Gov’t projects Japan Post spin-offs’ profit to decline over 10 yrs

The government projected Wednesday that all four spin-offs of Japan Post will be in the black in fiscal 2008 but, without new business, profits at three units will decline by the time the postal privatization process is completed in fiscal 2016.

According to the estimate released by postal reform minister Heizo Takenaka, only the spin-off in charge of postal insurance will be in the red in fiscal 2007, when the 10-year privatization process begins. The remaining three will take over mail delivery, postal savings and post office network management from Japan Post.

The projection is based on the assumption that the four entities do not start new businesses.

“The business environment (for the Japan Post spin-offs) will become severe in 10 years. It is necessary to increase freedom in their management during that period,” Takenaka told a press conference, indicating his view that it is inevitable the entities will start new businesses.

Private-sector firms are against the idea that Japan Post launch new services such as extending housing loans and selling investment trusts while it is not fully privatized, as their businesses could be hurt.

In the government projection, net profits at the mail delivery, postal savings and post office network management units will fall 72.8 percent, 35.2 percent and 66.6 percent respectively from fiscal 2007 to 10.4 billion yen, 148.3 billion yen and 68.2 billion yen in fiscal 2016.

The postal insurance company is expected to report 35.1 billion yen in net loss in fiscal 2007, but move into the black the following fiscal year and post a net profit of 30.1 billion yen in fiscal 2016.

The government attributed the projected shrinkage in the three bodies’ net profits to a decrease in mail delivery volume, a decline in postal savings and subsequent fall in proceeds from investment of those savings, and a drop in commissions paid to the network management body from the other two.

Most of the network management unit’s revenues are expected to consist of commissions from the remaining three Japan Post spin-offs.

The government estimates that postal savings, which will total 214.0 trillion yen in fiscal 2006, will fall 33.4 percent to 142.5 trillion yen in fiscal 2016.

In compiling the projections, the government allocated 120,000 of 271,000 total Japan Post employees to the mail delivery company, 8,000 to the postal savings body, 4,000 to the postal insurance entity, 135,000 to the network management firm and 4,000 to a holding company of the four entities.

The state-backed Japan Post was launched in April last year, taking over the three main service fields of the Postal Services Agency — mail and parcel delivery, postal savings, and “kampo” life insurance.