Hints of relaxed timetable over Japan postal reform

Senior aides to Junichiro Koizumi, Japan’s prime minister, have hinted that the timetable for postal privatisation could be allowed to slip, opening up the possibility of flexibility in talks with the ruling Liberal Democratic party (LDP), many of whose members vehemently oppose postal reform.

Mr Koizumi has insisted until now that the post office should be split into four separate entities from 2007 to ensure that there are no cross-subsidies between the mail, insurance, savings and counter divisions.

The prime minister has made privatisation of the post office, the biggest financial institution in the world, the centrepiece of his final two years in office, and has threatened to call a snap election if the LDP refuses to back his drive.

A foretaste of the rocky time that Mr Koizumi may face during the next 150 days of the regular parliamentary session came yesterday when opposition members walked out of the Diet chamber in protest at his answers on postal privatisation.

The chamber was thrown into confusion when members of the Democratic Party of Japan suddenly stood up and left, accusing Mr Koizumi of being vague in his replies to questions about postal reform.

On Friday, in the opening parliamentary session, Mr Koizumi was barracked by his own party members, who accused him of endangering Japan’s social cohesion by eroding the post office’s “universal service” mandate. In the upper house he was greeted by stony silence.

Many parliamentarians oppose splitting the post office into four because they fear it could lead to the suspension of unprofitable services, such as daily delivery in rural communities, parcel delivery and life insurance without health checks. There is also strong opposition to turning the post office’s 290,000 public workers into private employees.

Mr Koizumi has publicly stuck to his guns that he will not budge an inch on the timetable or content of reform. But yesterday Hiroyuki Hosoda, cabinet secretary, said of delicate negotiations with the LDP: “We have no particular pre-judgment on how the co-ordination with the ruling parties will proceed.”

His hint of a peace offering followed similar comments from Tsutomu Takebe, secretary-general of the LDP and a close ally of the prime minister. Mr Takebe also suggested there was some flexibility on the timetable, saying: “It is ideal for the public company to eventually be split into four firms.”

His comments were interpreted by political analysts as meaning it might be possible to split the post office into four some time between initial reform in 2007 and total privatisation in 2017.

Banks, insurers and parcel delivery services have argued that only by chopping the post office up immediately in 2007 can a level playing field be guaranteed.

Mr Koizumi says post office privatisation, which he has called the biggest reform since the modernising Meiji restoration of 1868, is needed to improve capital allocation and shrink government.

Aside from ideological opposition to postal reform, many members of the LDP enjoy close political and financial links with the enormous state entity.