The first step toward Japanese postal deregulation
The Cabinet of Prime Minister Junichiro Koizumi endorsed two of the four bills that have been drafted to set up a public corporation to take over the three main services of the post office and to enable private companies to provide mail delivery. The remaining two will be approved on May 7.
The bills were fiercely opposed by some members of the ruling Liberal Democratic Party, and they were endorsed without the blessings of the LDP leadership. In a news conference, Koizumi — who regards postal reform as "the mainstay of my reform program" — vowed to see all four bills enacted during the current Diet session.
The bills do not, however, go far enough. He must make clear that the next step will be to fully privative the public corporation. The four bills do not adequately spell out the path toward privatization.
The three postal services of mail delivery, savings, and life insurance face different issues and cannot be discussed in a single breath. Mail delivery, for example, has been monopolized by the state; the reform bills would open up this market to private companies. The aim is to boost competition and thereby enhance convenience for customers.
The bills classify new market entrants into those undertaking a full range of services and those providing just certain services or operating only in designated regions. Even this was strongly resisted by postal "tribe" lawmakers, but the hurdles for full market entry are nonetheless very high.
Actively seeking private-sector participation while maintaining uniform standards nationwide will invigorate mail operations, and this may form the basis for eventual privatization.
Reforms in the savings and life insurance operations, on the other hand, must be aimed at bringing their standards in line with those of existing private financial institutions. Some 240 trillion yen are held in postal savings accounts — 2.5 times the total at the newly created mammoth Mizuho Financial Group. This has warped Japan's financial markets.
The practice of entrusting all postal deposits and the premiums collected by the postal insurance scheme to the Ministry of Finance has been abolished. There is no longer a strongly felt need for state-run banks or insurance firms.
Private-sector management techniques should be incorporated by both of these operations, and decisions will need to be made on whether regional entities will continue operating as fully privatized companies, be sold to existing firms, or simply be abandoned.
The principle and interest on the deposits at the new public corporation will continue to be guaranteed by the state, as will insurance payments, exempting the new entity from making deposit insurance payments. The public corporation will be exempt from most taxes — their only payments will be to local municipalities, totaling just half of their real estate taxes.
And payments to the national coffers will only be to the extent that they are not harmful to the financial health of the new corporation. Such measures mean that postal services will essentially remain under state control.
There are no road maps to privatization. There is little doubt that exposure to market forces will prompt improvements in postal savings and insurance. But adequate preparations are needed before jumping to full privatization, so what is needed is a strong commitment to go private.
Diet debate following the "Golden Week" holidays are expected to prompt an avalanche of protests from both ruling-party and opposition lawmakers. Prime Minister Koizumi must demonstrate strong leadership and stick with these reforms. Any compromise will spell doom for this deregulatory initiative. (Mainichi Shimbun, April 27, 2002)
