[Feature: Thinking About the Logistics Crisis] Roundtable Discussion: Will the "2024 Problem" Really Happen?

Today, I would like to hold a roundtable discussion on the theme of domestic logistics in Japan.

The crisis known as the "2024 Problem" in logistics—where upper limits will be imposed on drivers' working hours due to the "Work Style Reform Related Laws"—is finally approaching. However, I believe the scenery looks quite different depending on the perspective from which you view it. First, could you please share your awareness of the issues while introducing yourselves?

I graduated from the Faculty of Economics and worked as a salaryman for about three years, but I loved cars and wanted to try driving a big truck at least once, so I became a driver. Since then, I have been a truck driver on the front lines for over 30 years. I think I am quite an outlier as a Keio graduate. Along with that, I write serialized columns from a driver's perspective for industry newspapers and other publications.

I have driven various trucks, but currently, I drive a large trailer based at Narita Airport, transporting international air cargo such as containers.

Regarding the "2024 Problem," starting next April, the upper limit of 960 hours per year will also apply to the construction industry and motor vehicle driving occupations, and it is said that 30% of goods will become untransportable. While the decrease in total working hours is only a few percent, it is said that the number of jobs will decrease, wages will fall, and the number of people leaving the profession will increase.

The reasons drivers work long hours are mainly waiting for cargo and long-distance driving. At factories and other locations, trucks stand by and load products as soon as they are finished to transport them. Like the Hikyaku (couriers) of old or wind-waiting ports, I believe the transportation industry has a character of "waiting" to accommodate the other party's convenience or natural conditions.

After graduating from university, I joined Mitsui Fudosan. At one point, I learned that there was a real estate sector in the U.S. called logistics real estate, which did not yet exist in Japan at the time. I wanted to do this business in Japan and kept making proposals, but it was not realized at that company. Therefore, I made up my mind to resign and joined a company called Prologis in the U.S., and later formed the current company, GLP, through an MBO (Management Buyout).

It was a time when Japanese logistics was undergoing major changes. As the world entered a long deflationary spiral, manufacturers and other companies that had logistics subsidiaries and owned logistics facilities were moving toward outsourcing. I worked on the premise that a rental market for logistics facilities would emerge, and I feel it has now grown into a relatively large sector.

Our sales strategy is how to solve the various challenges faced by logistics operations. Since it is an industry often called a "3K" (Kitsui, Kitanai, Kiken—Difficult, Dirty, Dangerous) industry where people are reluctant to come, we are trying to create bright, comfortable logistics facilities that make people want to work there, in order to dispel that image.

The 2024 Problem is a very important issue, but for our industry, we actually see it as leading to the creation of business opportunities. We approach our work daily while thinking about how we can turn these challenges in a positive direction.

I initially joined a think tank, but in 2007, I moved to my current company, Roland Berger, and have been doing so-called consulting work.

About a year and a half after I joined, the Lehman Shock occurred, and for about three years, I did nothing but structural reforms. When it comes to structural reforms for manufacturers and distribution companies, logistics was often a significant area for cost-cutting.

In other words, my first encounter with logistics was cost reduction. Manufacturers check procurement costs strictly, but logistics costs often account for only about 5% of sales, leading to surprisingly lax management. While procurement costs couldn't be cut by even 1%, there were cases where logistics costs could be reduced by 20%.

When people talk about lowering logistics costs, the conversation tends to focus on increasing truck loading and operation rates through on-site improvement activities, but I believe there are actually solutions through innovation. Thinking about the future, it would be better for companies with technology to solve the logistics crisis through innovations such as digitally matching trucks to increase loading rates.

Like Mr. Chosa, I also believe that the current logistics crisis is both a pinch and an opportunity. Japan is the most aging society in the world, but if we can build a society that can transport and deliver goods even with the world's lowest percentage of working people, we can become the most advanced country in the world. My awareness of the issue is that I hope we can turn this pinch into an opportunity, spark innovation, and solve the logistics crisis.

In my 20s, I worked for several consulting firms, and while I was an entrepreneur throughout my 30s, my first experience with the world of B2B logistics was being involved in a management reform project for a wholesale subsidiary.

There, I realized that the world of B2B logistics is actually vast and a very important infrastructure. However, it is completely analog, and inefficient things are happening all over the place. I thought that if things continued this way, this infrastructure would be in serious trouble, so I founded "Hacobu" eight and a half years ago to see if I could update that infrastructure using IT.

The essential problem of B2B logistics is that despite the involvement of various stakeholders, information regarding each logistics operation is closed off internally. Because they cannot collaborate, they fall into local optimization and are stuck in the so-called "fallacy of composition" problem.

To solve this, I believe it is difficult unless we take an approach where logistics information flows across corporate boundaries—using what is called logistics big data—to apply optimization among stakeholders. I am working to first digitize logistics information and create the infrastructure for it to flow.

The 2024 Problem is an issue that has been anticipated for nearly 10 years. However, by the government speaking out in that way, I suddenly feel that the awareness of shippers and the heads of major logistics companies has changed considerably. I also see this as an opportunity to change the world of logistics, which has hardly changed until now.

It's great to have that positive feeling of seeing the crisis as an opportunity.

Mr. Nagano, from a driver's perspective, while there are outcries about a driver shortage now, do you feel that the way you and those around you work will change significantly due to the changes in labor laws?

The problem now from the perspective of drivers and transportation companies is that freight rates do not rise. The government recently issued standard freight rates, but they are far removed from the actual situation. Tariffs (freight rate tables) do not have the same enforcement power as fares for public transportation like taxis and buses. It's market principles. People say there is a labor shortage, but the reason people don't gather is that only low wages are being offered.

So this is a structural problem where rates don't easily rise even if labor is tight.

I think that in reality, labor is not tight.

According to the "Standards for Improvement of Working Hours for Truck Drivers," it says to keep overtime within 960 hours per year in six months. Currently, the binding hours for one year are 3,516 hours. Reports say that will be reduced to 3,300 hours, but in reality, they are allowed up to 3,400 hours, and overtime will be 1,060 hours.

The current 3,516 hours are not actually being followed, and it will be reduced to that level from a virtually limitless state. However, if it goes from 3,516 hours to 3,400 hours, that is only a 3.3% decrease, so I feel that saying "34% of cargo will become untransportable" is a bit of an exaggeration.

In terms of the feeling on the ground, if you ask how things will change in six months, I think they will hardly change at all. This is because while major companies take the jobs, many of the ones actually driving are subcontracting companies.

The Ministry of Health, Labour and Welfare determines working hours, but in reality, unless there is a serious violation, the Ministry of Land, Infrastructure, Transport and Tourism takes over the enforcement. Audits by the MLIT only come around once every few years. There are about 60,000 transportation companies since the deregulation in 1990 and 2003, but the number of auditors and the number of transportation companies are on completely different scales. Therefore, in the end, major companies say "we are complying" and outsource the tough parts to subcontractors, and audits rarely reach the subcontractors. I don't think this current situation will change much. A group called "Truck G-Men" was created as a measure this year, but they don't crack down on trucks; they mainly monitor the shippers.

So, I think there might actually be a surplus of vehicles.

In the estimates presented by Nittsu Research Institute and Consulting (NX-RIC) at the government's "Study Group for Realizing Sustainable Logistics," it is stated that if the 2024 Problem occurs, 14% of transport capacity will be insufficient, and by 2030, the shortage will expand to 34% due to a further decrease in drivers. These are official figures used even in national cabinet meetings, but as Mr. Nagano says, they are based on the premise that the upper limit of annual binding hours is 3,300 hours in principle, and the data used for the estimates are the results from FY2019, before truck transport volume dropped due to the pandemic.

In fact, regarding whether a crisis will truly occur, I asked someone from one of the three major delivery companies, and they said that company has about 3,000 surplus trucks during normal times. The reason is that during busy periods like Christmas, they move those 3,000 trucks. Conversely, during normal times, they have that much leeway and are looking at a buffer. If this buffer is utilized, a crisis might not occur.

Personally, I want something to happen a little bit in April '24. A fatal situation for social infrastructure would be problematic, but for the transport of fresh produce from Kyushu to Tokyo, which is said to be the most critical right now—for example, if people go to the supermarket in April 2024 and find no Kumamoto tomatoes, I think the sense of crisis regarding logistics will increase.

What do you think, Mr. Chosa?

Actually, Mr. Nagano mentioned that the driver shortage problem is not tight, and I don't think it is very tight either. However, I think there is a lot of unevenness. Since it is the real world, people and trucks cannot always gather where there is a need at the right timing. Sometimes a driver has to wait for cargo for a long time because there is no cargo to load for the return trip.

Because of such inefficiencies, even if it's not tight, there is unevenness; places that are in trouble are in trouble, and problems occur where they occur. In the end, the fact that all the burden falls on subcontractors is also due to that, I think.

Various problems are occurring locally, and I believe there are things we can do to address them. For example, in the business Mr. Sasaki is doing, to reduce truck waiting time even a little, if they take it just-in-time and a berth (space used for loading and unloading cargo) is prepared at that time, the waiting time can be shortened slightly. If the cargo is also prepared by then, productivity will increase further.

Regarding the cause of unevenness, the supply chain fluctuates, doesn't it? If information sharing is not progressing, the waves of fluctuation become larger, or if deadlines are concentrated at a specific time, fluctuations occur. That's why I think if we move away from the obsession with things like next-day delivery, the fluctuations might settle down.

I also think the talk about unevenness is exactly right, but the problem is that it cannot be captured quantitatively right now. It is not quantitatively understood where there is a surplus and where it is tight.

For example, the issue of loading—even if it looks quantitative, it is actually qualitative, based on survey results. No one has grasped as data how much is actually loaded onto trucks. Unless we clear the problem that no one has grasped the current situation as a fact, I think the state of "it seems inefficient and bad when viewed macroscopically, but we don't know where to intervene" will continue forever.

When I interview various people, they say various things. If I ask Mr. Nagano, it's not tight. If I ask someone else, they say, "No, it's extremely tight." If I talk to shippers, they say, "The requests for price increases are incredible."

On the other hand, there are others with opinions like Mr. Nagano's. People at service providers who do matching between transportation companies say that transportation companies still want cargo. When I ask if that means vehicles are available, they say yes.

So, the perspective changes depending on various aspects, and the current situation is that we don't know what the facts are. I think we can't take action until we establish the facts.

The loading rate currently averages just under 40%. The problem is that we actually don't know to what percentage we can raise this sub-40% rate.

People who don't know say we can aim for 100%, but that's absolutely impossible. There is far less cargo going from Tohoku to Kanto than cargo going from Kanto to Tohoku, so even looking at this round trip, it will never be 100%.

Also, for store deliveries, even if the loading is 100% when leaving a logistics center, it's impossible for it to be full when returning after visiting multiple stores. If it's empty, the average loading rate is 50%. Since we are saying 40% including all these things, the reality is that even the government hasn't grasped how far it can be raised at maximum.

I proposed calculating that at the government's "Study Group for Realizing Sustainable Logistics," but they said it would be difficult within this period. That's why the measures state that we can cover this much by increasing the loading rate, but they are implementing policies without anyone knowing the upper limit of how much the loading rate can be raised.

The loading rate refers to cargo on trucks that are in operation, right? For example, if a truck unloads in Tohoku and waits at a parking lot for three days because there is no return cargo, is that included in the calculation?

That is not included. It is only the time spent moving.

Right. So in reality, it's even lower.

Yes. It's the loading rate within the time spent moving. However, the problem now is not a shortage of trucks but a shortage of drivers, so there is a way of thinking that the time they are not working is fine for now.

We also have truck waiting areas. They are temporary parking lots, but I see trucks parked there for over 48 hours. Apparently, they are told not to come back until they can get cargo, so they stay there for three to four days and go to nearby public baths. I think there are quite a few such people staying there.

Exactly. I think long-distance is more critical, but even in the case of intra-city delivery, the overwhelming majority are morning deliveries, so there are cases where they are free in the afternoon.

So, if all of that were "visualized," it might actually be so empty that there is no such thing as the 2024 Problem. However, the reality is that no one knows. Some magazine wrote that logistics is the last dark continent, and that's exactly right—no one knows. The reality is that even the government doesn't know.

Even major logistics companies don't know. For example, if you ask whether the headquarters of a major logistics company can see the whole picture, they can't see it at all; it's closed off within each branch. Even if a discussion arises that because vehicles are surplus at this branch, they could be used at another branch, it becomes difficult because it has to go through the accounting system. In the first place, the headquarters cannot see that resources are surplus. This is true even within a single logistics company.

Quantification seems very difficult. About five years ago, a concept like the Physical Internet—where optimization is achieved by tracking where cargo and trucks are in real-time, like the communication of information on the internet—gained attention, but I suspect it hasn't progressed well at all.

As a recent trial, there is an initiative our company is doing with Mitsubishi Shokuhin. We have them attach our GPS terminals to all 3,500 vehicles. These are all vehicles of subcontracting companies. Until now, they could see their own vehicles, but for the first time, we made it so the headquarters can see the movements of 3,500 vehicles, including those of partner companies called chartered vehicles.

Then, things that were previously optimized only around a single logistics center—when they considered how to rotate vehicles among multiple logistics centers, it became clear that they could transport more efficiently.

I think major companies are doing it to some extent, even on a single-company basis. But the vast majority of transportation companies are small and medium-sized, right?

Almost all of them. They make up 99% of the over 60,000 companies.

It's meaningless unless they do it, isn't it?

In the final summary of the "Study Group for Realizing Sustainable Logistics," there is a mention of "making digital tachographs (digi-tacho) mandatory." In short, regarding the problem of cargo waiting time, if digital tachographs were mandatory, it could be traced with data that there is a problem with the shipper.

If that happens, it should take a scalpel to the dark continent, but the description in the final summary was "opinions were seen that making it mandatory is necessary." Considering the cost burden on small and medium-sized transportation companies, they couldn't go as far as saying "we will make it mandatory."

Certainly, from the perspective of transportation companies, costs will be incurred regardless of who bears them. However, if it is "visualized" and it becomes clear that there are strange waiting times, transportation efficiency will improve because of it, and drivers should become happier. I think it's a waste for this movement toward digitalization to stop because of the talk that the cost burden is difficult.

Even with mobile phone location information, it should be possible to tell that someone is waiting a tremendous amount here.

According to NX-RIC's estimates, it is stated that just by reducing cargo waiting and handling time—even without eliminating redeliveries or transforming logistics—the 2024 Problem will not occur. That is how much cargo waiting time is occurring.

As Mr. Sasaki said, because data is not being exchanged between companies, even the shippers don't know on a map of Japan right now that this many vehicles are heading toward their center. When they open the lid, dozens of vehicles have arrived, and it ends up taking hours to wait for unloading. They should have known since the day before, but that information is not shared.

Another thing is that they could just change the arrival times. Instead of making all vehicles wait for "arrival by 8:00 AM sharp," they could operate 24 hours and say "please come at this time," which would solve the problem.

Berth reservation is exactly that, isn't it? We are doing that.

Does shipping also tend to concentrate at specific times due to customer needs?

What's common in shipping is that drivers go early and wait until the packing is finished. They don't know when the cargo will be ready.

People inside the warehouse should know that they can make this cargo in about this much time. That communication is not being done with the drivers. It's an operation of "just call them early" and loading them as they are ready.

But that is about to change now. Since the constraints on delivery resources are increasing, constraints must be added to supply chain management. Specifically, it doesn't seem to have progressed much yet, though.

In the end, it's because they are weak in terms of the power dynamic that truck drivers have no choice but to wait.

It's a matter of "come early and wait." Since the salary systems of transportation companies are still customarily commission-based per job, no additional fees are incurred even if they wait.

What's also troubling for logistics companies is that while it's easy to negotiate such things now, for example, if they tell a shipper to give instructions at the exact timing, they might be told, "Your working hours are getting shorter, right? Will you lower the price accordingly?"

There are certainly people who think that if they have to do such negotiations, the current way is better. Considering that there are people at truck matching companies saying "give us work," there is the question of which it really is in the end.

It's strange, isn't it? If someone were truly in trouble, wouldn't they be willing to pay even if the price was raised? If a driver could confidently say, 'If the cargo isn't ready at this time, I'm moving on to the next job,' the shipper would likely say, 'Sorry, sorry.' The fact that this doesn't happen suggests that things aren't actually that tight, which makes me wonder if the problem really exists.

Looking at 2024 alone, it's becoming clear that the labor shortage might not be as severe as is being rumored. However, as a medium- to long-term issue, it seems likely that new workers are simply not entering the field.

If the logic is 'wages won't go up because freight rates won't go up,' then we have no choice but to raise freight rates. But if it's hard to raise them because the supply-demand balance isn't tight, does that mean nothing will change until a shakeout occurs?

Freight rates for truck drivers are significantly higher in the US, largely because labor productivity is overwhelmingly higher.

Trucks are much larger than in Japan. Also, in the US and Europe, 'tailgate delivery' is the standard, so drivers don't handle loading and unloading. Therefore, there's no waiting, and if they do wait, it's a separate charge. This structure allows wages per person to rise because labor productivity is high.

In Japan's case, we should be able to address the waiting time issue, but increasing truck sizes to US levels is difficult due to road conditions. Therefore, drivers won't be attracted unless we increase loading efficiency to raise wages. That's why a mechanism to improve loading efficiency is necessary.

Regarding the question of whether things are 'tight,' it's possible that the total annual supply and demand are balanced. However, the problem is the high volatility of demand. It's a reality that when demand peaks, trucks can't be found, and prices skyrocket. Whether that actually reaches the wages of the actual transport workers is another matter, but the money shippers pay is increasing.

So, we shouldn't think about this tightness issue in a leveled-out way; we need to consider it within the relationship between peaks and bottoms.

It's a question of how to eliminate those inconsistencies, right?

Exactly. There's a term often used called 'peak shaving.' The idea is that if we can reduce peaks as much as possible, we might be able to manage with current resources. If logistics can be leveled out, the supply-demand balance won't be so tight.

Does that mean a change in mindset for the shippers?

Yes. To level out logistics, we have to intervene on the commercial side. In other words, the problem is that orders are being placed on the commercial side without considering logistics.

For example, if we can provide even a little input showing that 'ordering this way costs this much in logistics and affects the delivery price,' the way orders are placed will change and peaks will be shaved. The key is how to feed logistics issues back to the commercial side.

It's the idea that it would be great if shipping and delivery plans were set three days in advance. When it's 'order today, ship tomorrow,' the logistics company doesn't know how many trucks are needed and is forced to maintain a buffer. If they tell us three days or a week in advance, peak shaving is easy.

Let's change the subject slightly. I'd like to talk about 'modal shift' (switching to rail or sea transport with lower environmental impact) in the context of carbon offsets and the environment. How much of an impact will environmental concerns have on changing the shape of logistics?

Europe is certainly the leader in carbon neutrality, but in Japan, global companies are the ones most sensitive to CO2 reduction across logistics and supply chains as part of carbon neutral measures.

Companies that sell products or raise funds in Europe are starting to emerge in Japan with an environmental awareness that extends to logistics. Some logistics companies are moving forward with initiatives like providing CO2 visualization services or obtaining international certifications like EcoVadis.

However, looking at the flip side, for companies that operate only domestically or for small and medium-sized enterprises that aren't major players, the reality is that not many have the awareness that they need to achieve carbon neutrality up to Scope 3.

In reality, even in Europe, the fastest move for environmental measures is modal shift, so shifting from trucks and planes to ships and rail is the standard approach. However, since logistics only accounts for 5% or 10% of CO2 emissions even in Europe, there aren't many industries that have completely stopped using planes.

Is there a trend in Japan of moving from trucks to ships or trucks to rail?

As for whether everything can be moved to rail in Japan, rail capacity is already quite tight. The 'Emergency Package for Logistics Innovation' released recently sets a plan to double the transport volume of ships and rail over 10 years, but doubling it with rail alone is quite tough.

Rail capacity has been at its limit for a long time. During the day, they squeeze through gaps in passenger schedules, and at night, they do track maintenance, so they can't increase the number of trips beyond what they have now.

However, one thing that can be done is through deregulation. If passenger and freight transport can be combined, cargo can be loaded into passenger spaces. Even in taxis, the trunks are mostly empty, so they could handle deliveries. I think we can get quite far with deregulation even without a full modal shift.

Also, many of the companies that use our facilities have high environmental awareness, and some are already electrifying their light trucks, so we are significantly increasing the number of charging stations. Furthermore, since electricity is meaningless if it's originally made from fossil fuels, we are putting effort into developing facilities that charge with renewable energy.

Since trucks are overwhelmingly more convenient than trains for delivery, I think that if they run on the same electricity, trucks can sufficiently contribute to environmental protection.

As Japan's population continues to decline, there is the question of how to support transportation and logistics in rural areas. Also, on a global level, globalization has progressed over the last 30 years, and the way goods flow is changing significantly.

In addition to the discussion of how effectively we can do the same logistics as yesterday, what kind of vision should we draw for logistics as economic activity changes greatly in the future?

Especially in rural areas, a world is coming where the old ways of doing things won't work. This includes mixed passenger and freight transport on rail, and while it would have been unthinkable in the past, things won't be sustainable unless we reach a situation where Japan Post carries items for Yamato and Sagawa, and even carries people along with them.

That's the basic idea, but things could change dramatically once the era of autonomous driving truly arrives. Regarding the driver shortage, there's an argument that we should realize autonomous driving as quickly as possible.

We are helping with logistics reform for agriculture in Akita Prefecture, and the topic of using the Shinkansen to transport fresh produce to Tokyo often comes up.

However, while regulations have been relaxed enough to allow transport by Shinkansen and we are currently doing a PoC (Proof of Concept) using an entire car for cargo, the locations for bringing the cargo in haven't been set up. That infrastructure development is quite difficult; it might work for expensive cherries, but it doesn't pay off for leafy greens like lettuce.

Since developing infrastructure for modes other than trucks seems quite difficult, I also think implementing autonomous driving might be faster at this point.

Are you talking about things like truck platooning on the Shin-Tomei Expressway?

Platooning is one part, and the level of autonomous driving in China is quite high. Also, it seems autonomous driving will take off all at once in the US in the next two or three years. I used to think 2030 would be the point where we finally reached a service level for autonomous driving on highways, but I think there's a possibility it will be sooner. That's how fast global technology is developing.

Automation and robotization inside logistics facilities are very far behind in Japan. The reason they are behind is actually quite sad: it's because the quality of Japanese workers is too high and their wages are low. I've heard that because of this, there isn't much point in automating.

In places like the US, human workers only do exactly what they are told. But in Japan, if someone says, 'Could you do this too?', they'll push themselves to do it even for low pay. Business is built on the burden of these workers, and because that's too convenient, there's no motivation to introduce machines that can only do specific tasks.

The same probably applies to drivers. US drivers don't handle loading and unloading, right? But in Japan, if they're told, 'The previous person did it for me,' they'll end up doing it. That won't be possible with autonomous driving. I feel like the reason autonomous driving isn't spreading isn't just about regulations.

It's a case of 'excessive frontline capability.' Regarding logistics warehouses, I think one factor is that the multi-skilled nature of Japanese workers is so incredible it can't be imitated.

While automation is progressing in various areas, driver wages have actually decreased compared to the past.

Looking at social trends over the last year or two, automation has increased, such as self-checkouts in supermarkets and touch-panel ordering in restaurants. When you automate, the work for essential workers decreases. Even though there are many people who want to work or must work to live, the number of jobs decreases, so the value of labor drops relatively due to the supply-demand balance. Earlier, it was mentioned that people aren't gathering due to a driver shortage, but in fact, because of this background, people from various industries come to the company where I work saying they want to be drivers. Driver wages are still better. I think that's the current state of low driver pay. I fear it will drop even further if autonomous driving is realized.

Historically, there have been several industrial revolutions, and I think there was conflict in the process as existing occupations were wiped out. It's said that 49% of jobs will be replaced by AI, and whether workers will become poorer or wealthier in that process is an important theme from an academic perspective as well.

Statistically, the number of truck drivers is decreasing by 2% every year. That's assuming the global statistics are correct. While the numbers might be increasing around Mr. Nagano, I think we can say that overall, they are decreasing.

Also, right now Yamato is delegating its mail service to Japan Post and there's a conflict because they are terminating contracts with the people who were delivering that mail, but essentially that was a move toward shared delivery. The logic is: 'Japan Post, your main business is delivering letters, so carry our mail too; that will improve loading efficiency.'

However, when you do shared delivery, that many drivers become unnecessary, which became an issue. Despite it being an effort to improve transport efficiency, the media tends to frame it as 'Yamato cut people.'

Improving efficiency means the number of people needed decreases. In the long run, there will definitely be a labor shortage, but at the exact moment you implement a measure, you end up with a surplus. From the perspective of those people, it becomes an issue of their jobs being taken away.

However, from my position, I believe we must do it anyway. Japan is open to the world, and technology is evolving globally. In other countries, tasks that can be replaced by robots are being replaced, and those people are shifting to jobs that only humans can do. If Japan keeps doing work the same way as before, which country will have higher productivity 100 years from now? Unless we undertake reforms that involve pain, Japan's productivity will only continue to fall.

Mr. Nagano's point is certainly true, but if we think beyond that, a future where the absolute amount of labor required is overwhelmingly small is possible. If that happens, the economic model of working a lot to earn money will cease to exist in the first place.

That might be why discussions like basic income are coming up, but from a long-term perspective, the model itself where people accumulate wealth through labor could change due to automation and other factors. We'll likely manage the transition period by shifting jobs, and perhaps that's what will happen in the world of truck drivers.

In theory, we want to depict a scenario where we improve productivity while bettering working conditions, and reducing working hours while increasing the distribution rate. The overall thinking of current policy follows this logic as well.

However, when you look at the front lines, friction is occurring in various places. If that isn't properly addressed, there's a risk that things will collapse due to social resistance.

On the other hand, I feel that Japan still lacks enough jobs that only humans can do. I think the era when ordinary people had money and were vibrant was the Showa era. Nowadays, life should be improving more, but compared to the Showa era, I feel that not just essential workers, but people working normally have even less leeway.

Also, regarding productivity, the trailer I drive is probably the same size as those driving in the US. This type has increased quite a bit in the last five years, so productivity should be up. However, if I can carry 1.5 times as much, does my salary go up 1.5 times? It hardly goes up at all.

Ultimately, transport companies have surplus capacity, and there are even people from other occupations who want to join, so wages don't rise due to the supply-demand relationship. If we truly became unable to transport 30% of goods, freight rates would rise more, and wages would rise too.

Presidents of small transport companies often drive very nice cars, don't they? So I wonder if they just don't distribute the money even if freight rates go up.

Small companies actually distribute quite a bit.

Really? Are the wages high there too?

Yes. The reason people go to small operators is that the distribution rate is high. Some operators get work from fixed clients, so work comes in without much sales effort.

So because they don't need salespeople, they can distribute that money to the truck drivers instead.

In extreme cases, they can give away about half. The president drives a foreign car with the other half. The employees are satisfied and work there because, although the conditions are tougher than at major companies, they can hope for a high income if they push themselves. Major companies use them because it's convenient. That's the structure.

Because the presidents of small and medium-sized transport companies are satisfied with that structure, they have no motivation to pursue DX (Digital Transformation).

However, Japan doesn't recognize sole proprietor truck drivers. Vans are an exception, but you need five or more vehicles. In China, 80% to 90% are sole proprietors.

But that actually makes digitalization progress faster. Because everyone wants work, they put apps on their smartphones and get jobs themselves. People with vans work hard at sales using their smartphones because the more they transport, the more they earn. I think things might actually change if everyone became a sole proprietor.

There's currently a debate about whether to allow 'white-plate' (private) taxis, but there are also 'white-plate' trucks, and it's said that if these were allowed, many assets might actually be found to be surplus. I think we need to consider that kind of deregulation as well.

White-plate trucks currently have loose operation and vehicle management, so it would be much better to have them managed properly like 'green-plate' (commercial) trucks, and in exchange, allow them to do business.

Current white-plate trucks do carry a company's own goods, but there are almost no trucks that are freely taking on jobs.

White-plate trucks are basically not allowed to do that. However, wholesalers can carry their own goods with white plates. So, there might be a way to break the structure by using a 'workaround' where a transport company actually buys the inventory.

Mr. Chosa, you mentioned that mechanization hasn't progressed in Japanese distribution centers because the level of the people is high compared to overseas. If we were to introduce the world's most advanced systems to Japan, what would become possible?

Even if autonomous driving and mechanization aren't progressing yet, that's a matter of a few years; I think there's no doubt we'll head in that direction in the long run. So, I feel that in the not-too-distant future, we'll see warehouses where no one works and everything is robotized.

Although the working environment in current logistics facilities has improved considerably, the level of comfort is still low compared to working in an office building.

I somewhat self-deprecatingly call our logistics facilities 'Galapagos.' They get a lot of media coverage, people who visit are impressed, and the workers seem happy to work there—it's a wonderful warehouse. But if I thought about expanding this overseas, it would be absolutely impossible; I think it's way over-specced.

Logistics facilities that consider the workers in such detail and are so thorough resonate with the Japanese sensibility. But if you go overseas, they'd say, 'How much does this cost? We don't need that.' I think this kind of thing will be the mainstream for a while, but in the medium to long term, I think a stage will come where things change significantly again.

The reason we are building such high-spec warehouses now is that we hope to change the perception of working in logistics companies and the logistics industry itself, as well as the awareness of the people working there. It's an industry called '3K' (Kitsui, Kitanai, Kiken—difficult, dirty, dangerous) where wages are hard to raise, but since it handles very important social infrastructure and the work deserves more respect, I believe it should receive proper evaluation.

I think we have covered a good number of points, so finally, I would like to ask if there are any policies or business practices that you think we should change.

I think one thing is that we must increase the buffer for cargo. For example, at a cup noodle company's loading dock, trucks from various vendors are constantly arriving.

However, for a company that loads multiple trucks, I think it is necessary to have dedicated loading drivers stationed there to set aside trucks that have finished loading. Then, a dedicated long-haul driver would come on duty and drive the pre-loaded truck a long distance. We need that kind of buffer.

Marine containers already have this. Ferries using ships also go to the customer's location at their own timing to load cargo, then disconnect the trailer at the port and return. But for trucks that cannot be disconnected, there is no buffer.

Recently, there are trucks called swap body containers where the cargo bed can be detached. Upon arriving at the delivery destination, the cargo bed is immediately separated, and the vehicle body takes the cargo bed that was left behind during the previous arrival. This way, the driver can spend their time solely on driving.

That was the original concept behind containers, wasn't it?

Exactly.

Also, regarding modal shift, the items in the government's Emergency Package for Logistics Innovation focus on sectors with small volumes relative to the entire logistics industry, and only major companies can use them. Even for ships, the number of trailers they can carry is only in the hundreds or thousands. Since tens of thousands of trucks move every night, it only solves a fraction of the problem. I think it is important to reform the high-volume areas where subcontractors handle the actual transportation.

With the 2024 problem, working hours and binding hours will be reduced, and because they cannot work as much, drivers' take-home pay will decrease. This 2024 problem should make drivers happy because they will actually have more free time when they go home, yet it seems no one is going to be happy.

For example, at highway parking areas at night, drivers are legally required to stop driving for 30 minutes every 4 hours, but there is no place to park the trucks, so they overflow onto the road, and occasionally fatal rear-end collisions occur there. We need to do things that actually make drivers happy, such as saying, "We will double the number of parking spaces in parking areas over the next 10 years."

Also, in 2023, it was decided that overtime pay for more than 60 hours a month would be 1.5 times the base rate, but this is hardly being implemented, and the media rarely mentions it.

If that functions properly, salaries should remain the same even if working hours decrease.

Mr. Chosa, what are your thoughts?

Regarding the issue of waiting times, for example, places like Oi Wharf experience terrible congestion. In short, there are many small warehouses, and warehouses with only two or three truck berths continue endlessly. But no one tries to redevelop them. A major reason for this is that ownership is divided among different warehouses, and there is no idea of raising funds for rebuilding or working together with neighboring landowners.

For example, our very large warehouse in Sagamihara, which has over 100,000 tsubo in a single building, can have plenty of parking space on its quite large roof. This makes body swapping very easy to do.

If we use such spacious designs, we can significantly improve the efficiency of waiting times, but old and small warehouses are lined up, and each can only park one or two trucks. This prevents circulation. Therefore, I think it would be good if we could implement a policy where individual landowners contribute their land, and if four plots are gathered, the value of your land will increase by this much.

Increasing land value can be done simply by increasing the floor area ratio. For example, industrial zones generally only have a floor area ratio of 200%, but if we say we will increase it to 300% if four or more plots are gathered, the real estate price should theoretically increase by about 1.5 times. For developers who develop large facilities, we could make the mandatory provision of parking spaces stricter. I believe this is a feasible idea.

Looking abroad at the status of autonomous trucks in China, I wonder when Japan stopped being a "country to be admired" and became a "country that admires" others. Especially in the field of logistics, we are constantly admiring others. Perhaps when the Shinkansen was built, there was no such wonderful railway in the world. During the period of high economic growth, Japan was a country that was greatly admired for a time. However, unfortunately, we are now in a situation where we are ignored even when we go to China. Is this acceptable?

Japan has the most aging population in the world. Therefore, if we can build a society that functions even with a small working-age population, we should be able to lead the world's cutting edge, and in that sense, I think logistics is a great opportunity.

Logistics is one of the most labor-intensive industries in Japan, but it is now on the verge of breaking down at a tremendous pace. Autonomous driving can completely overturn this. A society where labor productivity changes drastically will arrive. The point is the impact that technology brings.

Another point is that logistics is connected to every single industry. It is often called the lifeblood of the economy, and almost all industries transport goods. Therefore, if logistics changes, the entire Japanese industry will change.

The country of Japan has matured, and the society itself is elderly. Therefore, logistics is suffering from arteriosclerosis, but if the blood vessels are reborn, the organs should also be reborn. So, why not innovate? I hope the government and the private sector will invest in evolution, and I hope Keio University will produce people who can do that.

I have been working on optimizing transportation for about eight and a half years, and the industry's bedrock is very thick. In order to invest in the evolution Mr. Onozuka mentioned, I believe we must change our way of thinking about return on investment.

For example, in both digital and robotics investments, the focus is on how many people or man-hours can be reduced, and labor costs are used as the "R" in ROI (Return on Investment). However, this makes it difficult to show results, so there are many cases where proposals are not approved.

In response, Japanese digital and robotics people lower their prices. This leads to a vicious cycle where they cannot make a profit and cannot create good products.

To evolve, investment must come from companies, but within corporate logic, it inevitably gets stuck. We must break through this.

Recently, I think there is a glimmer of hope in reframing investment in logistics as sustainability investment. Companies must manage from a medium- to long-term perspective. I wonder if we can create a policy framework for investment in logistics from such a perspective. I think it is important to devise a way of thinking that shows how investing in logistics will improve the P&L to this extent in the medium to long term.

We have truly had a wide variety of points raised. From a macro perspective, we heard that if we add up all the supply and demand for 2024, it might be sufficient, but at a micro level, there is time spent unevenly or wastefully, and a tight situation is expected.

In that context, there was talk of changing the situation by considering using parking spaces and data as buffers, instead of drivers being the buffer as they have been, and by consolidating small and medium-sized warehouses and securing things like parking spaces.

While technology is advancing dramatically, we should actually be able to do many future-oriented things. By actively doing so, while the whole of Asia faces a declining birthrate and environmental issues like carbon offsets are emphasized, we can create an optimal system not just for logistics but for the entire Japanese economic system. If we do that, is it possible for Japan to regain a competitive status and become a country to be admired once again? Thank you very much for today.