Japan Post sell-off to begin by 2007

Japan Post, which holds a quarter of the nation’s savings, will have to compete with banks, insurers and other deposit-takers starting in 2007, said Economy and Fiscal Policy Minister Heizo Takenaka.

“We’ll be privatizing Japan Post in 2007,” Takenaka said. “Privatizing means that it has to compete completely on its own with the private sector.” Japan Post, which does not pay any tax, will have to compete like any other banks and insurers in the country for the benefit of the public, Takenaka said, without giving details. The state-run service, which combines mail delivery with selling insurance and government-guaranteed savings, may have to break up, said Japan’s guild of corporate executives.Japan Post “is too big” and is almost a monopoly that hampers competition, said Kakutaro Kitashiro, the IBM Japan Ltd chairman who is also head of the Japan Association of Corporate Executives. Unless its businesses are split up, “the private sector won’t be able to compete,” he said.

Japan’s postal service held 208 trillion yen (USD1.90 trillion) of savings at the end of March, 124 trillion yen (USD1.13 trillion) of insurance policies, 110 trillion yen (USD1 trillion) of government bonds and operates more branches than the nation’s banks.

It must be sold because its inefficiencies are costing the public, said the 53-year old Takenaka, who has been leading the government’s push to turn Japan Post into a company.

The Japanese Bankers Association, a group representing the nation’s lenders, proposed in February that Japan Post terminates some of its deposit-taking services, limits the amount of savings it can take, and not offer loans.

The government may end its policy of exempting the postal service from paying taxes and may shift its collection of insurance premium, the Nikkei English News said in March.

Japan’s Prime Minister Junichiro Koizumi has been planning to reorganize and sell Japan Post since he first came into office in 2001.

Takenaka did not provide any details on how the sale of Japan Post will take place. The nation’s post offices will remain, he said. The public wants the postal service to improve its services, extend post office opening hours and cut costs, Takenaka said.

“We have to clarify what demand there are from the public towards the postal savings service, what ability Japan Post has in the area, and secure a business model that can endure,” he said.

Takenaka, a former Harvard University professor, won plaudits for his plan to reduce bad loans among the country’s banking system, investors said.

“Takenaka is highly recognized by the people, and voters appreciate the job he’s done,” Hisakazu Amano, who helps manage the equivalent of US$329 million at Tokyo-based T&D Asset Management Co, said last week. “Koizumi will focus on the privatization of Japan’s post office from now on, so Takenaka may have this job next as the bad-loan issues at the banks have already been worked out.” To be sure, the task of selling Japan Post and changing its business may take up to 10 years to complete, Takenaka said.

“The issue of how we correct the flow of money is very important and will lead to activating the private sector,” said Susumu Takahashi, chief economist with Japan Research Institute Ltd, on the programme with Takanaka. “The debate that focuses too much on maintaining the convenience of the service belittles the other debate that its size is distorting the market.”