. Conventional lines in the Kanto area generate roughly two-thirds of this, and Shinkansen lines account for approximately one-third. Bearing this in mind, I repeatedly emphasize to employees that ensuring safe and reliable transportation centered on conventional lines in the Kanto area is the most effective way of increasing revenues. Not only employees who have direct contact with customers, such as those working at railway stations and travel centers, but employees in all positions, including drivers, conductors, and construction and maintenance personnel, must be strongly focused on improving profitability and take on the challenge of unearthing revenue sources.

In addition, the Shinkansen network presents opportunities for taking on challenges. In light of the openings of the Hokkaido Shinkansen to Shin-Hakodate-Hokuto and the Hokuriku Shinkansen Line to Kanazawa, I want to fully leverage this expanded Shinkansen network to create new passenger flows. In comparison with the Tokaido Shinkansen Line, the Tohoku Shinkansen and Hokuriku Shinkansen lines carry fewer business passengers. Therefore, the extent to which we can encourage new tourism is crucial. We have established initiatives targeting active seniors, such as Otona no Kyujitsu Club, but I would also like to target young people and encourage them to enjoy railway excursions. Accordingly, for the 2017 summer vacation period we launched Fretemina experience-type travel products, which allow customers to experience fishing onboard a fishing boat or farming and to take part in recreational activities in woodlands and rivers or at ranches. I want children to experience new kinds of trips that involve staying in farmers’ homes or in fishing villages. Our aim is to broaden demand for railway-based tourism to include younger generations as well as active seniors.

Tourism is very important for the revitalization of regions. Domestic tourists account for roughly 90% of Japan’s tourism industry. In the Tohoku region, tourism demand has been low since the Great East Japan Earthquake. Through collaborative efforts with this region, we intend to unearth, enhance, and publicize unique tourism resources. In May 2017, the “cruise train” TRAIN SUITE SHIKI-SHIMA began operating. Taking advantage of the tourism resources of eastern Japan’s regions, we will invite passengers to enjoy time spent amid out-of-the-ordinary luxury while journeying by railway. I want to use such initiatives as “seeds” that help create new passenger flows.

Recently, tourism has seen “kids week” emerge as an idea. The aim is to stagger part of elementary and junior high school students’ summer vacation periods. In Japan’s tourism industry, demand is heavily skewed toward the summer vacation period and the Golden Week spring vacation. Inevitably, this bias lowers productivity. However, staggering summer vacation periods would eliminate congestion for tourists and increase the tourism industry’s productivity. If people were able to take advantage of the new flexibility resulting from workstyle reform and stagger their vacations effectively, I think it would generate new employment and growth in regions.

Another major task is to capture demand from visitors to Japan. On an upswing, the number of visitors to Japan reached 24 million in 2016. Moreover, the government aims to attract 40 million visitors to Japan by 2020 and 60 million by 2030. Unfortunately, only around 1% of visitors to Japan travel to the Tohoku region. On the other hand, this figure shows how large the potential is. We want to work in partnership with local communities with a view to having even just 5% or 10% of visitors to Japan include the Tohoku region in their itineraries. Through these efforts, in fiscal 2018 we aim to increase revenues from visitors to Japan (passenger revenues) 20% year on year, to ¥24 billion.

Of course, as well as in railway operations we have to boost the earning power of the life-style service business. Specifically, the development of areas in and around railway stations is an important theme. Until now, the JR East Group has concentrated on developing station concourses. Going forward, however, the Group will focus on town development centered on railway stations. In particular, we will advance town development plans to create a new hub of international exchanges in the area that is around Tamachi and Shinagawa stations and centered on Shinagawa New Station (provisional name), which we aim to provisionally open in spring 2020. By incorporating the very best of Japan’s technology and culture into the town, we want to create a new symbol of international towns and of Japan that serves as a gateway to Japan for visitors from overseas as well as a gateway to the world for domestic customers. While advancing this initiative, the Group is also developing towns centered on such terminal stations as Tokyo, Shibuya, Shinjuku, Yokohama, Chiba, and Sendai stations. In the area surrounding Chiba Station, we opened some reconstructed station buildings in spring 2017. Redesigning the railway station and its surrounding area has markedly changed foot traffic flows in the town.

As well as developing towns in the Tokyo metropolitan area, the Group is developing towns centered on regional core railway stations. With reference to regional municipal authorities’ efforts based on the “compact cities” concept, we are creating railway stations that have better coordinated intermodal passenger transportation, serve as exchange hubs for regions, and provide such amenities as childcare, nursing care, medical, health, educational, and cultural services. Through these initiatives, the JR East Group will revitalize regions and increase passenger traffic. We see railway stations not simply as places where people get on and off trains but as important hubs that determine towns’ foot traffic flows. I want to continue joining forces with local communities to develop attractive towns centered on railway stations.

In the IT & Suica business, which we regard as a third pillar of operations alongside railway operations and the life-style service business, electronic money settlement services are the mainstay of earnings at present. However, I think adding value to Suica system usage by extending cloud Suica systems into the sphere of public services is possible. In October 2016, we began offering settlement services compatible with Apple Pay. However, this is only one step. We can introduce Suica settlement services into many different situations by integrating them with social networking services (SNS) and a range of other outside information systems. Moreover, we can exploit the big data obtained from Suica to create new businesses and heighten the level of services for customers. The JR East Group has information about customers’ movements and purchases, including the type of customers that come to railway stations, how customers behave at different times of the day, and the types of places they go to afterwards. We want to make effective use of this information. By unearthing new sources of earnings in the IT & Suica business, the Group will generate synergies among businesses, improve railway services, increase passenger flows, and create new services.

Through the initiatives I have mentioned so far, we will further heighten the earning power of each business, thereby enhancing our business results steadily. Three years from now, in fiscal 2020, we aim to reach operating revenues of approximately ¥3 trillion and operating income of roughly ¥500.0 billion.