regime by new policy inviting to more competition into the field.

With respect to domestic aviation, the Ministry of Transport promoted a policy which induced competition in the form of double or triple tracking, based on the quantitative standards in 1986. In these standards, new entries were judged on the number of passengers carried in the previous year. Since that policy change, double and triple trucking routes have increased gradually. In 1993, about 65% of total air transport passenger flied in either double or triple trucking route, although the number of these routes counts for only 19% of the total.

In addition, a related bill was passed in September 1987 pertaining to the complete privatization of JAL.

However, it should be noted that the new policy did not give enough freedom for airlines to change themselves. This new policy seeks “promotion of competition” within the range of administrative operation without altering the previous systematic framework stipulated by the Civil Aeronautics Law. In other words, the licensing system for new entry and approval system for setting fares remained unchanged. On top of that, it is criticized that the new policy enhanced administrative discretion and that in some respects the regulation was strengthened because regulators have to decide which route will become a double track and which carrier will enter.

The liberalization in 1986 increased the opportunity of service competition but price competition was suppressed in the fear, according to the regulator, that competitive strength of Japanese airlines are weaker than that of the U.S.

Accordingly, the authors conclude that the new air transport policy since 1986 has not brought effective competition to the market. As a result, consumers have not obtained gain from the policy change. Thus what Japanese government should do urgently is to make the competition effective in the air transport markets. At the end of last year, the government revised the Civil Aeronautics Law to relax the conditions for introducing discount fare in domestic markets, but in order to give the fruit to consumers more drastic relaxation is needed. (Figure-1 & 2)

### I V. Trucking Industry

Japanese trucking industry experienced the regulatory reform through replacing the Road Transport Law by the Motor-Trucking Business Law in 1990. The main theme of this section is to examine what kind of changes have been rendered by this reform. But before analyzing that change it will be useful to review the development of trucking industry since 1950's.

When we look at the history of transport industry, it is most striking that the market share of railways declined dramatically: in 1955 its share was 50%, in 1965 30%, in 1975 17% and finally in 1991 5%. The market share of coastal shipping has been stable at around 45%, trucking succeeded in capturing the business of railways. This process is closely linked with the failure of the Japan National Railways. JNR was given a status of Kosha (public corporation) which is independent of the ministerial regulation in principle. JNR started as an excellent company in 1950's but in early 1960's met a financial difficulty because the Diet would not allow rate increase in