Valuation of Urban Rail Service
Experiences from Tokyo, Japan

01

Discussion Paper 2014 • 01
Hironori KatoThe University of Tokyo, Japan

Valuation of Urban Rail Service
Experiences from Tokyo, Japan

Discussion Paper No. 2014-1

Prepared after the Roundtable on
Valuing Convenience in Public Transport(12-13 September 2013, Paris)

Hironori KatoThe University of Tokyo, Japan

January 2014

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANTABLE OF CONTENTS

1.

INTRODUCTION ................................................................................................................. 5

2.

THE GOVERNMENT’S COST-BENEFIT ANALYSIS MANUAL FOR
RAIL PROJECTS IN JAPAN ............................................................................................... 6
2.1. Cost-benefit Analysis Manuals in Japan ......................................................................... 6
2.2. CBA Manual for Rail Projects ........................................................................................ 7
2.3. Estimation of User’s Benefit in Rail Projects ................................................................. 7
2.4. Definitions of Generalized Cost...................................................................................... 8
2.5. Methods of Valuing Rail Service Components............................................................... 92.6. Complementary Method of Valuing Transfer Improvement in Rail Stations............... 14
2.7. Method of Valuing the Reliability of Rail Service ....................................................... 15

3.

EXAMPLE OF VALUING URBAN RAIL SERVICE 2000
URBAN RAIL DEVELOPMENT MASTER PLAN IN TOKYO...................................... 16
3.1. The Urban Rail Market in Japan: The Case of Tokyo .................................................. 16
3.2. 2000 Urban Rail Development Master Plan for Tokyo ................................................ 173.3. Rail Demand Analysis and Project Evaluation in the 2000 Urban RailDevelopment Master Plan for Tokyo ............................................................................ 19
3.4. Values of Rail Service Estimated in the 2000 Urban RailDevelopment Master Plan for Tokyo ............................................................................ 20
CONCLUSIONS ................................................................................................................. 24
ACKNOWLEDGMENTS ................................................................................................... 26
REFERENCES .................................................................................................................... 27

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN

1. INTRODUCTION

Promoting public transportation, which includes rail, metro, bus rapid transit, and bus
services is one of the most popular urban transportation policies among transportation
authorities in many countries. This popularity may reflect the social requirement topursue a sustainable transportation system by motivating people to use anenvironmentally friendly transportation mode. In particular, the modal shift from theautomobile to public transportation is highlighted in urban transportation planningbecause many cities have suffered from serious traffic congestion, which has caused
economic losses as well as negative impacts on local, regional, and global environments.
In order to attract individuals to use public transportation, the improvement of service iscritical. This includes increasing service frequency, decreasing travel time, upgrading
station facilities, and introducing higher-capacity vehicles. As most public transportation
services are provided directly by public authorities or are financially supported bygovernment/public-sector entities, an investment in public transportation is typicallyevaluated within a cost-benefit analysis framework. However, since public transportation
service consists of many different components, including accessing public transit stops,
waiting for the service, riding trains, transferring from one train to another, and exiting
to a final destination, it is necessary to evaluate each component in detail. This has madeit more difficult to analyze the benefit from public transportation projects than roadprojects. Thus, there is a strong need to develop a clear methodology by which to value
the expected benefits stemming from a public transportation service change in monetary
terms according to each service component.
This is also the case for Japan’s urban rail service. Japan’s Ministry of Land,
Infrastructure, Transport and Tourism (MLIT) introduced the Cost-Benefit Analysis (CBA)
Manual for rail projects in 1998 to provide a standard methodology for valuing rail
service in Japan. This methodology has been applied to a number of rail projects in Japanthat were subsidized by the central government. The Manual contains detailed methods
for valuing the improvement of rail transportation services by the components of service
as well as by their multipliers and parameters. Some parts of the CBA Manual may behighly dependent on the uniqueness of the Japanese urban rail market; however, it may
be worthwhile for Japan to share its experiences with other OECD member countries.
Additionally, although a number of studies have examined valuations of travel time forroad traffic in Japan (for example, Kato et al., 2010b; 2011), valuations for public transit
services have been rarely reported (an exception is Kato, 2007).
This paper aims to describe the government’s manual and report the recent practices ofvaluing urban rail transportation services in Japan. The remainder of this paper isorganized as follows. First, the CBA Manual for rail projects in Japan will be introduced.
The detailed methods for valuing rail transportation services are described. Next, thelatest master plan for urban rail development in the Tokyo metropolitan area is presented,
including the policy targets set in the plan. The characteristics of the urban rail market in
Japan are also discussed. Then, the rail service values are computed with the travel

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANdemand model used in the master plan are presented. Finally, further issues are
discussed with a summary of the paper.

2. THE GOVERNMENT’S COST-BENEFIT ANALYSIS MANUALFOR RAIL PROJECTS IN JAPAN

2.1.

Cost-benefit Analysis Manuals in JapanThe Government of Japan officially introduced the CBA to the evaluation of public-funded
projects in 1998. The introduction of formal CBA Manuals reflected a political statement
made by then-prime minister Ryuichiro Hashimoto, who requested the improvement of
the effectiveness of public investment. (Note that various approaches, such as regional
econometric models, hedonic models, and general equilibrium models, were informallyused in an ad-hoc manner for project evaluation even before the official introduction of
CBA in Japan.)
In Japan, various CBA Manuals have been made for different types of public
infrastructure projects such as airports, railways, roads, seaports, agriculture, urban
development, natural parks, rivers, and coastal projects. These CBA Manuals aredeveloped independently by different bureaus under Japan’s MLIT. Although the MLIT
provides general guidelines (MLIT, 2009) that cover all transportation-related projects
under them, the details of CBA Manuals vary among project types. Table 1 shows thelatest CBA Manuals for transportation investment in Japan. The first CBA Manual for rail
projects was published in 1998 (MLIT, 1998) by the Railway Bureau under the MLIT. It
was established with support from advisory committees including experts in economics
and transportation research. It has been revised three times: in 2000, 2005, and 2012
(MLIT, 2000; 2005; 2012). These revisions addressed additional policy requirements
such as sophisticated methods of re-evaluation and post-evaluation, new evaluation
methods for anti-disaster projects, the consideration of additional benefits fromenvironmental impacts, and the introduction of updated techniques for benefit estimation.
Although the CBA Manuals are available publicly online, they are exclusively in Japanese.
Table 1. Latest CBA Manuals of Transportation Investment in Japan
Type of project

Title

Latest updated

AirportCost-effectiveness Analysis Manual of Airport
Development Projects Version 4

March 2008

Rail

Cost-effective Analysis Manual of Rail Projects
2012

July 2012

Road

Cost-benefit Analysis Manual

November
2010

SeaportCost-effectiveness Analysis Manual of Port
Development Projects

June 2011

Source: Author

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2.2.

CBA Manual for Rail Projects

The CBA Manual for rail projects provides methods and examples of rail project
evaluation. It covers not only urban rail service, but also inter-urban and rural rail
services. The projects included in the Manual consist of new construction of rail lines, theimprovement of existing rail lines, the improvement of rail stations, the installation of
barrier-free rail service facilities, and anti-disaster rail investment, all of which arefinanced in full or in part by the national government. The Manual contains three types ofproject evaluations: pre-evaluation, re-evaluation, and post-evaluation. Pre-evaluation is
implemented to analyze the feasibility of a new project; re-evaluation is implemented to
examine the feasibility of the continuation of on-going projects of five years or more;
post-evaluation is implemented to study the impacts of completed projects five years
after project completion.
Conventional cost-benefit analysis theory (Small and Verhoef, 2007) is applied in the
CBA Manual, where three indexes are produced from the economic analysis: the netpresent value, cost-benefit ratio, and economic internal rate of return. Periods of project
evaluation are construction years plus 30 and 50 years. The social discount rate is four
percent, which is assumed to be constant throughout the project period. Sensitivity
analysis is required with respect to total travel demand, total project cost, andconstruction years. The benefit and cost stemming from a transportation project arecomputed assuming two scenarios: a without-project scenario and a with-project
scenario. The benefit is classified into user’s benefit, supplier’s benefit, and other benefit.
The user’s benefit is estimated with the consumer surplus approach based on travel
demand analysis. The supplier’s benefit is computed with the net profit of rail operators.
Other benefit includes environmental (dis)benefits such as the reduction of the emissionof carbon dioxide from automobiles, changes in noise damage emitted from the rail
service, and the existence benefit.
Although the CBA Manual does not explicitly provide a methodology for forecasting travel
demand, it expects travel demand to be analyzed with a discrete-choice modelingapproach (for example, Ben-Akiva and Lerman, 1985) for rail route choice analysis,
particularly for urban rail projects. Note that for three major metropolitan areas in Japan,
Tokyo, Osaka, and Nagoya, revealed preference (RP) about rail route choice data for railusers is available. The MLIT has implemented the Metropolitan Transport Census every
five years since 1960, in which large-scale paper-based questionnaire surveys areadministered with support from local public transportation operators, including rail
companies and bus operators (ITPS, 2008). Respondents are requested to describe their
daily travel using the public transportation service such as origin, destination, mode of
travel to rail stations, chosen rail routes, departure time, and ticket type. Rail routedemand analysis in the Tokyo metropolitan area typically uses multinomial logit or probit
models with data from the Metropolitan Transport Census. The CBA Manual then uses the
expected consumer surplus to estimate the user’s benefit when the discrete-choice
approach is used for route demand modeling.
2.3.

Estimation of User’s Benefit in Rail Projects

The CBA Manual shows the method for estimating the user’s benefit based on theconcept of generalized cost. It assumes the origin-destination (OD)-based generalized
cost. The benefit is computed using the “rule-of-half” formula, which is shown as

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN





1
GCijo  GCijw X ijo  X ijw
ij 2

UB  

(1)owhere UB is the user’s benefit, GCij is the generalized cost from zone i to zonew

the without-project scenario, GCij is the generalized cost from zone i to zone

j in

j in theoj in the without-w

j in the with-project

with-project scenario, X ij is the travel demand from zone i to zone
project scenario, and X ij is the travel demand from zone i to zone
scenario.
2.4.

Definitions of Generalized Cost

The CBA Manual presents two approaches to define the generalized cost. The first
approach uses a log-sum index, while the second approach does not. The log-sum index
is the expected maximum utility or expected indirect utility computed from themultinomial logit (MNL) model (Williams, 1977).
Log-sum approachThis approach assumes that the MNL model is used for travel demand analysis in thecontext of travel modal choice or rail route choice. The generalized cost is computed witha utility function in the MNL as

GCij 

1
Vk ,ij Fk ,ijln Vk ,ij

(2)

k

where

Vk ,ij is the (indirect) utility function under the condition that an option (travel modeor rail route) k is chosen for travel from zone i to zone

j and

Fk ,ij is the travel cost or fare in the utility function under the condition that an option(travel mode or rail route) k is chosen for travel from zone i to zonej.

As the utility function is typically assumed to be linear with a generic coefficient withrespect to travel cost, the marginal utility with respect to income is constant. Thus, thefollowing formula of the generalized cost is presented in the Manual:

GCij 

1ln Vk ,ij
ˆ k

(3)

where ˆ is the estimated coefficient with respect to travel cost in the utility function.
When the discrete-choice modeling approach is used, public transportation service values
such as the value of travel time, value of service frequency, and value of crowding can be
estimated with the empirical data in the travel demand analysis. However, they are not

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used to estimate the total user’s benefit because they are implicitly incorporated into theutility function. Rather, they are often used to compute the shares of different benefit
components of the total user’s benefit.
Non-log-sum approachThis approach first assumes a route-based generalized cost. The Manual shows that theformula of the generalized cost of a rail route is as follows:GCk ,ij  Fk ,ij    a    k ,ij , pq  Ta, k ,ij , pq     b    k ,ij , pq  comfb, k ,ij , pq 

 b 

a 
pq
pq




(4)

where

GCk ,ij is a generalized cost of rail route k from zone i to zone j ;Ta, k ,ij , pq is the travel time of link type a in a link from p to q of rail route k fromzone i to zone j ;comfa, k ,ij , pq is a comfort level of link type b in the link from p to q of rail route kfrom zone i to zone j ; k ,ij , pq is equal to 1 if the link from p to q is included in the rail route k from zone
i to zone j and 0 otherwise;

a is a value of travel time of link type a ; andb is a value of comfort level of link type b .
The Manual cites in-vehicle travel, rail station access, rail station egress, and transfers at
stations as examples of type- a links, whereas it cites in-vehicle comfort, convenience oftransfer at stations, and service frequency as examples of type- b links.
Finally, the OD-based generalized cost is computed using the route-based generalized
cost. The Manual proposes a weighted average method to estimate the OD-based
generalized cost with the route shares of travel demand and the route-based generalized
costs, although this method is not theoretically supported (Kidokoro, 2004; Kato et al.,2003a).
2.5.

Methods of Valuing Rail Service Components

The Manual also presents methods for valuing each rail service component. These are
primarily aimed at estimating the generalized cost in the non-log-sum approach, but arealso used to compute the shares of different benefit components out of the total user’s
benefit even when the log-sum approach is applied.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANIn-vehicle travel time
User’s welfare with respect to in-vehicle travel time is computed with a value of invehicle travel time as

in vehicle    k ,ij , pq  Tin vehicle,k ,ij , pq

(5)

pq

where

invehicle is the value of in-vehicle travel time; k ,ij , pq is equal to 1 if a link from p to q is included in the rail route k from zone i
to zone j and 0 otherwise; andTin vehicle, k ,ij , pq is the in-vehicle travel time of the link from p to q in rail route kfrom zone i to zone j .
The Manual recommends that the value of travel time be estimated empirically withtravel data because it may vary among regions and individuals’ attributes. However, if
the data is not available to estimate the value of travel time, the Manual requests thatthe analysts show the reason for it, and it allows them to use a standard value. The
Manual presents the standard values in 2010, which are estimated with the government’s
statistics for the entire nation of Japan, Tokyo, and Osaka, as shown in Table 2.
Table 2. Standard Values of Time in 2010 Estimated from Monthly Work Statistics Survey
Japan
Value of time
(JPY/min)

Tokyo
36.2

Osaka
47.0

39.2

Source: 2010 Annual Report of Monthly Work Statistics Survey: Local Survey, Ministry of Health, Labour andWelfare, Japan.

Note 1: Values of time are computed by dividing the monthly average cash income of permanent
workers working at workplaces with over four workers by the monthly average work hours ofpermanent workers.
Note 2: Table 2 shows the value of time in 2010. The latest statistics should be used when the data
is available in the same manner as that shown in Note 1.

The Manual notes that the time values of children and elderly people who do not work
should be equal to the standard value because another family member may have thewillingness to pay to save travel time as an opportunity cost assuming the case where norail service is available.
Rail station transfers
The Manual identifies two approaches to valuing the convenience of rail station transfers:
a multiplier approach and a constant-parameter approach.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANFirst, the multiplier approach assumes the following formula:transfer  in vehicle    k ,ij , pq  Ttransfer ,k ,ij , pq

(6)

pq

where

transfer is a multiplier with respect to transfer time (= 2);

invehicle is the value of in-vehicle travel time; k ,ij , pq is equal to 1 if the link from p to q is included in the rail route k from zone
i to zone j and 0 otherwise; andTtransfer , k ,ij , pq is the transfer travel time of the link from p to q of rail route k fromzone i to zone j .
This multiplier refers to past studies of rail route choice in Tokyo such as Yai et al. (1998).
It should be noted that the above multiplier is higher with respect to transfer time (=2)
than the multipliers with respect to transfer time by transfer type (= 0.89 to 1.65), which
will be shown later in Table 4. This is probably because the above multiplier includes thepsychological effect of transferring. It means that the above multiplier contains both thevariable component that is in proportion to transfer minutes and the fixed component.
On the other hand, the constant-parameter approach assumes the following formula:in vehicle10  transfer ,k ,ij 

(7)

where

invehicle is the value of in-vehicle travel time; andtransfer ,c, k ,ij is the number or frequency of transfers of rail route k from zone i tozone j .
This means that the constant-parameter approach assumes that the value of a unittransfer equals the value of 10-minute in-vehicle travel time.
In-vehicle crowding
The (dis)comfort of in-vehicle crowding is computed with the following formula:in vehicle  k ,ij , pq  Tin vehicle,k ,ij , pq  f x pq , cap pq 

(8)

pq

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANwhereinvehicle is the value of in-vehicle travel time; k ,ij , pq is equal to 1 if the link from p to q is included in the rail route k from zone
i to zone j and 0 otherwise;
Tin vehicle, k ,ij , pq is the in-vehicle travel time of the link from p to q in rail route kfrom zone i to zone j ;f  is an in-vehicle congestion function;x pq is the traffic flow in the link from p to q ; andcap pq is the traffic capacity in the link from p to q .
The Manual shows the in-vehicle congestion function as presented in Table 3.
Table 3. In-vehicle Congestion Functions Proposed by the CBA Manual
In-vehicle congestion rate

In-vehicle congestion function

Less than 100 percent

f  0.0270R

100 to 150 percent

f  0.0828R  0.0558

150 to 200 percent

f  0.179R  0.200

200 to 250 percent

f  0.690R  1.22

250 percent or moref  1.15R  2.37

Note: R is the in-vehicle congestion rate, which is defined as the traffic flow over the traffic
capacity, that is, R pq  x pq

cap pq .

Figure 1 depicts the curves of the in-vehicle congestion functions, including the function
shown in Table 3 and other estimates in Japan.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN

Figure 1. In-vehicle Congestion Functions

In-vehicle congestion parameter

Ieda (1989)

Ieda (1989)
Ieda (1989)
Ieda (1989)

Ieda (1989)
Ieda (1989)
Ieda (1989)

CBA Manual (2012)
Ieda (1989)
ITPS (1993)
Yai et al. (1993)
In-vehicle congestion Rate (=traffic volume/capacity x 100)

Source: Slightly changed from MLIT (2012)

It should be noted that the in-vehicle congestion function is not equal to the multiplierwith respect to in-vehicle congestion and in-vehicle travel time. The multiplier withrespect to in-vehicle congestion is given as

cong  1 f x pq , cap pq 

(9).

The traffic capacity of rail service is typically defined in terms of hourly capacity. It isestimated using the passenger capacity of cars, the number of cars per rolling stock, andhourly service frequency. The passenger capacity of cars is defined by the JapaneseIndustrial Standards (JIS). Rolling Stock−General Requirements of Car Bodies for
Passenger Cars (JIS E 7103, 2006) defines the passenger capacity as follows:
5.1 a) Passenger capacity: the passenger capacity is the sum total of seat capacity andstanding capacity.
1) Seat capacity: seat capacity is calculated by dividing the total width of all seats ina car body by the width of a seat occupied by a unit passenger, and it is rounded
down to the nearest decimal. When there is no specific agreement about the seatcapacity between the rolling-stock producer and the client, the width of the seatcapacity occupied by a unit passenger is given to be 430 mm.
2) Standing capacity: standing capacity is calculated by dividing the available floor
space by the space occupied by a unit passenger, and is rounded down to thenearest decimal. The available floor space is calculated by eliminating the seatarea and the floor space within 250 mm of the front edge of seats from the total
passenger space that has an effective width of 550 mm or more and an effective
height of 1,900 mm or more. When there is no agreement about the standing
capacity between the rolling-stock producer and the client, the space occupied bya unit passenger is given to be 0.3 m2.

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2.6.
Complementary Method of Valuing Transfer Improvement in Rail
Stations
The Manual also presents complementary guidance for evaluating rail projects to improvetransfers. This is because the government has recently called attention to rail station
improvement projects in its goal of developing a seamless rail network. The Manual
includes projects in rail stations for decreasing transfer time, lowering transfer barriers,
reducing in-station congestion, and decreasing waiting time.
Multipliers of Transfer Time by Transfer TypeThe Manual recommends that transportation planners primarily use travel demandmodels to value station transfers. The coefficients estimated in the travel demand model
can be used to value transfers by transfer type when the travel demand model contains
the variables with respect to the service level of going upstairs, going downstairs, using
escalators, etc. The Manual presents a method to value transfers in stations by transfer
type when such travel demand models are not available.
The following formula is presented for valuing transfers in stations: r  in vehicle  Ttransfer ,r

(10)

where

 r is a multiplier with respect to transfer type r ;invehicle is the value of in-vehicle travel time; andTtransfer , r is the travel time of transfer type r .
The transfer types are walking upstairs, walking downstairs, walking on a flat floor, andusing escalators. The Manual shows the multipliers as presented in Table 4.
Table 4. Multipliers with Respect to Transfer Time by Transfer TypeTransfer typeMultiplier

Walking upstairs

Walking
downstairs

Walking on a flat
floor

Using escalator

1.65

1.53

1.25

0.89

Source: Institution of Transport Policy Studies (2000)

Note that Kato et al. (2003b) also report the estimation processes and results of valuing transfer
time by transfer type, which is the original source of Institution of Transport Policy Studies (2000).

Multiplier of Waiting Time in Stations
The Manual identifies two types of waiting times in stations: waiting time in front of stairs
for passengers and waiting time at station gates for passengers who want to passthrough the gates. It is assumed that benefits in this area stem from expanding thewidth of existing stairs in stations and installing new station gates.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANThe generalized cost of waiting time is formulated as follows: wait  in vehicle  Twait

(11)

where

 wait is a multiplier with respect to waiting time (=1);

invehicle is the value of in-vehicle travel time; andTwait is waiting time.
The Manual also suggests that the space occupied by a unit passenger is given to be 0.5
m2; above this threshold, waiting queues occur.
2.7.

Method of Valuing the Reliability of Rail Service

Although the Manual does not provide any official method of valuing the reliability of rail
service, it includes an example of an estimation of the benefit stemming from theimprovement of service reliability. According to this example, the multiplier with respect
to delay is assumed to be 1. This means that the formula for valuing the reliability of rail
service is delay  in vehicle  Tdelay

(12)

where

 delay is a multiplier with respect to delay time (=1);

invehicle is the value of in-vehicle travel time; andTwait is the time delayed from the given schedule.

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3. EXAMPLE OF VALUING URBAN RAIL SERVICE:
2000 URBAN RAIL DEVELOPMENT MASTER PLAN IN TOKYO

3.1.

The Urban Rail Market in Japan: The Case of Tokyo

Tokyo is one of the most populated cities in the world, with approximately 36 million
people in its metropolitan area as of 2005. Tokyo is also well known to be a rail-oriented
city: daily rail use demand was 26.22 million passengers in 2005. Rail’s modal share was
30 percent as of 2008 according to the 2008 Person Trip Survey, an increase from 25
percent in 2003. One of the reasons for the recent increase in rail demand is thedevelopment of an urban rail network. Recent changes in the population distribution
pattern and sharp increase of gas prices may also influence individuals’ modal choice. In
any case, the economy of Tokyo is highly reliant on an efficient urban rail network.
Tokyo’s urban rail market has unique characteristics. First, many rail services areprovided by private rail companies. Each rail company has its own rail infrastructure androlling stock with its own management system. They are, in essence, monopolistic firms
in their own network. Note that one rail company’s network may be physically connected
directly with another rail company’s network, but the service in a rail network is usuallyoperated by the company that owns the rail network. Although they provide rail service
monopolistically in their networks, these companies sometimes compete with other rail
operators that may also have a rail network connecting the same pair of cities. For
instance, Tokyo and Yokohama are connected by three rail lines operated by threedifferent rail companies: JR East, Tokyu Co., and Keikyu Co. Competition between thesefirms is fierce, and as each rail operator has its own fare table and timetable in addition
to its own infrastructure, they attempt to improve their service by improving fares, travel
time, and station facilities to obtain more passengers.
Second, the rail network in Tokyo has been developed under the guidance of the central
government. Long-term urban rail development plans, so-called “master plans,” aremade by the central government and have an important role in the decision-making ofrail companies. Tokyo’s urban rail master plan began in the early twentieth century, andis now over 100 years old (Morichi, 2000). At least ten master plans have been proposedby the government’s committee under commissions by the Minister of MLIT. The latest
master plan was issued in 2000 in Report No. 18 of the Council for Transport Policy(Morichi et al., 2001). It should be noted that the master plans do not have any statutory
basis; a master plan lays out the government’s vision regarding the future of the urban
rail network in Tokyo, and the government cannot force rail operators to follow it.
However, in the long history of the urban rail market in Japan, most rail developments
have been implemented voluntarily following the master plans.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN

Third, Tokyo’s rail users have suffered from chronic traffic congestion for many years(Kato et al., 2012). The urban rail demand for commuting increased sharply from the
1960s to the 1980s. This was caused by the constant growth of the working population,
which was mainly due to migration from rural areas for job opportunities. Although rail
operators tried to increase traffic capacity by investing in new rail lines, increasing
service frequency, enhancing station capacity, and introducing high-capacity rolling stock,
the speed of demand growth was much higher than that of supply increase. This
motivated the government to spotlight a transport policy to reduce traffic congestion,and it also encouraged the evaluation of in-vehicle crowding since the 1980s in Japan.
Fourth, a recent demographic trend should be also highlighted in Tokyo: rapid aging. The
senior population—those ages 65 and over—comprised eight percent of the Tokyo
metropolitan area’s population in 1985; in 2005, it was 18 percent, and it is expected toreach 24 percent by 2015. The population of workers is also expected to decrease in the
future. This aging issue may be faced by other OECD countries in the near future; thus,
the experiences in Tokyo could be very useful for transportation policy there.
3.2.

2000 Urban Rail Development Master Plan for Tokyo

MLIT finalized the 2000 Urban Rail Development Master Plan in January 2000 (Morichi,
2000). This plan presents an ideal picture of the Tokyo Metropolitan Area’s urban rail
network in 2015 with the necessary rail developments. It identified five major targets tosolve the expected problems in Tokyo’s urban rail market: “Reduction of in-vehicle
crowding,” ”Saving travel time,” “Contribution to urban redevelopment,” “Improvementof accessibility to airports and high-speed rail,” and “Development of seamless transport
network by introducing barrier-free facilities.” The first target is a congestion-related
policy issue in Tokyo, and has not been solved yet. The government stated that thecongestion rate in 31 major rail links should be equal to or lower than 150 percent duringmorning peak hours. Note the government has regularly monitored in-vehicle traffic
congestion in major rail lines in Tokyo. The second target is related to the Tokyo
metropolitan area’s decentralized land-use policy, in which satellite sub-centers havebeen developed for business. Saving travel time for rail connections between sub-centers
was pursued in addition to saving travel time for commuting from residential areas tobusiness districts. The third target aims to increase rail capacity, particularly in thecentral business district (CBD) of Tokyo. Since the 1990s, a number of high-rise buildings
have been built both for business use and for residential use in the CBD. This is becauseseaside areas near Tokyo Bay have been redeveloped for business and residential use
and because the younger generation has gradually changed its preference for living
space from suburban residential areas to the central area. These land-use patternchanges are expected to generate a large traffic volume. The fourth target follows theglobalization of business and tourism markets. The government has also implemented a
globalization policy that includes the deregulation of the air transportation market andthe promotion of tourism in Japan. The improvement of rail access to and from airports
and high-speed rail are critical for better business and tourism conditions. Finally, thefifth target reflects the rapid aging of Japanese society. Social participation by seniors is
widely understood to have a vitalizing effect on economic activities under the
depopulation trend, and easy access to social services could be one of drivers to givethem better mobility in urban areas. Thus, the introduction of new devices and upgrades
to station facilities for handicapped passengers was highly recommended.

Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 201417

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANThe 2000 Urban Rail Development Master Plan also presented a list of rail development
projects that were recommended to implement construction or to study feasibility. The
recommended network is depicted in a map shown in Figure 2. The proposed projects are
categorized into three types: A1 routes that are suitable for operation by the target year;
A2 routes that are suitable for starting development by the target year; and B routes
that must be developed or studied in the future. Rail projects in A1 routes are considered
the highest priority, which may mean that they are strongly supported by thegovernment. In A1 projects, a consensus among stakeholders has been reached or
almost reached; thus, these projects can be started immediately following the completionof the official process. Rail projects in A2 routes are regarded to be middle priority, whichmeans that they are supported by the government but may have some reasons for not
being immediately started, such as technical problems in construction or contract
problems between different companies. B projects are typically considered importantfrom the viewpoint of government targets, but they may not satisfy necessary conditions
such as cost-benefit criteria or financial viability criteria. Thus, further feasibility studies
are required. The total length of the proposed projects is 658 km. The length of the A1,
A2, and B routes are 288.0 km, 166.8 km, and 203.3 km, respectively.
Figure 2. Urban Railway Network Master Plan in the Tokyo Metropolitan Area.

Source: Morichi et al. (2001)

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN

3.3.
Rail Demand Analysis and Project Evaluation in the 2000 Urban RailDevelopment Master Plan for Tokyo
The 2000 Urban Rail Development Master Plan for Tokyo was based on the typicaltransportation planning process. Future traffic demands of proposed rail lines and therelated network were estimated with a traffic demand model, whereas the proposed
projects were evaluated both from economic and financial perspectives.
Rail demand modeling and traffic demand forecasts have been included in the masterplans for over 30 years. A mathematical travel demand analysis was first introduced into
urban rail planning in Tokyo in 1972. In 1985, a four-step travel demand model was
introduced into rail demand analysis. Multinomial logit (MNL) models were used for themodal choice and rail route choice models.
In the 2000 Urban Rail Development Master Plan for Tokyo, the four-step travel demandmodel was again used for travel demand forecasts (Figure 3). The MNL model was used
for the modal choice analysis, while a probit-based stochastic user equilibrium (SUE)
method was used for the route choice analysis. The probit model is used because it isnecessary to incorporate the commonality of routes into the rail route choice analysis. A
huge urban rail network with high density has already been developed in the Tokyo
metropolitan area. Thus, to avoid an enormous amount of calculation time, the probit
model with a structured error component was introduced (Yai et al., 1997). We call thismodel the “structured probit model.” The coefficients are estimated by the simulation
method using the Geweke, Hajivassiliou, and Keane (GHK) recursive simulator (Geweke
et al., 1994; Train, 2003). The details of the urban rail route choice model in the context
of Tokyo have been also studied by Kato et al. (2010a).
Figure 3. Travel Demand Analysis System in the 2000 Urban Rail Development Master Plan forTokyo• Four-step modeling approach• Geographical scope– Tokyo Metropolitan Area including
Tokyo, Kanagawa, Saitama, Chiba andthe southern part of Ibaraki prefectures

Estimated
population(Given)Additional
population
estimation
model

Zoning systemRail
networkRoad
network

Transfer
networkBus
network

Population forecast
Generation/
Attraction
model

Trip
generation/attraction

Trip
distribution
model

Level-of-service data

– Generation/attraction: Trip rate modelby socio-demographic category;.
– Trip distribution: Frator model ingeneral; a gravity model is partly applied
to new development areas;– Modal split: MNL model;– Rail route choice: Structured MNPmodel; and– Station access modal choice: Distancebased share model for bus and bicycle.

Trip Distribution
Modalchoicemodel

Modal Split
Rail route
choice model• Zones– 1,812 zones
Route Choice

Stationaccess modal
choice model

1

Source: Author

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19

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANThe conventional cost-benefit analysis approach has been used for rail project evaluation.
The 2000 Urban Rail Master Plan for Tokyo introduced a systematic cost-benefit analysis
for all proposed rail projects. The with-project and without-project cases are defined, andthe benefit and cost from the project will be estimated using the estimated traffic
demand from the traffic demand forecast. The with-project case assumes the rail
network and service under the condition that a new rail service has been introduced in
the target year, while the without-project case assumes the current rail network andservice in the target year. The benefit consists of the user’s benefit, supplier’s benefit,
and other benefit. The user’s benefit is estimated from the expected maximum utility
divided by the marginal utility with respect to income, which is equal to the (expected)
consumer’s surplus. The expected maximum utility is derived from the (indirect) utility
function in the rail route choice model, which is estimated in the traffic demand analysis.
The supplier’s benefit is also estimated with the expected profits of rail users using theestimated results of rail traffic demand. The other benefit is mainly the reduction ofenvironmental impact. The details of the cost-benefit analysis follow the CBA Manual.
3.4.
Values of Rail Service Estimated in the 2000 Urban Rail Development
Master Plan for Tokyo
Examples of valuing rail service can be provided from the estimation results of the railroute choice model in the 2000 Urban Rail Master Plan for Tokyo. Four rail route choicemodels were estimated by travel purpose—home-to-work, home-to-school, private, andbusiness—using a sample dataset constructed from the 1995 Tokyo Metropolitan
Transport Census (ITPS, 1996). The following variables are used in the linear utility
functions: in-vehicle travel time, access and egress travel time, access travel time (onlyfor home-to-school travel), egress travel time (only for home-to-school travel), transfer
time (including waiting time), travel cost, and in-vehicle congestion index (only forhome-to-work and home-to-school travel). Transfer time means the connection timefrom one train to another train, which mainly includes walking from one platform toanother platform in the same station. The in-vehicle congestion index is defined asfollows:

 x pq CI k ,ij   k ,ij , pq  Tin  vehicle, k ,ij , pq   cap pq 
pq



2

(13)

where

CI k ,ij is the in-vehicle congestion index of a rail route k from zone i to zone j ; k ,ij , pq is equal to 1 if the link from p to q is included in the rail route k from zone
i to zone j and 0 otherwise;
Tin vehicle, k ,ij , pq is the in-vehicle travel time of the link from p to q in rail route kfrom zone i to zone j ;x pq is the traffic flow in the link from p to q ; andcap pq is the traffic capacity in the link from p to q .

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Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 2014

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANThis means that the in-vehicle congestion function is assumed to be a quadratic functionof the in-vehicle congestion rate. The estimated coefficients of the rail route choice model
are shown in Table 5.
Table 5. Estimation Results of the Rail Route Choice Model
Home-to-work
In-vehicle travel
time (min.)-0.0943(-8.1)

Access andegress travel
time (min.)-0.127(-11.7)Home-to-school-0.0597(-5.8)

Access travel
time (min.)-0.0691(-6.2)

Egress travel
time (min.)-0.0603(-5.7)

PrivateBusiness-0.0494(-2.9)-0.0499(-3.3)-0.0583(-4.3)-0.0599(-5.8)

Transfer time
including waitingtime (min.)-0.112(-10.7)-0.0793(-8.7)-0.0722(-4.2)-0.0687(-4.5)

Travel cost (JPY)-0.00200(-4.0)-0.00388(-7.1)

0.00233(-3.0)

0.00103(-1.6)

In-vehicle
congestion index-0.00869(-3.3)-0.00177(-0.8)

Ratio of two
variances

0.436
(2.7)

0.161
(1.4)

0.513
(1.2)

0.214
(1.1)

Log-likelihood
ratio

0.390

0.331

0.172

0.156

Number ofobservations

1218

811

436

357

Note: Values in parentheses are t-statistics.
Source: Morichi et al. (2001)

The estimated values and multipliers of in-vehicle travel time, access/egress travel time,
access travel time, egress travel time, and transfer time (including waiting time) arepresented in Tables 6 and 7. Table 6 includes the results using both JPY and USD. The
currency exchange rate as of November 1995 is used because the original data in the
1995 Metropolitan Transport Census was collected in late autumn.

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VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPAN

Table 6. Rail Service Values Estimated with the Rail Route Choice Model
Home-to-work
In-vehicle travel
time
Access andegress travel
Access travel
time
Egress travel
time
Transfer time(including waiting
time)

47.2
(0.46)
63.5(0.62)

Home-to-school
15.4(0.15)

PrivateBusiness21.2(0.21)
25.0(0.25)

48.4(0.48)
58.2(0.57)

31.0(0.30)

66.7(0.65)

17.8(0.17)
15.5(0.15)
56.0(0.55)

20.4(0.20)

Note: Units are JPY per min. (USD per min.) as of November 1995 when 1 USD = 101.86
JPY.

Table 7. Multipliers Estimated with the Rail Route Choice Model
Home-to-work
Access andegress travel
time
Access travel
time
Egress travel
time
Transfer time(including waitingtime)

Home-to-school

1.35

PrivateBusiness

1.18

1.20

1.46

1.38

1.16
1.01
1.19

1.33

Table 7 shows that the estimated multipliers of the value of in-vehicle travel time withrespect to access/egress travel time vary from 1.01 to 1.35, whereas those with respect
to transfer time vary from 1.19 to 1.46. Compared with the data shown in the CBAManual, the estimated multipliers are in the range of the multipliers with respect totransfer time by transfer type shown in Table 4. Note that the estimated multipliers withrespect to transfer time in Table 7 contain both transfer time and waiting time.
Next, an in-vehicle congestion multiplier is computed with the estimated coefficients in
the rail route choice models. A single link is assumed for the computation, although thein-vehicle congestion index is, in general, defined as the sum of the link-based in-vehicle
congestion disutility of all links in a given route. This means the in-vehicle congestion
multiplier is shown asˆ  x  cong  1  ˆ  cap 

22

2

Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 2014

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANwhere cong is the multiplier with respect to in-vehicle congestion;

ˆ is an estimated coefficient with respect to the in-vehicle congestion index; andˆ is an estimated coefficient with respect to in-vehicle travel time.
The in-vehicle congestion multipliers computed for home-to-work and home-to-school
travel are depicted in Figure 4.
Figure 4. Computation Results of In-vehicle Congestion Multipliers with the Multiplier of
the CBA Manual.

In-vehicle congestion multiplier

2

1.8
1.6
1.4
1.2
1
0.8

Home-to-work
Home-to-school
CBA manual

0.6
0.4
0.2
0

0

0.5

1

1.5

2

2.5

In-vehicle congestion rate

Figure 4 shows that the in-vehicle congestion multiplier increases to approximately 1.6
for home-to-work travel and to approximately 1.2 for home-to-school travel. In contrast,
the formula shown in the CBA Manual is nearly equal to the multiplier of home-to-school
when the in-vehicle congestion rate is lower than 2, and it sharply rises and becomesclose to the multiplier of home-to-work as the in-vehicle congestion rate increases over 2.

Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 201423

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANCONCLUSIONSThis paper introduced the recent practices of cost-benefit analysis for urban rail
investment projects in Japan, particularly focusing on the values of rail service, andshowed examples of the valuation of rail service using the case of the 2000 Urban RailDevelopment Master Plan for Tokyo.
As seen in the CBA Manual for rail projects, the valuation of in-vehicle congestion has
been highlighted in Japan for years. This is because the urban rail service has sufferedfrom serious in-vehicle crowding in the urban rail networks of metropolitan areas,
including Tokyo. The national government has also raised the issue of the in-vehicle
congestion of urban rail networks in its railway development policy for many years; forexample, it explicitly set the policy target that average in-vehicle congestion rates in 31
major rail sections in Tokyo should be 150 percent or less. In spite of the government’s
policy, however, the latest government review found the average in-vehicle congestion
rate to be 164 percent as of 2010 (ITPS, 2013). One of the reasons for this is the recent
prolonged economic recession, which has made it difficult for private rail operators tofurther invest in the expansion of traffic capacity.
In addition, the importance of valuating transfers at stations has been recognized in the
CBA Manual. This reflects the recent socio-demographic trend in Japan of an aging
population. Additionally, the social inclusion of handicapped people has been emphasizedin recent years. The national government introduced the Barrier-Free Act in 2000,
making the installation of elevators and escalators at large-scale rail stations mandatory.
According to the government’s review, as of 2010, 77 percent of rail stations whose daily
passengers numbered 5,000 or more had installed barrier-free facilities (MLIT, 2011). As
the further growth of the number of aged rail users is expected in the coming decade,the national government revised the Act in 2011 with a new policy target: that 100
percent of rail stations whose daily passengers numbered 3,000 or more install thebarrier-free facilities.
For the further promotion of comfort and safety improvements in public transportation
service, MLIT introduced the “Indexes of Comfortable and Easeful Public Transportation”(ICE-PT) in March 2004 (MLIT, 2004). ICE-PT contains nine indexes for operators in theTokyo and Osaka metropolitan areas covering both urban rail and buses (see Table 8).
MLIT regularly collects statistical data from public transportation operators and provides
the indexes to the public every year. MLIT’s goal is to monitor the performance of public
transportation operators for benchmarking, based on which the government promotes
the voluntary-based efforts made by private operators of public transportation service.

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Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 2014

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANFinally, further issues are summarized, particularly in the Japanese context. First,
parameters and multipliers in valuing rail service should be regularly monitored andrevised. One of the barriers to this is the difficulty of data collection in recent years.
Although regular large-scale travel surveys have been implemented in metropolitan areasin Japan, the government’s prolonged financial problems may not guarantee asustainable travel survey system in the future. Instead of a large-scale RP survey, astated preference (SP) survey should be considered for estimating the values of rail
service as a potential solution. Additionally, an SP survey for valuing rail services inOECD member countries may be helpful for sharing Japan’s skills and experiences.
Table 8. Definitions of Nine Indexes in “Indexes of Comfortable and Easeful Public
Transportation” proposed by MLIT, Japan
Index
1. Rail in-vehicle congestion
rate during a peak hour

Definition
Average hourly rail in-vehicle congestion rate at the mostcongested rail section during a peak hour

2. Share of step-free station

Share of rail stations with over 5,000 passengers/day that haveintroduced non-step routes out of stations

3. Share of non-step bus

Share of non-step buses out of total buses

4. In-vehicle comfort index

Share of rail vehicles in which high-performance air conditioners
have been installed out of all rail vehicles

5. Availability of rail service
information at platforms

Share of station platforms with light-emitting diode (LED)
devices installed that display the service schedule, destination,and other information out of all platforms

6. Availability of rail service
information in stations

Share of rail stations where display boards and announcement
systems are installed to provide information about the type ofrail service, destination, etc. out of all stations

7. Availability of rail service
information in vehicles

Share of rail vehicles where display boards or announcement
systems are installed to provide information about the nextstop, etc. out of all vehicles

8.
Accessibilityof
rail
passengers to staff at stations

Share of station platforms where station staff are allocated ordevices for communication between passengers and rail staff
are installed out of all platforms

9.
Accessibilityof
rail
passengers to staff in vehicles

Share of rail vehicles where rail staff are allocated or devices forcommunication between passengers and rail staff are installedout of all vehicles

Source: MLIT

Next, the valuation of more detailed rail service categories may be necessary. For
example, the multipliers of rail in-vehicle congestion may vary among different sociodemographic sub-groups such as aged rail users versus young rail users. These have notbeen explicitly taken into consideration in the CBA Manual, although some studies, suchas Kato et al. (2003b), have challenged the empirical analysis. As rapid aging is expected
in many OECD member countries, further investigation of multipliers/parameters may beneeded and shared among them.

Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 2014

25

VALUATION OF URBAN RAIL SERVICE: EXPERIENCES FROM TOKYO, JAPANFinally, the comparison of the values of rail service with those of other public
transportation services, such as bus service, bus rapid transit, inter-urban transportation,
and air transportation, should be explored. The valuation of inter-urban transportation in
the context of Japan has been challenged by some studies (e.g., Kato and Onoda, 2009);
however, bus service values have not been well analyzed in Japan even though bus
service is important in many cities. Evidence from other OECD member countries invaluing other public transportation services may also contribute to the discussion in
Japan.

ACKNOWLEDGMENTS

Some data shown in this paper refer to documents used in the Committee on Current
Problems and Future Direction of Railway Development in the Tokyo Metropolitan Area.
Information about ICE-PT was kindly provided by MLIT, which also provided advice. I am
grateful to Mr. Tomoharu Hase (MLIT), Mr. Kasuhiro Kishimoto (MLIT), Mr. Shinichiro
Kato (Institute of Transport Policy Studies), Mr. Yoshihisa Yamashita (Creative Researchand Planning Co.), and Mr. Satoshi Seki (Tokyu Co.) for their support with the data.

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Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 2014

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Hironori Kato — Discussion Paper 2014-1 — © OECD/ITF 201429

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