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Paper short abstract

This paper examines how labor regulations and subcontracting structures jointly produce fragmentation in Japan’s trucking industry. It shows how regulatory reform intended to improve working conditions paradoxically deepens coordination failures in transport markets.

Paper long abstract

This paper analyzes how recent regulatory reforms interact with the fragmented industrial structure of Japan’s trucking industry and reshape coordination among firms, shippers, and drivers. Trucking carries the overwhelming majority of domestic freight in Japan, yet the sector is characterized by extreme atomization: a very large number of small and micro-enterprises linked through multilayer subcontracting chains. This structural feature conditions how labor regulations are implemented and how costs and risks are allocated along supply chains.

In this context, new working-hours regulations and enhanced compliance requirements have been introduced with the stated aim of improving labor conditions, enhancing safety, and addressing chronic driver shortages. The paper shows that these reforms generate heterogeneous effects across firm types. Large carriers and major shippers can reorganize operations, invest in digital management systems, and renegotiate contracts. In contrast, small carriers face rising administrative burdens, unstable demand, and increasing dependence on subcontracting relationships. Instead of eliminating overwork, regulatory pressure may cascade downward, shifting responsibility onto weaker actors.

The analysis combines policy documents, industry statistics, and qualitative interview materials from ongoing research to examine how price formation, load matching, and route allocation are influenced by these institutional changes. The paper argues that the core issue is not merely a lack of drivers or low productivity, but a problem of coordination failure across market and regulatory arenas. Freight rates do not easily internalize rising labor costs, and fragmented contracting structures impede collective adjustment.

By conceptualizing the trucking sector as a multilayer coordination system linking law, market organization, and everyday labor practices, the study contributes to debates on logistics and labor governance. It demonstrates how well-intentioned regulation can deepen inequalities and institutional stress when introduced into already fragmented systems. The findings have broader implications for discussions of the “2024 problem,” supply-chain resilience, and the political economy of essential services in contemporary Japan.