Japan passed a law to halt the privatisation of the country’s postal service, holder of $3.446 trillion in Japanese investments and household wealth, in a move symbolic of the new government’s efforts to overturn nearly a decade of deregulation in the world’s second-largest economy, reports The Wall Street Journal.
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The law blocks the planned sale of shares in Japan Post’s banking and insurance arms and paves the way for a drastic overhaul of the group during the next parliamentary session starting in January.
The move will force Japan Post to reverse efforts to slowly transform itself in smaller, disparate earnings-driven companies. It will instead begin to revert to its former status as a key nonprofit organization carrying out the government policy in the country’s hinterlands.
“Through the period of privatisation, the morale of Japan Post employees fell. So we have to revive their spirits, without which we cannot rollout new businesses. I expect to increase the workforce,” said Shizuka Kamei, Japan’s postal reform minister and a vocal opponent of privatisation, at a press briefing.
The specifics of Japan Post’s business model have yet to be hammered out and will likely be decided during the next parliamentary session starting January.
“From today, I am going to leap into action, in cooperation with other ministers and Japan Post management,” said Kamei.
The first tranches of shares in one of the world’s largest savings banks and life insurance businesses by assets were slated for sale as soon as next year.
Canceling the IPOs will deprive the government of trillions of yen at a time when it is looking for extra revenues to fulfill its election promises. The move will also disappoint global investment banks who were hoping to reap fat fees from handling the share sales.
The left-leaning Democratic Party of Japan won a landslide victory 30 August on expectations it would overturn many of the policies enacted during nearly half a century of rule by the business-friendly Liberal Democratic Party of Japan.
The LDP’s former prime minister, Junichiro Koizumi, won a landmark election that became a referendum on privatization of Japan Post in 2005. Reform of Japan Post was the cornerstone of Koizumi’s campaign to slim-down Japan’s bloated government and slash public spending.
“It’s a symbolic move that shows the DPJ is determined to close the door on the Koizumi era,” said Peter Tasker of Arcus Research, a Tokyo-based consulting firm.
Koizumi’s free-market reforms steadily lost momentum after he stepped down in 2006 and the quick succession of less charismatic LDP prime ministers failed to convince the population that painful reform was necessary.
Source: Wall St Journal