Japan Government to allow investment trust sales in 2005

The Japanese government plans to allow post offices to sell investment trusts and other financial products starting as early as next fiscal year from April 2005, before Japan Post’s privatisation process begins in 2007. The move is intended to strengthen Japan Post’s earnings base and help ease its transition into a private company. Under the proposal, Japan Post will sell products developed by private-sector investment trust companies on their behalf and pocket the commissions, the report said. In exchange for approving such sales, the FSA will inspect and monitor the post offices. Permitting Japan Post to sell investment trusts before privatisation, coupled with the FSA’s examinations, is expected to boost the postal entity’s profitability and strengthen its risk management structure, the financial daily reported. Japan Post will not be allowed to sell proprietary products that go beyond the scope of its existing postal savings and postal life insurance offerings. But the entity would be able to sell products developed by private-sector financial institutions before its privatisation. Among the short-listed products are health insurance policies offered by life insurers and residential mortgage-backed securities (RMBS) from the Housing Loan Corp. But sales of such products at post offices will be permitted only on the condition that they expand business opportunities for firms that develop them, such as life insurers, because the unrestricted expansion of Japan Post operations could result in post offices taking away business from private-sector financial institutions. The government Council on Economic and Fiscal Policy will include such steps in its final proposals for the privatisation process to be compiled in August.