Japan Post looks to an exciting future after the privatisation

What is happening in the mail market in Japan?

The market for ordinary mail, booklet parcels and mail delivered by private sector operators is mature and little growth is expected in the future. While the market grew slightly by 0.4% in fiscal 2005 (April 2005 to March 2006), it had previously contracted in each of the three previous years. This was due to the spread of IT, including e-mail, coupled with a decrease in the volume of mail sent by companies in their bid to cut communications costs.

Japan Post and private-sector operators are currently competing fiercely in the mail market. The amount of mail handled by Japan Post is decreasing, while that delivered by the private sector operators is increasing.

In this severe environment Japan Post is vigorously developing new services to improve the merchantability of direct mail and Yu-Pack (parcels), and is putting the brakes on declining sales.

How is Japan Post regarded by its customers? Do you have any measures of success? If so, could you share them with us?

Since changing the organisation from the Ministry to Japan Post, we have been making strenuous efforts to provide Macco Services (straightforward customer oriented services), recognising that our three postal operations (mail delivery, postal savings, and postal life insurance) are unquestionably service businesses.

Most of the committees established under the Management Committee, Japan Post’s top decision-making body, are chaired by an Executive Deputy President or Deputy President. The Customer Service Promotion Committee is chaired by the CEO.

We have a company-wide system to recognise employees’ good attitude and manners toward customers. We conduct surveys of customers and use the results to raise the awareness of all employees with an eye toward improving customer satisfaction.

However, according to the 2006 Japan Home Delivery Service Customer Satisfaction Study conducted by J.D. Power Asia Pacific, Inc, the level of customer satisfaction with Japan Post’s services is still below the industry average, indicating much remains to be improved compared with our competitors. We score 597 (out of a possible 1000), compared to an industry average of 622, and 644 for Yamato Transport.

What is happening with your competition, particularly in letters and parcels? What product and service innovations has Japan Post made to respond to the competitive threats?

There is tough competition in the parcel delivery market. According to survey results released by the Ministry of Land, Infrastructure and Transport, the four leading private sector operators handled 86.4% of the almost 3.2bn items delivered in Japan during fiscal 2005. Japan Post’s Yu-Pack accounted for only 7.7% of the total (246.6m items).  The four leading private sector operators areYamato Transport Co. Ltd., Sagawa Express Co. Ltd., Nippon Express Co. Ltd., and Fukuyama Transporting Co. Ltd.

Japan Post has been working to improve the quality of various Yu-Pack services for customers.

Recent improvements include:

• the introduction of a new rate structure based on parcel size, not weight;
• the introduction of a new discount structure;
• the addition of a new service for delivering golf and ski equipment;
• increasing the number of service access points including convenience stores;
• the introduction of an address conversion service;
• the introduction of a frozen goods delivery service.

Since its renewal, Yu-Pack has enjoyed double digit growth of between 10% and 18% in the number of items handled, whereas the growth rate of private sector operators and the home delivery market as a whole is at 1% to 3%. We feel that the renewal is yielding steady results.

The biggest private sector mail operator is enjoying steady growth in volumes handled, which rose to 1.7bn items in fiscal 2005 compared with 600 million in fiscal 2002.  To halt the downward trend in postal mail, Japan Post established an annual contract rate structure for large users of booklet parcels in February 2004. As a result, the number of booklet parcels handled increased to 1.8bn items in fiscal 2005, up from 250 million in fiscal 2001. We have also been developing new products to enhance the quality of service.

Examples include:

• in September 2005 Japan Post launched the “Town Plus” service which delivers booklet parcels without addressee names to all households and offices in a designated area (same town or home);
• in April 2006 the POSPACKET service for sending small and light items was launched in response to the popularisation of e-commerce, including Internet auctions and other Web-based sales.

Could you please bring us up to date on the regulatory and privatisation process?  What are the major events we should be looking out for in the next twelve months or so?

Our first priority is to make sure all employees understand the significance and possibilities of privatisation so that we can move to the new company with a positive outlook and high expectations. Toward this goal, the CEO and Management Executives send messages to employees frequently and exchange opinions with junior and middle-level personnel at various locations throughout the organization. We always tell employees that we have to achieve two essential missions regarding privatisation of postal services:

• a public mission that includes maintaining the public nature of postal services and continuing the post office’s traditional role of contributing to local  communities; and             
• a new mission of becoming an ideal business and private company unsupported by any government guarantees.

In preparation for privatisation and split up, we have set the following four principles:

• to ensure the execution of privatisation scheduled for October 1, 2007;
• to fully respect the Diet proceedings and statements, laws and accompanying enactments;
• to ensure the postal service company operates under a new business model;  and 
• to establish and fully complete a provisional information system.

Before the privatisation and split up, we must make sure that the new knowledge gained in these preparations, especially in training, can be utilised smoothly during the transfer.

The success of privatisation and split up will depend on the execution of action plans to achieve the corporate goals of Japan Post and enhancement of the compliance system, in addition to thorough preparations. Our mission is to restructure the managerial system during the time remaining so that we can make a fresh start upon privatisation in the best possible condition.

We understand Japan Post has established a number of alliances and joint ventures with other transport companies, department stores, air cargo operators etc. Could you explain a little more about your alliance strategy inside and outside Japan?

The postal service business in Japan is facing tough conditions, with the volume of items handled expected to continue to decline. In view of this trend, Japan Post has been strengthening areas other than ordinary mail service. The full-scale launch of an international logistics business will become a pillar of our diversification in the future.

In developing our international logistics business, Japan Post is particularly interested in the Chinese and Asian markets, which are expected to grow strongly in the coming years. As a first step toward launching our international logistics business, ANA & JP Express Co. Ltd. established jointly by Japan Post and All Nippon Airways in April 2006, started an air cargo service mainly between Japan and China in August. In the fall of 2006 flights to Shanghai were increased from two to five a week. A North American route was also established, reflecting the steady expansion of our logistics business.

We will continue to strengthen the international logistics business mainly targeting China and the Asian region and possibly expanding service to Europe and the U.S.

We are also seeking to expand our international business through collaboration with private sector operators both in and outside Japan.