Japanese prime minister brings privatisation battle to a head

Postal reform sounds like an unlikely issue to stake a government on, but Japanese Prime Minister Junichiro Koizumi is doing just that.

Koizumi has been pushing privatisation of Japan's sprawling postal savings system for years. It was a central plank in his platform when he became prime minister in 2001 and has been featured in major speeches since.

The ramifications for the world's second-largest economy are pivotal: Japan Post is in effect the world's largest bank, with 2.9 trillion dollars in savings and insurance deposits.

Koizumi argues the reform is needed to make the enormous pot of money in the postal service open to more efficient investment, providing a jump-start to a country that is only now emerging fitfully from a lengthy slowdown triggered by the bursting of the 1980s "bubble economy." The legislation would privatise Japan Post by 2017.

Now Koizumi's privatisation campaign is coming to a final showdown, with the future of his government hanging in the balance.

In a bold challenge to opponents in his Liberal Democratic Party, Koizumi wants a quick vote in the upper house of Parliament, likely within days, that could finally settle the battle over privatisation, or force him to call general elections.

Koizumi suggested that a failure of the package could lead him to dissolve the powerful lower house of Parliament.

"If the bill is passed, then the house won't have to be dissolved, so I'd like everyone to try their best," he told reporters on Thursday.

Just how high the stakes are in this battle has become apparent in recent weeks.

Koizumi loyalists punished lawmakers who strayed from the party line when the package passed the lower house by a razor-thin margin last month. A ruling party member's suicide this week has been linked to the battle over the package.

Koizumi is up against the vested interests of his own party, which depends on the sprawling network of unionised postal workers as a bastion of rural support. Postal deposits have long been used as a bottomless fund for public work projects at the core of the LDP's pork-barrel system.

Japanese media reported that 12 of the 114 LDP members in the upper house have vowed to vote against the package. With the opposition voting in a block against the package, 18 LDP defectors would be enough to reject the bill.

With the vote so tight, even Koizumi loyalists were unwilling to predict absolute victory. The upper house committee handling the legislation was expected to meet on Friday, meaning a vote in the full chamber probably would not come until Monday, Parliamentary officials said.

"Regardless of when the vote takes place, the government will continue to make the greatest efforts in getting the bill through," said Chief Cabinet Secretary Hiroyuki Hosoda. "Whatever happens, it's only a matter of days."

Opponents argue that privatisation will reduce postal services in rural areas and lead to layoffs among the 400,000 postal system workers. They also say the new bank created will drive private financial institutions out of business.

Koizumi defended the measure in Parliament on Tuesday, chastising opponents for shying away from what he considered a relatively modest reform. On Wednesday, his economics chief, Heizo Takenaka, sought again to calm nerves in Parliament.

"There is a universally recognised duty to provide a postal service that must be protected," Takenaka told lawmakers.

Opposition lawmakers also accused Koizumi of trying to ram the bills through Parliament without sufficient debate and consideration.

Heightening the debate, Yoji Nagaoka, a lower house LDP member, was found dead of an apparent suicide on Monday.

Media reports quoted an aide at his legislative office as saying that Nagaoka was distraught after being criticized for backing off his opposition to the postal reform and voting for it, suggesting that Koizumi had gone too far in pressuring party members to support the reform.

In floating the possibility that he could call general elections, Koizumi appeared to be playing on many of his colleagues unstated fears that the LDP would lose power in a poll.

The opposition Democrats made a strong showing in elections for the upper house last year, posing an increasing threat to LDP control of the government, which has continued nearly uninterrupted since 1955.

In the meantime, some lawmakers were printing election posters in case they have to hit the campaign trail.