Japan Post privatisation report fails to deliver details

The government will privatize the three postal services in stages from April 2007 and discontinue its guarantees on new postal savings deposits and new insurance policies, according to an interim report drawn up on April 26 by the Council on Economic and Fiscal Policy.

The postal savings, life insurance and mail delivery services will be fully privatized after a transition period of five to 10 years. The report stipulates that postal savings and insurance services should be scaled back, but does not go into specifics. Details regarding many other key issues, such as organizational structures and job security, have also been left out.

The CEFP plans to compile its final report after July’s upper house election.

Given the sheer size of the postal services, the direction of privatization will have a huge impact. These services are provided nationwide by Japan Post, which employs 280,000 workers, and postal savings and insurance funds total 357 trillion yen.

Postal privatization, which the report says is aimed at improving convenience, will be reviewed in four parts: the post office network, mail delivery, postal savings and life insurance.

The report says mail delivery service should be privatized in a way that will enhance management freedom, which could allow expansion into the global distribution business.

To achieve a level playing field with private-sector companies, the postal services should be subjected to such requirements as the corporate tax and the payment of deposit insurance premiums, according to the report.

The postal savings and life insurance systems serve as the largest purchasers of Japanese government bonds, and also help special public corporations procure funds.

These roles have long drawn criticism, but the interim report merely notes that the system’s contribution to smooth government bond sales should be taken into consideration.

Banks are voicing concerns that the postal services could be expanded during a transition period.

Japanese Bankers Association Chairman Yoshifumi Nishikawa on the same day issued a statement proposing that the government impose restrictions on the scope of postal operations allowed during the transition period.

Major banks generally believe that the postal savings service will shrink over time, while many regional banks are alarmed by the prospect that postal privatization will result in the emergence of strong local rivals.

Because of such concerns, the association called on Japan Post to stop accepting the popular teigaku deposit certificates.

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