Japan Post sees delay in computer system
Japan Post will not be able to develop a new computer system in time for October 2007 – when Junichiro Koizumi, the prime minister, has pledged to split it into four separate units in preparation for full privatisation – according to its president.
“We cannot do it. It’s such a gigantic business,” said Masaharu Ikuta, president of Japan Post, referring to the world’s biggest savings institution. The post office has more than Dollars 3,000bn (Pounds 1,700bn) in deposits, 280,000 employees and 24,000 branches.
It is due to begin a 10-year transition towards full privatisation from October 2007, a six-month delay from the original timetable, which was disrupted because of initial parliamentary opposition.
Mr Ikuta’s remarks come at a particularly sensitive time, given the high-profile failure of the Tokyo Stock Exchange’s computer system to deal with high volumes of orders. Those problems led to the early closure of the TSE on Wednesday and warnings that it might have to shut down again if volumes were too high.
In November, the world’s second biggest exchange closed for most of the day after a computer glitch. The formation in April 2002 of Mizuho bank – then the world’s biggest bank by assets – in a three-way merger was also dogged by computer problems.
Speaking at an investor conference organised by Credit Suisse yesterday, Mr Ikuta said there were 42m steps of code needed to build the post office’s new system. That compared with 5m steps needed for privatisation of NTT, the former telecoms monopoly. That upgrade took nearly three years, he said.
Mr Ikuta’s best estimate was that 17m steps could be completed in time, allowing the new-look Japan Post to begin operations with a “provisional system”. New legal safeguards might have to be established to allow the post office to meet obligations related to company law, the commercial code and financial reporting with an incomplete system, he said.
“Koizumi can’t understand it,” he said, adding that the prime minister was adamant that his schedule for privatisation was adhered to.
Mr Ikuta is regarded as having done a good job in improving the post office’s management in preparation for privatisation, a step he said would improve Japan’s allocation of capital.
But he said some aspects of the privatisation law were unsatisfactory. The new entity would face unfair restrictions on the type of businesses it could enter, referring to caps on the size of insurance policies it could offer and limits on its activity in international logistics.
Japan Post was also likely to pay more tax than was justified, partly because of the mechanism agreed to finance a Y2,000bn (Dollars 17bn, Euros 14bn, Pounds 10bn) fund to subsidise unprofitable branches.
