Global Opportunities: Japan

Japan's big brands are trying to shake up its taxi industry

Taxis sit in traffic as they wait for a traffic signal to change at a junction in Tokyo, Japan.
Yuriko Nakao | Bloomberg | Getty Images

Tokyo has some of the best taxi services in the world. They're widely praised for spotless cars, polite drivers and a culture of no tipping.

Their high quality is one reason that ride-hailing services haven't taken off in the city. But that could soon change as major Japanese companies and their partners enter the field ahead of the 2020 Olympics in Tokyo.

Worth some $17 billion, the taxi market in Tokyo is among the world's biggest, and newcomers want their share. But would-be innovators face some big hurdles: Regulations are tight, cabs work well enough for most users, and taxi companies, along with messaging application Line, have released ride-hailing apps to keep up with the times. Uber accounts for less than 1 percent of monthly rides in Tokyo, according to Bloomberg.

Japan's No. 3 telecom, SoftBank, announced earlier this year it's working with Chinese ride-hailing titan Didi Chuxing to launch a joint venture aimed at developing a taxi app for Japan. The new company will begin trial services in Osaka, Kyoto, Fukuoka, Tokyo and other cities this year, making use of Didi's technology for demand prediction and dispatching.

Sony is also trying to get in on the game, partnering with five taxi companies to build a ride-hailing platform using artificial intelligence. The resurgent electronics giant, which expects to post a record-high profit of 630 billion yen (about $5.97 billion) for the year ending March 31, wants to launch a platform using its AI tech to forecast demand for taxis based on factors such as traffic, weather, time of day and large-scale events.

Nissan Motor and mobile gaming firm DeNA, meanwhile, have begun testing driverless Nissan Leaf taxis on the streets of Yokohama. The Easy Ride cars work a 4.5-kilometer route around the carmaker's global headquarters. The carmaker says feedback from people trying the robo-cars has been positive.

In fact, the tech could be a novelty for the 2020 Games in neighboring Tokyo.

"We intend that in the early 2020s we will start offering services, deploy necessary infrastructure, and actually help bring some of the promises that driverless mobility is going to bring to the markets around the world," Ogi Redzic, senior vice president of connected vehicles and mobility services at the Renault-Nissan-Mitsubishi Alliance, told reporters last month in Yokohama. "With the launch of Easy Ride, especially, we see there is a lot of value that we can bring in Japan."

Automation might also help address another problem with taxis in Tokyo: With an average driver age of 60, they're not getting any younger. There are other issues too. In Tokyo, many drivers need directions because they're not from the city. And if you're trying to find a ride late at night or in any low-density area such as a suburb, you may be in for a long wait.

Nissan rival Toyota Motor is also trying to change the industry. It has agreed to work with Japan's largest ride-hailing app, JapanTaxi, to develop connected taxi terminals, vehicle-dispatch support systems, and big data solutions for mobility. Toyota is also an investor in Uber, and while it's one of the world's largest carmakers today, it wants to become more of a mobility services provider in the future. Meanwhile, South Korea's Kakao has also said it would partner with JapanTaxi so that South Korean travelers could use some of the app's 60,000 cabs.

"What is happening in ride hailing in Japan is a parable for what is to come for the entire economy," says Steven Bleistein, CEO of Tokyo-based management consultancy Relansa. "There is no dearth of innovation in Japan, only a dearth of freedom to innovate. Compelling value ultimately overcomes blockages in Japan. Japan has no shortage of technology, infrastructure, capital, and know-how to achieve just about anything."