Trucking's "Appropriate Cost" — Can a Legal Floor Stop Rates Thinning Toward the Bottom of Multi-Tier Subcontracting?

Shipper (true consignor)Places the order for transport

↓ re-subcontract, minus a 5–10% fee

Prime contractor (tier 0)Takes the order, skims a fee, and re-subcontracts

↓ re-subcontract, minus a 5–10% fee

First-tier subcontractSkims another fee and re-subcontracts again

↓ re-subcontract, minus a 5–10% fee

Second-tier (actual carrier)Actually hauls the load; bears the most below-cost pressure

In an MLIT field survey, over 70% of operators had re-subcontracted, and about 30% ordered work at under 90% of the price they received. Each tier skims 5–10% of the rate as a fee, so the rate thins out by the time it reaches the bottom, and the operator who actually hauls the load bears the below-cost risk. The appropriate cost is an attempt to set, by law, a floor that must not be undercut at the bottom. The four tiers shown are the structure the two laws aim for; a new best-effort duty limits subcontracting to two tiers down to the actual carrier, and the present chain can run deeper.

The State Sets a Floor Under Freight Rates, in Law

On July 17, 2026[1], Japan's Ministry of Land, Infrastructure, Transport and Tourism opened the first meeting of an expert panel on setting an "appropriate cost" for trucking. The ministry is also running a field survey with operators toward calculating that cost. It is an extraordinary report under Article 60(1) of the Motor Truck Transportation Business Act: not a request, but a survey operators are obliged to answer. The appropriate cost is a figure built up from the minimum cost of transport, a floor below which work should not be made to run. It rests on two 2025 laws promulgated on June 11, 2025. They abolish the standard rate, until now only an advisory benchmark, and replace it with a legally binding appropriate cost. The weight of the duty varies. Prime contractors and forwarding operators who subcontract transport to others bear a duty not to order it at a rate below the appropriate cost. And a shipper who pays only below that cost becomes subject to corrective guidance. A five-year license renewal presses operators who fail to keep to the duty toward exit. The figure is to be issued within three years of promulgation, by June 2028.

Labor Costs Are Built From the All-Industry Average Wage

The core of the scheme lies in what goes into the cost. The labor cost built into the appropriate cost is defined in law as one that "takes account of the average wage per worker across all industries." That folds the very fact that drivers earn less than the all-industry average into the formula itself. How regional wage differences are reflected in that labor cost, and how overtime pay is worked in, are questions the ministry's panel lists as still to be decided.

Transport Capacity Falls Short by 34% in 2030

Behind it is a projection that, left alone, transport capacity will fall short by 34%[2] by 2030. Before the people who haul disappear, the state is trying to set the floor of a rate on which they can live. The panel begins hearings with the parties in August, sorts the issues in October, and is due to compile its recommendations in December.

Only the Cap on Hours Moved First

Why a floor, and why now? Truck drivers' work came under a cap on overtime in 2024. Under what is called the 2024 problem, overtime was capped, in principle, at 360 hours a year, and at 960 hours even with special circumstances[3], with standards set for on-duty hours and more. Yet hours fell while pay did not follow.

Long Hours, Low Pay

By the ministry's tallies, truck drivers' annual income stays below the all-industry average, at 4.38 million yen for medium and small trucks, 13.6% lower[4]. Annual hours run, for large trucks, 2,544 hours, 19.1% longer[4] than the all-industry figure. Hands are short, too: the job-opening ratio for truck drivers is 2.18[4], far above the 1.17 for all jobs. The all-industry figure for annual hours is 2,136 hours[4], so the gap for large trucks is 408 hours a year, or 51 days counted at eight hours each.

It is not that the gap has failed to close. Annual income for medium and small trucks rose from 4.15 million yen in 2017 to 4.38 million[5]. But over the same years the all-industry average rose too, from 4.91 million yen to 5.07 million[5], so the gap narrowed only from 760,000 yen to 690,000. Seven years for that much.

A Benchmark Alone Did Not Reach the Bottom

Behind hours falling while pay lags is a failure to pass rates through. The standard rate was advisory, and its reach into actual rates was limited. A benchmark alone did not reach the bottom.

Every Time Work Is Passed On, the Rate Is Cut

At the root of that failure lies multi-tier subcontracting. The ministry surveyed the 51,657 member operators of the Japan Trucking Association and 4,401 answered, a response rate of 8.5%[6]. Of those, over 70% of truck operators had re-subcontracted[6], and when they did, about 30% ordered work at under 90% of the price they received[6]. About nine in ten respondents are small firms capitalized at 50 million yen or less.

The Fee Is Deducted Without Being Shown

As a rate descends from shipper to prime, first tier, and second, each tier skims a fee. About 60% of operators set that fee at 5–10% of the rate[6], while more than 60% do not show the fee to the party they hand the work to[6]. Only 30% bill the fee separately from the rate; most deduct it from money that was to reach the hauler. The report notes that the size of the fee rests on custom rather than any stated reason. The side receiving the work, shown nothing, has no way to learn what the rate originally was.

With a Truckless Operator in the Chain, More Is Cut

How much is cut depends on who sits in between. Where the work comes from a first-class freight forwarder that owns no trucks, about 50% are paid under 90% of the prime's contract price[6], and about 15% do not know the prime's price at all[6]. The report calls this a margin taken on the information gap, and notes that the operator who actually hauls the load, at the bottom, bears the below-cost pressure. From the field come voices: contract directly with the prime and you break an industry rule; you cannot even tell what tier you are on. Brokers who never haul anything themselves fall outside trucking regulation, and their workings remain little surveyed. The Japan Trucking Association has proposed capping the chain at the second tier.

Setting a Floor Moves Three Forces at Once

The appropriate cost sets a floor at this bottom. But setting a floor moves three forces at once. One is that the shipper's responsibility becomes visible. Place a duty on the ordering side too, and orders too cheap to match the cost grow harder to make. Next, culling may advance. Small operators who scraped by on below-cost rates face pressure to exit under the renewal system. Bankruptcies in road freight stand at 321 in FY2025[7], the fourth-highest on record after 371 in FY2008, 351 in FY2024 and 341 in FY2009. That is 30 fewer than the year before, so the count is not simply climbing. Still, of the 441 bankruptcies attributed to labor shortage, 55 were in road freight[7], heavy for a single sector. And price pass-through follows. If the appropriate cost rides on the rate, that share is borne in the end by shippers and consumers. From the shipper side comes concern that, depending on the level, the impact would be considerable.

The More You Improve, the Lower the Floor Falls

A twist remains inside the scheme itself. The appropriate cost is built up from the time and money actually spent, so an operator who improves loading and cuts waiting time, and thus working hours, ends up with a lower calculated cost. The floor under the rate an efficient operator receives can fall below that of an operator who did nothing. The ministry's panel lists this as a problem it must solve. Setting a floor assumes that costs are incurred, and so runs head-on into the effort to reduce them. This shape, where a fix meets a push-back somewhere else, is what structural analysis of social problems（このサイトの記事） is for.

A Floor Under Rates Is Not a Floor Under Wages

One more thing is undecided. What the appropriate cost puts a floor under is the rate an operator receives, not the wage a driver receives. How to ensure, through the five-year license renewal, that money received as rates is paid on to drivers as proper wages is a question the panel has only just posed. So is the design that would carry the floor all the way to the bottom of the subcontracting chain. That the floor under rates reaches the driver's seat is, as of now, not written into the scheme.

The appropriate cost can become a floor that protects labor at the bottom. But it also brings the pain of small operators' exit and of rising prices. It is not the simple story that tightening a rule makes working conditions better. We examined the year after the 2024 problem, when only the cap on hours moved first, in a separate column（このサイトの記事）. How will society as a whole, shippers and consumers included, bear a rate on which the people who haul can live? To keep enjoying only cheap rates and fast delivery, while the labor at the bottom stays pushed deep into an unseen chain of subcontracts, is no longer tenable. Where to set the floor of the cost is a question of who bears logistics, and how, among us all.

Further Reading

• 物流危機は終わらない 暮らしを支える労働のゆくえ (The Logistics Crisis Will Not End: The Future of the Labor That Supports Our Lives)（外部サイト、新しいタブで開きます） (Wakana Shuto, Iwanami Shinsho, 2018) — a study, from statistics and the field, showing that the root of the logistics crisis lies in the labor problems of truck drivers. (In Japanese.)

References

Overview of the Two Trucking-Fairness Laws (Amendment to the Motor Truck Transportation Business Act, etc.) — Ministry of Land, Infrastructure, Transport and Tourism. Ministry of Land, Infrastructure, Transport and Tourism

Report of the Study Group on Multi-Tier Subcontracting in Trucking — MLIT Study Group on Multi-Tier Subcontracting in Trucking. Ministry of Land, Infrastructure, Transport and Tourism

Improvement Standards Notice for Truck Drivers (Standards for Improving Working Hours of Motor Vehicle Drivers) — Ministry of Health, Labour and Welfare and MLIT. Ministry of Health, Labour and Welfare and MLIT

Bankruptcy Trends in Road Freight Transport (FY2025) — Teikoku Databank, Ltd.. Teikoku Databank