Japan Post privatisation should not be delayed

If there is one achievement with which Junichiro Koizumi, the Japanese prime minister, hopes to make his mark on his country’s history, it is the privatisation of the post office.

Outsiders might regard this as a curious choice for a man who has moulded a more assertive Japanese foreign policy and overseen a recovery, albeit fragile, of the world’s second largest economy. Mr Koizumi, however, has been determined for 20 years to reform an organisation at the heart of Japan’s old-fashioned political and financial systems; the post office, with savings and life assurance assets of Dollars 3,300bn (Pounds 1,800bn), is the world’s biggest bank as well as a means of sending letters.

It was inevitable that modernisation of atreasured institution employing 280,000 permanent staff, a third of the civil service, would meet stiff opposition. But there have been worrying signs this week that Mr Koizumi and his supporters are considering further relaxation of the already generous deadlines they have set themselves.

The original plan, which Mr Koizumi insists he still stands by, was for the post office to be split into four separate groups – mail, insurance, savings and counter services – in 2007, leading to full privatisation in 2017. Given that the reform-minded Mr Koizumi will be obliged by the rules of the governing Liberal Democratic party to step down before the end of next year, this is already a risky timetable even if he manages to push through the legislation. Further delay could be fatal.

Politicians such as Tsutomu Takebe, the LDP secretary-general, who said the aim was “eventually” to break up the post office into four entities, have good reason to be concerned. Rural voters are appalled by the possibility that a privatised post office, deprived of subsidies, would cut mail deliveries from daily to every other day in remote parts of Japan.

But the real issue is money, not mail. Mr Koizumi has admitted that after privatisation the savings and insurance divisions of Japan Post would no longer have to invest in Japanese government bonds. This goes to the heart of Japan’s post office problem.

The 130-year-old postal service, now a fiefdom of the conservative factions of the LDP, has gradually been transformed into a kind of giant off-budget piggy bank to fund poorly monitored government expenditure. Japan Post has contributed to the sharp rise in government debt, and has thus distorted not only the market for financial services but the country’s whole financial system.

Japanese legislators are right to be cautious about such a large and complicated undertaking. But the best reason to take care – the risk that a half-baked reform will allow the post office to seize new markets from private competitors without abandoning its old privileges – probably concerns them less than the prospect of a disappearing LDP cash cow. Mr Koizumi should stick to his guns if he wants to be remembered as a true reformer.