Photographer: Kiyoshi Ota/Bloomberg

A Scandal May Put Brakes on World's Fastest Train: Q&A

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Not satisfied with its world famous bullet trains, Japan is developing a yet-faster rail service known as maglev. It takes its name from the magnetic-levitation technology that promises to cut journey times from Tokyo to Osaka by more than half to just over an hour. The cost of the world’s fastest train is a staggering $80 billion, but that’s not all that’s raising eyebrows: Allegations of corporate skulduggery are emerging and threatening to derail progress on the maglev project.

1. What is maglev exactly?

Maglev trains use magnetic power to float carriages, eliminating the friction of steel tracks. The trains set off on wheels (the kind used on F-15 fighter jets) until there’s enough speed for the magnets to kick in and create lift. China already operates a maglev over a short route in Shanghai, but the Japanese work-in-progress is on a much larger scale. It already set a world record for a train of 603 kilometers an hour (375 miles an hour) during a trial in 2015.

2. When can I ride one?

Don’t line up for tickets just yet. Central Japan Railway Co., known as JR Central, is running the project and began construction in 2015, but the first leg -- from Tokyo to Nagoya -- isn’t scheduled to open until 2027. The second stage to Osaka is planned for 2045, though the government is providing a loan to try to bring that forward by eight years.

3. Why’s it so important for Japan?

The government has hailed the project as “Japanese technology that will revolutionize intercity transport.” It sees maglev as a highly exportable revenue generator, with foreign dignitaries frequently taken on rides at a test line near Mount Fuji. Prime Minister Shinzo Abe has said his government may provide financing to JR Central’s bid to provide trains for a proposed Washington-Baltimore line. Japan’s interest in maglev technology dates back to the 1960s, about the time when bullet trains first appeared.

4. Why has it taken so long to develop?

As well as the cost, there are technical challenges. Such as tunneling through the Japanese Alps. Or making the train line straight enough to accommodate maglev’s speed. To achieve that goal, JR Central has to dig some 246 kilometers of tunnels for the first leg -- almost five times the length of the Channel Tunnel linking Britain and France. Now, there’s also a scandal.

5. What’s the controversy?

It centers on possible collusion on contracts for the project by four of the giants of Japan’s construction industry. The Tokyo District Public Prosecutors Office and the Japan Fair Trade Commission this week raided the headquarters of Kajima Corp., Shimizu Corp., Obayashi Corp. and Taisei Corp. The raids followed reports that the quartet were under investigation for possible antitrust violations related to maglev contracts. Then on Dec. 19, the Yomiuri reported that Obayashi admitted to the Fair Trade Commission that it colluded with the three others. An Obayashi spokesman declined to comment on the report.

A construction site of the maglev train Nagoya station in Aichi, Japan.

Photographer: The Asahi Shimbun via Getty Images

6. How did the alleged collusion play out?

The contractors are suspected of having conspired to decide in advance which of them would win orders and at what prices, Japanese media including Sankei newspaper reported. Managers met once a month to discuss progress on the project, according to Sankei, with each of the companies ending up with an equal share of 70 percent of the contracts. All four firms acknowledged the raids and said they’re cooperating with authorities.

7. What’s at stake? 

Other than another black mark for Japan Inc. in a year when manufacturers admitted faking data, there’s a risk that the project will face delays. The contractors are four-fifths of what are known as "super zenecon", or super general contractors, that dominate Japan’s construction market. The super zenecon are said to be the only companies with the capacity to handle large-scale projects with the technical precision required. Tunnel-building would face a serious obstacle if the investigation were to jeopardize their involvement, industry experts say. Many see such far-reaching consequences as unlikely, however. Transport Minister Keiichi Ishii has declined to comment on the possibility of delays.

8. What’s at risk for the companies?

The worst-case scenario is a criminal conviction against the companies and their executives, according to Daiske Yoshida, a Tokyo-based partner at Latham & Watkins LLP. While Japanese authorities rarely prosecute cartels, criminal charges were filed against three of the nation’s ball-bearing makers in a price-fixing case earlier this decade. Shares in the four construction firms fell as much as 10 percent in the days following the first reports, but investors don’t seem overly concerned. “The market isn’t having a big reaction,” said Minoru Matsuno, president of Tokyo-based investment adviser Value Search Asset Management Co. “There is a feeling that the market accepts that for this type of large-scale project, bid rigging is a necessary evil.”

The Reference Shelf

— With assistance by Kiyotaka Matsuda

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