Japan Post Participation in 2003 Fund Market

The Japanese Ministry of Public Management plans to let the public postal corporation, to be created in spring 2003, participate in the call market, a short-term fund market for financial institutions, the Nihon Keizai Shimbun reported in its Monday edition. If the plan materializes, the corporation will be allowed to pump postal deposit and insurance funds, totaling Y2-3 trillion, directly into the market, making it the largest fund supplier in the call market. Postal deposit and insurance funds currently total some Y360 trillion [US$2.7 trillion], most of which are invested in central and regional government bonds. Since the public postal entity will operate under a self-supporting accounting system, the ministry thinks it is better to reduce the risks of the entity’s funds and pursue higher investment efficiency by allowing it to diversify its investment vehicles, ministry sources said. The ministry is set to incorporate a related provision in a public postal corporation bill, due to be submitted to the regular Diet session this spring, the sources said. The call market, in which life insurers and regional banks are fund investors and major city banks are fund procurers, is a key venue for private-sector financial institutions to meet their needs of funds. The postal entity is expected to supply funds into the market through a settlement-only account to be set up at the Bank of Japan, the sources say. It is unlikely to supply a huge amount of funds into the call market if fund demands from private financial institutions continue to be sluggish. Even in such a case, its fund supply volume will be some Y3 trillion, accounting for 20% of the Y16 trillion in funds traded on the market. Many private lenders are thus already expecting the entity to be a key fund supplier in the future when their fund needs recover. The entity, however, will be required to have a thorough risk control system because it could suffer a loss if the funds it has lent go sour.