Financing of the JR Maglev - "Profitability is expected to worsen" (?)

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Miss Maglev
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Financing of the JR Maglev - "Profitability is expected to worsen" (?)

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Text translated form the Japanese Website
Image
https://www.at-s.com/news/article/shizuoka/988922.html
Accesssed: November 20, 2021


The profitability of a "national policy" (?)



 In 2016, the then cabinet of Shinzo Abe announced a policy of taking advantage of the zero-interest-rate environment to bring forward the opening of the entire line to Osaka for up to eight years by using a ¥3 trillion fiscal investment and loans (FILP) for the construction of the linear line. Initially, JR Tokai had planned to suspend the construction work temporarily after the opening of the Nagoya line in order to recover its business strength and complete the project at its own expense. However, now that public funds are being injected into a private-sector project, it has taken on the meaning of a "national policy.

[...]

 The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has announced that it will lend 0.6% to 1% interest on a huge loan to JR, which will be repaid over about 10 years after the principal is set aside for about 30 years. Yoshie Harada, a professor of finance at Chuo University, who was a member of the expert committee, said, "A loan with a low interest rate and a 30-year deferment is a substantial risk for the loan.

 This perception has not changed. When interviewed, Professor Harada said, "This was an incomparably long loan period for the time. It was a picture-perfect repayment plan," he recalled, adding, "We don't know what the interest rates and economic environment will be like 10 or 20 years from now. There is uncertainty about whether the loans will really be repaid.

 At the meeting at the time, the Ministry of Land, Infrastructure, Transport and Tourism officials stressed that the public funds would be repaid without fail. Citing the revenue forecast presented by JR at the Council for Transport Policy and the trial calculation of the outstanding debt based on the Council's demand forecast as the basis, he said, "The accumulated debt will surely decrease and we will be able to repay it. Other members of the committee asked whether the demand forecast was reasonable in light of the declining and aging population, but the official in charge of the project explained that they had done a solid job, including assuming a 0% economic growth rate, and the FILP plan was approved.

 In April this year, JR announced an increase in construction costs of 1.5 trillion yen. In April this year, JR announced an increase of 1.5 trillion yen in construction costs to strengthen the entire structure in preparation for earthquakes and to increase the cost of disposing of residual soil generated during construction.

 Loans from public funds are based on the premise that the businesses that are to repay the loans are expected to continue to earn profits. Professor Yoshitaka Fukui of the graduate school of Aoyama Gakuin University, who specializes in accounting and is an employee of the former Japanese National Railways, mentioned the possibility of further increases in construction costs and said, "Before Corona, the Tokaido Shinkansen was unusually profitable, but from now on, the revenue from the Shinkansen will not be enough to cover the cost.

 Although JR is promoting cost reduction, it has not indicated its revenue forecast after Corona, taking into account the "integrated management" of Linear and Tokaido Shinkansen. Professor Fukui warned, "Profitability is expected to worsen, and not only will services on the Shinkansen and conventional lines decline, but the company's management may be shaken.
 (The Oigawa and Linear reporters)

 <The government lends funds raised through the issuance of government bonds to FILP agencies such as policy financial institutions and independent administrative agencies. In addition, the FILP agencies lend the funds to private companies. If a company continues to lose money and cannot expect to make a profit, it may not be able to repay the loan. In the case of the Linear-Magnetics Central Shinkansen, the Japan Railway Construction, Transport and Technology Agency (JRTT) lends the money to JR Tokai and checks the financial situation and the possibility of repayment, but the details are not disclosed because "there is a duty of confidentiality with JR Tokai.


Text translated form the Japanese Website
Image
https://www.at-s.com/news/article/shizuoka/988922.html
Accesssed: November 20, 2021
頻繁に日本で、頻繁にヨーロッパで。ツイッターはたまに。フェイスブックやWhatsappは使わない。

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