Japan offers California loan to help pay for $40-billion high-speed train

February 14, 2001 Japan said it's ready to loan California money to help pay for a planned high-speed railroad as trainmakers compete to work on a project that will cost at least $40 billion, according to Bloomberg. The state-owned Japan Bank for International Cooperation is prepared to lend funds, Japan's Transport Minister Seiji Maehara told reporters in Tokyo after meeting with California Governor Arnold Schwarzenegger. He declined to comment on the size of the possible loan.

Schwarzenegger is set to
ride on a Japanese bullet train able to hit speeds of 275 kmph (171 mph) as
part of an Asia tour that includes looking for contractors and funds to help
with the 432 miles Los Angeles-San Francisco railway. Japan is offering a loan
to California, which is wrestling with a $19.1-billion deficit, to help
exporters compete with Chinese, Korean and European trainmakers.

"They have to get money
from some place," said Edwin Merner,
president of Atlantis Investment Research Corp. in Tokyo, which manages about
$3 billion in assets. "Japanese trains are going to cost more but they’re going
to last."

Schwarzenegger rode on a
Chinese high-speed train and he is also set for a similar trip in South Korea.
California has encouraged Asian companies including East Japan Railway Co., China South Locomotive & Rolling Stock Corp. and Hyundai Rotem Co. to
bid on the high-speed rail project.

"Japan’s strength lies
not only in being able to provide finance but also in the quality of the
product," said Ryota Himeno, an
analyst at Mitsubishi UFJ Morgan Stanley Securities Co. "China and South Korea
lag behind in terms of operating experience."

Maehara also said he may
go to the U.S. next year to help stoke sales of Japanese bullet trains. He has
already visited the country twice this year after U.S. President Barack Obama awarded
$8 billion of federal funds to help support high-speed rail projects
nationwide.

Japan also earlier this
year made it possible for the Japan Bank for International
Cooperation to provide
financing for U.S. high-speed train lines to help the sales push.

"By exporting Japanese
technology we can strengthen ties with another country and help Japanese
companies," Maehara said today. "JBIC is prepared to help finance the project"
in California, he said.

Schwarzenegger also met
with Japan Prime Minister Naoto Kan, Maehara
said, without elaboration.

California won $2.3
billion of federal funds to help build the high-speed train, the largest award
in Obama’s program. The state also approved in 2008 a $10-billion bond sale to
help fund the rail line, which is due to start services in 2020.

The California State
Auditor has said that the state’s business plan for the high-speed rail network
does not include steps to replace all of the $17 billion to $19 billion in
federal funds initially envisioned for the system.

"The program risks
significant delays without more well- developed plans for obtaining or
replacing federal funds," the April 2010 report signed by State Auditor Elaine Howle said.

California expects bids
from about 10 trainmakers for the project and construction may start as early
as the first half of 2012, the California High Speed Rail Authority said
earlier this year. The train will whisk passengers between Los Angeles and San
Francisco in less than 2 hours and 40 minutes, according to the state-backed
group’s website. The railway would eventually be extended to San
Diego.

U.S. Transport Secretary Ray LaHood visited
Japan earlier this year and road aboard a JR East bullet train.