Using smartphone apps to match private car owners with passengers ushered in the gig economy, changing not just how people think about taxis and transportation but a slew of other industries as well. Major platform providers like Uber and Lyft from the U.S. and Didi from China are poster children of the tech unicorn — but how have they fared in Japan?

Silicon Valley meets Japan’s infamous red tape

Uber launched strong and immediately expanded its presence globally, establishing a Japanese subsidiary in 2012 when it began offering matching services. While its focus was on taxi-hailing services, Uber launched a ride-sharing pilot program called “Everyone’s Uber” in Fukuoka in 2015. The program aimed to accumulate data on on local needs, but it was soon halted after the Ministry of Land, Infrastructure, Transport, and Tourism issued a directive stating that ride services using private vehicles with regular license plates violated the Road Transportation Act.

Beureucratic resistance to ride-sharing was evident all the way to the top, with the 190th session of the Diet in 2016 introducing a supplementary resolution to a bill explicitly stating that “the introduction of ride-sharing will not be permitted.”

However, in April 2024, new legislature called the "Private Vehicle Utilization Business" was introduced. Based on Article 78 of the Road Transportation Act, this system allows transportation services to be provided for a fee using private vehicles and drivers under the supervision of taxi operators. Unlike the ride-sharing business models of companies like Uber or China's DiDi, where anyone with a driver’s license and a registered vehicle can independently operate as a service provider, the Japanese-style ride-sharing system has significant differences.

This system is mainly divided into two types:

1: Private Vehicle Utilization Business

In this model, taxi companies operate ride-sharing services, utilizing private vehicles and drivers to meet demands that regular taxi services cannot fully address. This pattern is the most common among services popularized in Japan.

While drivers can use their private cars to offer passenger transport services—similar to standard ride-sharing—the key difference lies in who manages the service. Typically, the service provider must be a taxi operator. Consequently, drivers often work as part-time or contracted staff under the operator and provide services under the operator's management.

Additionally, fare structures generally align with those of taxis. However, the Ministry of Land, Infrastructure, Transport, and Tourism is exploring more dynamic pricing options to diversify fare systems, such as surge pricing.

2: Private Vehicle Paid Passenger Transport System

This model is mainly operated by local governments or NPOs and is designed to address mobility needs in rural or depopulated areas where public transportation is insufficient. Nokkaru is an example of such a service, meeting the needs of local residents in areas that buses and taxis cannot adequately serve. A distinctive feature of this model is its community-focused approach, encouraging residents to actively participate as service providers within their communities.

Ride-Sharing Companies Operating in Japan

While Uber Japan has entered the Japanese ride-sharing market by collaborating with taxi operators, the most popular services are the two listed below. Both work closely with Japanese taxi companies to secure drivers.

S.RIDE

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A taxi-hailing application uisng AI technologies owned by the Sony Group, its main strength lies in the ability to call a taxi with a single slide after launching the app.

The standout feature is its proprietary AI-driven demand forecasting. By collecting historical customer ride data, the AI calculates where and when taxis should be dispatched to maximize the likelihood of picking up customers. This information is relayed to drivers through the car navigation system in their taxis, creating a more efficient and customer-friendly service.

GO

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GO is working to address driver shortages and enhance supply capacity in urban areas through products like the app-exclusive vehicles under GO Reserve and part-time drivers under GO Crew. Drivers can choose from various employment types: ride-share drivers (part-time), GO Crew (part-time), and full-time drivers. Ride-share drivers can use their private vehicles and start working with just one shift per week, while GO Crew and full-time drivers both use dedicated vehicles provided by the company.

One of the main differences from S.RIDE is that it is relatively easy to become a driver. Prospective drivers can apply through the company’s recruitment website, GO Job. The company actively promotes recruitment, including producing commercials aimed at people interested in becoming drivers.

Under Japan's strict regulations on ride-sharing, collaboration with taxi companies is essential for operating ride-sharing services. Newmo, a Tokyo-based startup specializing in mobility technology, has acquired a taxi operator in Osaka Prefecture as part of its strategy to expand into the ride-sharing sphere. Newmo provides an app for calling vehicles and handles driver recruitment, while the taxi company manages vehicle maintenance and driver training. This close collaboration with taxi companies distinguishes Japanese ride-sharing services from models like Uber.

Challenges in Japanese Ride-Sharing

One major issue is that Japan's ride-sharing services are often limited to certain urban areas. Services like GO and S.RIDE are thriving in metropolitan areas such as Tokyo but have yet to extend their reach to rural regions. This is particularly problematic because many of the issues faced in the Japanese countryside, like aging populations and limited public transportation, are addressed through ride-sharing systems.

To address these issues, some companies are developing services tailored to rural needs. These initiatives aim to provide reliable transportation solutions in areas where traditional ride-sharing models struggle to operate effectively.

Ride-Sharing Service Targeting Rural Areas

ノッカル(Nokkaru)

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Nokkaru is part of a MaaS (Mobility as a Service) project launched in collaboration between Hakuhodo and Suzuki, with pilot testing beginning in August 2020. Since October 2021, it has been operating as an official form of public transportation in some regions. The service allows local residents with private cars to provide rides to others in their community. Drivers register their availability in advance, and passengers select their preferred travel times. Dedicated pickup points are established, where drivers pick up passengers at the reserved times (link).

In the town of Asahi in Toyama Prefecture, where the service is implemented, the elderly account for 44% of the population (link). With an increasing number of elderly residents surrendering their driver's licenses, demand for public transportation services is growing. While the town is equipped with a full range of public transportation options, including train stations, community buses, and taxis, issues such as aging infrastructure and service discontinuation due to population decline pose challenges to sustainability. In this context, Nokkaru promotes active participation by residents in transportation, fostering community communication and establishing a sustainable model of public transportation.

PIBLIC Technologies

PIBLIC Technologies is focused on developing services targeting depopulated areas. Guided by its mission to "create towns where people want to continue living," the company operates in the GovTech sector, aiming to enhance the efficiency of local government operations and improve the quality of public services through technology. It has developed services such as a public ridesharing platform specifically designed for local governments and PubTech, an all-in-one solution for utilizing regional public services.

Website

Market Outlook for Ride-sharing in Japan

The domestic market for Japanese ride-sharing is expected to grow significantly in the coming years. According to research firm Fuji Keizai, the market is projected to expand from an estimated ¥100 million in 2018 to ¥13.1 billion by 2030 (link). However, the complex regulations surrounding Japanese ride-sharing may hinder its widespread adoption, and ride-sharing services will need to address concerns regarding safety and service quality when compared to the well-established taxi services in Japan.

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