Kyushu Railway Co. (JR Kyushu) has listed its stock on the First Section of the Tokyo Stock Exchange (TSE).
The government had held JR Kyushu's shares since it was created in the break-up of the red ink-drenched Japanese National Railways (JNR) in April 1987. As such, the national government had the power to approve the firm's business plans and appointments of new presidents. With JR Kyushu shares now being openly traded on the market, the railway operator has been reborn as a purely private company.
Among six JR passenger companies, East Japan Railway Co. (JR East), West Japan Railway Co. (JR West) and Central Japan Railway Co. (JR Central) have already listed their stocks on the market, making JR Kyushu the fourth JR company to go public.
Even before JNR was split into regional passenger companies and a nationwide freight company, it was feared that Hokkaido Railway Co. (JR Hokkaido), Shikoku Railway Co. (JR Shikoku) and JR Kyushu would go deeply into the red. This is because these three companies do not have lucrative lines, such as the Tokaido Shinkansen bullet train line between Tokyo and Shin-Osaka, and the Yamanote Line in downtown Tokyo.
JR Hokkaido, Shikoku and Kyushu -- dubbed the "three island companies" as they are headquartered on islands smaller than Honshu -- have made up for their deficits by using investment profits from business stabilization funds set up by the central government for these firms. As such, the three island companies had not been expected to go public.
To overcome its disadvantages, JR Kyushu has diversified its business and strengthened its brand, aggressively launching real estate, hotel and farming projects. Although some of its projects ended in failure, JR Kyushu's real estate division has grown steadily to become one of the largest companies in Kyushu in terms of new condominium sales.
JR Kyushu has also pursued business opportunities overseas. The company launched high-speed ship services between Fukuoka's Hakata and Busan in South Korea, and opened restaurants in China serving food using Kyushu ingredients. Sales from non-railway projects, which accounted for less than 20 percent of total sales when the company was launched, have surpassed 50 percent.
A luxury vacation train, "Seven Stars in Kyushu," has strengthened the JR Kyushu brand as a railway company. JNR lines in Kyushu had been called the "train graveyard," because the rails were populated by aging, worn-out hand-me-downs from Honshu. JR Kyushu's introduction of trains with unique external designs has apparently enhanced employee morale.
JR Kyushu's listing of its stock on the TSE is not its ultimate goal. The company will face major challenges going forward. The company had used up its business stabilization funds by spring this year, and is required to improve its business performances on its own. It must consider how to maintain its railway lines to secure transportation for local residents, while developing new businesses and profitable projects.
JR Kyushu has already unmanned over half of its stations, but it cannot overcome the company's problems simply by doing away with money-losing lines. The company should work out excellent plans that will bring long-term benefits to local residents and businesses, and to shareholders.
"A company can remain an excellent company 20 or 30 years later if it keeps trying something that no one else has ever done," says industrial designer Eiji Mitooka, who has designed many unique vehicles for JR Kyushu, including Seven Stars in Kyushu.
JR Kyushu's attitude to continue trying something new while continuing its trial-and-error efforts appears to have broad potential for improving business performance, not only at JR Kyushu and its fellow "island companies," but also other firms that tend to be pessimistic about their future because of Japan's aging, shrinking population.