LDP refuses to accept government estimate on postal privatisation

Japan’s governing Liberal Democratic Party refused to accept a government estimate Thursday that postal privatisation will create an increase of up to 600 billion yen in pretax profits annually.

Rejecting the estimate as too idealistic, the party urged the government to present what it called a more realistic estimate next week on the profitability of Japan’s postal system after its privatisation begins in 2007, LDP House of Representatives member Yoichi Miyazawa told reporters.

During Thursday’s meeting, the government gave the party a projection that the four privatised entities spun off from the state-backed Japan Post will be able to chalk up large profits by launching new businesses such as financing and merchandising.

According to the estimate, a business unit to take over mail and parcel delivery is expected to produce 50 billion yen by streamlining operations and starting international logistics business.

A bank to inherit postal savings is estimated to generate 320 billion yen by starting such new businesses as securitization and lending, the estimate said.

It said an insurance firm for “kampo” postal insurance services is likely to chalk up 5 billion yen after it scraps its ceiling for its insurance money and expands its insurance services to the medical and nursing fields.

A company to take over the network of post offices and provide over-the-counter services will see 230 billion yen more profit from the merchandising business and commission revenues from the postal savings and insurance companies, the government said.

But the projection is made based on such premises as the planned postal bank offering 35 trillion yen in the new loan business, leaving it with many uncertain factors.

LDP participants raised such questions as the impact of the megabank to be created by postal privatisation on existing financial institutions and whether the envisaged businesses are really feasible, Miyazawa said.

Postal privatisation minister Heizo Takenaka said the estimates are based on an assumption that the new businesses take firm root and whether to actually launch them depends on the management of the new firms, according to Miyazawa.

Chief Cabinet Secretary Hiroyuki Hosoda, meanwhile, apologised for the government’s failure to meet the LDP request that it stop advertising the contentious policy while negotiations are still under way, and promised to heed to the party’s demand, he said.

But the government separately chided six LDP lawmakers at the public posts of parliamentary secretaries for joining an LDP meeting Wednesday aimed at opposing the privatisation policy, Hosoda said in a press conference.

The LDP meeting drew 59 participants despite government efforts to win the party’s backing to the policy that Prime Minister Junichiro Koizumi, who doubles as LDP president, aims to pass through the Diet during the ongoing session through June.

The government plans to privatise Japan Post, a public corporation set up in April 2003 taking over the governmental postal services, over 10 years beginning in April 2007.