Postal privatisation crisis in Japan
Japan's privatization of postal services is being imperiled by a compound crisis of political confusion and failing management at the newly created postal companies.
At the heart of the political turmoil surrounding postal reform is a bill to freeze the planned sale of government-held shares in Japan Post companies.
The bill was jointly submitted to the Upper House a year ago by three opposition parties–Minshuto (Democratic Party of Japan), the Social Democratic Party and the People's New Party. After approval by the opposition-controlled Upper House, the bill was sent to the Lower House, but deliberation on it has yet to be concluded.
The law to privatize Japan's postal system requires the government to sell its stakes in Japan Post Holdings Co. and two of the companies operating under the holding company–Japan Post Bank Co. and Japan Post Insurance Co.–to the public.
The opposition-sponsored bill is designed to freeze sales of the shares and thereby pave the way for a fundamental review of the group's management.
Now, Minshuto, the largest opposition party, is urging the ruling Liberal Democratic Party to put the bill to a vote in the Lower House before a vote on vital legislation to allow the government to inject cash into banks facing a possible capital inadequacy.
Minshuto is betting that killing the bill will cost the LDP the huge "postal vote," long a bedrock of political support for the ruling party, in the next Lower House election.
The LDP has decided to vote down the bill by the end of the week. The party should reject the bill since the planned sales of shares in the Japan Post companies and the listing of their stocks constitute the core of the privatization plan, which is aimed at improving the efficiency of the postal businesses for their independence.
But this is not the end of the story. Alarmed by the potentially damaging political attack over the issue from the opposition camp, the LDP has started efforts to hold on to the crucial postal vote. It has set up a task force to consider a merger of Japan Post Network Co. and Japan Post Service Co., which operate the nationwide network of post offices and mail services, respectively.
Just as the partisan jockeying for the postal vote was intensifying, Prime Minister Taro Aso fueled the fire by saying the planned sales of Japan Post shares should be frozen. Although Aso's remarks were made in the context of the recent stock market rout, they didn't indicate any serious commitment to postal privatization, which he should be spearheading as chief of the "headquarters" for promoting postal privatization.
The political confusion over the undertaking started two years ago, when the LDP under the leadership of then Prime Minister Shinzo Abe reinstated former party members who were expelled after voting against the bill to privatize Japan Post in 2005.
After the Upper House rejected the privatization bill due to opposition by the LDP rebels, then Prime Minister Junichiro Koizumi dissolved the Lower House for a snap election and led the LDP to a resounding victory. The party should remember the huge public support for postal reform.
Part of the blame for the dwindling political momentum for postal privatization lies with the Japan Post management.
The powerful postal election machine has been driven by many postmasters using their own properties as post offices. Under the state-run postal system, many of them acted like private business owners.
Since reform of the system was insufficient, the Japan Post group has been stuck with a dual operational structure, with an independent organization operating within the group. This structure allows postmasters to spend much of their time on political activities instead of business operations.
The Japan Post management has made concessions to influential LDP politicians serving the interests of the postal lobby. This attitude has hampered management reforms for turning Japan Post firms into competitive private-sector players in various areas.
Japan Post Holdings postponed its announcement of a new medium-term business plan slated for the end of November, citing the financial crisis. If the move is intended to ride out the political battle over privatization, it is another troubling sign about Japan Post's management.
As the history of the privatization of Japanese National Railways shows, such a radical makeover requires a strong commitment by management.
