MOF researcher proposal may affect Japanese postal privatisation

A recent proposal to convert “Yucho” postal savings into Japanese government bonds may affect debate on the planned privatization of Japan Post, which Prime Minister Junichiro Koizumi regards as a top-priority item in his structural reform initiatives.

The proponent, Yoichi Takahashi, a guest researcher at the Ministry of Finance’s Policy Research Institute, on Friday assumed a senior position in a Cabinet Secretariat section to prepare for the privatization of the postal services slated for April 2007.”Deposits at the Yucho postal savings service, whose repayments are guaranteed by the government, are quite similar to a class of JGBs targeted at individual investors,” Takahashi says in an analysis featured in a report late last month from the institute’s study group on Japan’s capital markets and economy.

The conversion of Yucho deposits would be a promising JGB management policy measure if the government guarantees were to be scrapped in step with postal privatization, he says.

Takahashi goes on to say that the government could increase its issuance of JGBs for individuals to secure JGB buyers who would hold the bonds until maturity and ensure stable JGB consumption in the market.

Of the 238 trillion yen in assets managed by the Yucho service, 201 trillion yen’s worth are now invested in government debt securities or deposited with the government, he said, suggesting a need for existing Yucho deposits to be converted directly into JGBs.

Japan Post, owned by the government, has attacked the proposal, citing concern that Yucho depositors might be confused by such a step.

Its popular “teigaku” savings with fixed interest rates are totally different from floating-rate JGBs for individuals, Japan Post claims, noting that commissions from the sale of retail JGBs are not enough to finance the total upkeep costs of Japan’s post offices.