July 8, 2014 4:54 am JST

Japan's Kyushu Railway to go public by fiscal 2016

TOKYO -- Japan's transport ministry is weighing plans for an initial public offering by Kyushu Railway, one of the last government-owned blocs of the old national rail network.

     Officials are looking to take the Fukuoka-based company public by the end of fiscal 2016. It would become only the fourth member of the Japan Railway family to list its shares and the first since Central Japan Railway debuted in 1997.

     JR Kyushu covers Japan's southernmost main island. It is wholly owned by a government rail agency, as are sister companies for the islands of Hokkaido and Shikoku, all of which have been burdened by money-losing local lines. But JR Kyushu has managed to fortify its earnings, in part by diversifying.

     Craving greater management independence, it has been urging Tokyo to let go. One brokerage reckons the government will sell off a roughly 500 billion yen ($4.84 billion) chunk, a view echoed by many.

     Proceeds from the sale should go toward completing planned stretches of the shinkansen bullet train network ahead of schedule, according to some government and ruling coalition members. This would require new legislation because such money is currently limited to certain uses, including pensions for employees of the old Japan National Railways.

     Some ruling coalition lawmakers want bullet train lines extended as far north as Sapporo in fiscal 2030 and to Tsuruga on the Sea of Japan coast in fiscal 2022 -- five and three years ahead of schedule, respectively. Doing so would cost around 540 billion yen.

     But only about 200 billion yen of the proceeds from the JR Kyushu IPO would likely go toward expanding bullet train service. Transport officials are hoping for additional budget allocations but face a reluctant finance ministry. With some questioning the financial viability of the new shinkansen segments, plans for extending the network are likely to go through twists and turns.