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Business

Rules leave Uber with hard road in Japan

An Uber driver in Kyotango, western Japan, shows off a tablet he uses to connect to the ride-hailing service's website.

TOKYO -- Uber Technologies has launched its first service in Japan after clearing various regulatory hurdles, but the domestic taxi industry's stiff resistance remains a major challenge to the top U.S. ride-hailing company's ambitions.

The service is permitted only in part of the city of Kyotango in western Japan, and drivers and their cars must be registered with the central government.

"We have finally gotten started," said Masami Takahashi, president of Uber Japan, at a news conference in the city.

The service connects private car owners with people who need a ride. Uber's 18 vehicles offer rides in the city for about half the price of a taxi. Uber receives a cut of the fares.

Speed bump 

Under Japanese law, private drivers are banned from transporting paying passengers. Private cars must use white license plates. The terms shiro taku (white taxi) and shiro basu (white bus) refer to illegal, unlicensed vehicles.

The ban does not apply to areas where public transportation is unavailable. Nevertheless, Uber was saddled with restrictions. It is allowed to operate only in seriously depopulated areas and must submit daily reports of its operations to Kyotango City Hall.

In Japan, unlike in the U.S., Uber is regulated like a taxi operator and is thus unable to expand as freely as it does elsewhere. According to sources, the additional restrictions came, in part, as a result of pressure by big taxi operators from elsewhere. Executives of these companies visited Kyotango, ostensibly to conduct market research. There actual mission was to lobby city officials and local residents against letting Uber have a free hand.

Uber does business in 70 markets worldwide, but has repeatedly stumbled in Japan. It began a ride-sharing trial in the southwestern city of Fukuoka last year, but the transport ministry ordered the operation shut down on the grounds that paying drivers to take part in the trial was illegal.

In February, the San Francisco-based company announced another pilot project in Nanto, Toyama Prefecture, backed by the city's mayor, Mikio Tanaka, who wanted to lure more tourists to the city.

Taxi companies protested fiercely, fearing that would lose their market when Uber began dispatching cars in earnest. The taxi companies confronted members of the city assembly with their complaints. In response to the pressure, the city announced in March that it was canceling the program. Tanaka said ruefully that it should have been announced after receiving money from the city budget.

No compromise

"We would reject any compromise or conditional acceptance with regard to moves to lift the ban or legalize shiro taku," said Masataka Tomita, chairman of the Japan Federation of Hire-Taxi Association.

Most taxi operators in Japan are small and midsize businesses and are not connected to global markets. Entry by new competitors is restricted in cities such as Tokyo, and the government forces taxi operators to reduce their fleets if it deems there to be too many cabs on the street

Japan's taxi companies are alarmed by the financial headaches Uber has given their U.S. counterparts. Toyota Motor, which recently announced plans to invest in Uber, said the alliance between the two companies does not cover Japan due to the country's "regulations and other factors."

Japanese hotel operators, too, are facing new competition from U.S. venture businesses, but they have put up less of a fight than the taxi drivers. One, Airbnb, runs a website that lets people list rooms for short-term rentals. Between July 2014 and June 2015, some 5,000 people rented rooms to around 525,000 overseas tourists.

Airbnb has benefited from deregulation in the hotel industry, which has coincided with a boom in travel to Japan. This has left the hotels with more than enough guests to go around. 

The taxi industry, on the other hand, has resisted deregulation. Consumers will be the ones to suffer if business interests are given priority.

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