Japanese Postal network must be maintained
A plan to maintain the current nationwide network of post offices by offering new administrative functions and services was stressed Tuesday by the Council on Economic and Fiscal Policy as the council resumed debate on the privatisation of three postal services.
However, the treatment of special post offices, which comprise about three-quarters of the nation's post offices, and their high personnel costs, is another major issue in the debate.
Special post offices began operating in the Meiji era (1868-1912), when the government asked local magnates for land or buildings and used them for postal services.
As of late December, there were 18,937 special post offices in the country. About 60 percent were small post offices with five employees or less. The postmasters are regarded as government employees, but the position is inherited by a member of the postmaster's family.
At the center of the debate is the privatization of the nation's mail delivery, postal savings and "kampo" life insurance services. Japan Post, established in April 2003 as a public corporation to assume the duties of the state-run Postal Services Agency, provides these three services, but the government plans to privatize the entity in 2007.
In the meeting, Japan Post President Masaharu Ikuta said, "We're trying to maintain post offices so they can continue to offer services to customers nationwide. We want to transform post offices into 'mini-family banks,' which take care of postal savings and life insurance mainly, but offer administrative services as well."
Under the mini-family bank plan, 24,700 post offices nationwide will offer a diverse range of small-scale financing services. The system has been introduced already in Europe and the United States.
Ikuta stressed the importance of maintaining the nationwide network as a precondition to these services.
In response to Ikuta's opinion, the council members generally agreed to maintain the wide range of over-the-counter services, which means the council will not focus on significantly reducing the number of post offices.
A government source said the council had taken the potential influence of the national association of post masters at special post offices into consideration as a strong support base for the ruling Liberal Democratic Party in the upcoming House of Councillors election.
In 1999, the then Management and Coordination Agency highlighted the fact that the management costs for special post offices would be more than double those for postal service operations entrusted to individuals or private companies. The agency recommended that special post offices be transformed into those entrusted to individuals or private firms, but this was implemented only in a few cases.
At Tuesday's meeting, economic critic Naoki Tanaka, one of the council members, asked, "From the investors' point of view, isn't it necessary to further reduce labor costs for post offices as part of restructuring?"
The council discussed the treatment of the postal savings system, especially its contribution to local communities and relationship with government bonds.
"The main point in reforming the postal services is that the current system of postal savings and life insurance, which own one- quarter of the government's bonds, needs to be changed," Tanaka said.
Postal savings and kampo life insurance flow through a system of fiscal investment and loan programs into semigovernmental corporations, but in some cases these funds became nonperforming loans, while in others they were used to offset bad loans.
The balance of postal savings reached about 230 trillion yen, while the balance of government bond holdings exceeded 130 trillion yen.
The Japanese Bankers Association proposed reducing postal savings and limiting their operation through the following methods:
— Stop accepting new fixed-amount savings.
— Post offices begin dealing with only normal savings accounts and manage them by holding government bonds and specializing their account operations.
— The government continues to guarantee the total amount of postal savings preceding privatization, but should not guarantee savings banked after privatization occurs.
But it remains unclear as to whether the proposed measures will bring enough profit to maintain postal operations. Therefore, the Public Management Ministry strongly opposed the proposal, saying it would lead to the abolition of the postal savings system.
It is important to secure profit bases so post offices can develop healthy management and be subjected to the same competition as private financial institutions after it is privatized, Ikuta said.
Ikuta seemed to want to stabilize management by expanding business, because any aggravation in management after privatization would negatively influence the financial market.
Within the government, some support the proposal to keep the conventional postal savings in a separate account. However, it is not certain that the government will abolish fixed-amount savings in the end. Others believe that abolishing fixed-amount savings would hinder the absorption of government bonds.
The problem of postal savings and kampo life insurance services is directly related to how to treat the nationwide network.
About 80 percent of special post offices do not offer mail delivery services, but mainly engage in postal savings and kampo life insurance services. If postal savings and kampo life insurance services were reduced, some fear that the network could not be maintained.
