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Financing Japanese bullet train proves problematic

TOKYO - While the ruling Liberal Democratic Party (LDP) has endorsed a plan to launch the construction of three shinkansen bullet train segments in fiscal 2005, securing the more than 1 trillion yen (US$9 billion) needed for the projects will be a daunting task.

The LDP proposal calls for building three sections: the Aomori-Hakodate span for the Hokkaido shinkansen, the Toyama-Matto stretch for the Hokuriku shinkansen and the Takeo Onsen-Isahaya segment for the Nagasaki shinkansen.

The combined construction costs are estimated at 1.16 trillion yen ($10.5 billion). Financing for these segments will come from Japan Railways companies, the government's public works budget and local regional governments.

The fiscal 2004 budget allocates 210 billion yen ($1.9 billion) for the projects.

The initial funding schedule for the shinkansen projects already under way, anticipated construction through fiscal 2017. But with the projects now slated for completion as early as fiscal 2012, the LDP is seeking to apply the funding for the last five years toward the three new segments.

The roughly 330 billion yen ($3 billion) that would come from Japan Railways in those five years would be used as collateral for loans to finance construction starting in fiscal 2005.

But tapping into future income will generate several tens of billions of yen in interest payments.

"How do we explain the burden to taxpayers when it wouldn't be incurred if construction is launched in fiscal 2012 or thereafter?" a Finance Ministry official asked.

(Asia Pulse/Nikkei)

Jun 4, 2004

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