# The market logic of Japanese rail

**Published by:** [Brandon Donnelly](https://brandondonnelly.com/)
**Published on:** 2026-04-21
**Categories:** japan, rail, toronto, urbanism, cities, transit-oriented-development, transit, work-in-progress, mobility
**URL:** https://brandondonnelly.com/the-market-logic-of-japanese-rail

## Content

We have spoken many times before about the fact that Japan is built around rail-oriented urbanism. But if you have the time right now, I'm going to suggest that you read this longish article by Matthew Bornholt & Benedict Springbett called "Why Japan has such good railways," because nowhere else in the developed world uses rail for passenger kilometres more than Japan, and they explain why.One common hypothesis, which is mentioned in the article, is that it's largely cultural. The Japanese are rule-abiding collectivists who are more willing to take public transit compared to us selfish and individualistic North Americans. But this doesn't seem right. In fact, one could argue that the Japanese solution is actually more free-market oriented.The Japanese rail model seems to work so well because (1) most of the network is private, (2) liberal land-use policies have allowed Japan's urban centres to develop enough density to properly support the use of rail, and (3) the rail operators make money in a bunch of other ways beyond rail. They're typically also in the business of real estate. Here's a quote from the article by the president of the Tokyu Group that I absolutely love:I think that though we are a railway company, we consider ourselves a city-shaping company. In Europe for instance, railway companies simply connect cities through their terminals. That is a pretty normal way of operating in this industry, whereas what we do is completely different: we create cities and then, as a utility facility, we add the stations and the railways to connect them one with another.This is a fundamentally different model that allows rail companies to capture some of the value that they inherently create. To use the example of Toronto's Eglinton Crosstown line, it's the difference between saying, "I'm going to build a rail line and then, presumably, other stuff will happen," and, "I'm going to develop this midtown corridor and then I'm going to run rail underneath it to maximize value creation." If Japan can do it, so can we. Ironically, a big part of it means easing land-use controls and allowing transit-oriented development to simply be what it wants to be — dense and proximate to rail.Cover photo by Mylène Larnaud on Unsplash Charts from Work in Progress

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