Japan's PM gets tough on reform

In a battle shaping as his last stand on reform, Japanese Prime Minister Junichiro Koizumi is facing a bitter battle with his ruling Liberal Democratic Party over proposals to deregulate Japan’s heavily subsidised postal system.

Mr Koizumi wants the legislation, which would open up Japan’s publicly run mail delivery system to private operators, passed in the current six-week Japanese parliamentary session, which opened on Tuesday.

Postal reform is an issue long championed by Mr Koizumi, who recently described it as the centrepiece of his reform package.

“I won’t budge an inch [on postal reform],” he said recently.

But the plan is facing bitter opposition from within Mr Koizumi’s ruling Liberal Democratic Party.

This reflects the fact that the operators of Japan’s extensive network of 24,000 post offices are the largest single sectoral interest group in the LDP’s membership, and are powerfully represented in the LDP’s parliamentary wing.

In small towns and villages across Japan, post office operators are invariably prominent individuals with the power to influence local voters.

But existing arrangements are no boon for the consumer.

A standard letter costs ¥80 ($1.15), and many Japanese businesses reportedly ship their magazines and catalogues from Hong Kong and Korea because international rates are more competitive.

The proposals being pushed by Mr Koizumi would allow private operators in the mail delivery market and would convert the existing national post office to a publicly owned corporation, with a view to eventual privatisation.

Mr Koizumi insists that the legislation must pass, or else. “If the LDP kills the bills, it will become a battle of whether the party destroys the Koizumi Cabinet, or whether the Cabinet destroys the LDP,” Mr Koizumi said.

It is a dangerous all-or-nothing approach.

“The [postal reform] package symbolises Mr Koizumi’s reforms and if it does not pass he is in big trouble,” UBS Warburg political analyst Shigenori Okazaki said.

“If he fails he will look like a complete fool,” Mr Okazaki said yesterday.

Mr Koizumi won a partial victory on the issue late last month when he ignored traditional practice and submitted the package of bills directly to the Diet, thus bypassing hostile party committees. But opponents within the party are simply biding their time, and are preparing to tie the bill up in lengthy parliamentary procedures.

“Because the package was submitted without the LDP’s advance approval, we’ll see to it that lower house members of the ruling coalition alone continue raising questions for as long as 50 or 60 hours,” an LDP member said recently.

The case for privatisation has also been weakened by the announcement from parcel delivery transporter Yamoto Corporation that it was unlikely to enter a liberalised mail delivery market, citing overly complicated rules.

That leaves just two private players vying for work after deregulation, a fact immediately seized upon by opponents to the reform process.

Meanwhile, other analysts said that the Koizumi Administration should instead be focusing its energies on the privatisation of the postal savings system, which account for nearly one-third of all savings deposits and one-third of all life insurance policies in Japan.