Prime Minister Junichiro Koizumi’s plan to privatize Japan’s enormous postal system got the go-ahead Friday from the Cabinet — but not from the Liberal Democratic Party, which he heads.
The LDP-New Komeito ruling bloc refrained from either supporting or opposing the plan, which would split Japan Post into four separate units at the start of the privatization process in 2007.
Cabinet plans to prepare a bill for the Diet are rarely finalized without the ruling camp’s backing.
“The party cannot block Cabinet approval for the basic plan, but it will take necessary steps (to effect changes) in the drafting of the bill,” the LDP said in a statement.
“We have buried the outer and inner moats” in the way, Koizumi was quoted as telling ministers during the Cabinet meeting, referring to what he believes is a victory he has achieved over the ruling bloc.
But the LDP’s stance suggests a bitter fight ahead as a panel of Cabinet ministers now must prepare a privatization bill for the regular Diet session beginning in January.
The postal organization has financed roads, dams and other public works for decades, raking in votes for the LDP in the process.
Postal privatization represents a 20-year goal of Koizumi’s to fundamentally change how money moves in the economy.
The postal system holds a quarter of the nation’s personal financial assets, including 227 trillion yen in individual savings deposits and 122 trillion yen worth of life insurance policies. The funds, which are backed by government guarantees, are channeled into government bonds to finance the nation’s growing debt.
If the bill to reform Japan Post is passed, the huge institution would be privatized over a decade, from 2007 to 2017, and could reduce waste in public spending and increase investments in private industry.
According to the proposal, Japan Post will be split in 2007 into four units: a mail delivery company, a postal savings group, a life insurance firm and a group to manage over-the-counter services. Since companies overseeing bank and insurance services won’t have offices of their own, all postal savings and “kampo” insurance will be handled by the new counter-services company.
Bank and insurance groups claim that unless Koizumi’s administration can keep the four companies completely separate, the postal operations will have an unfair advantage over commercial banks and insurance companies.
They point to Japan Post’s 24,700 branches nationwide, which give the corporation access to a wide range of customers and information about their lifestyles and financial needs.
Chief Cabinet Secretary Hiroyuki Hosoda echoed these concerns at a news conference.
“We must resolve how to deal with government guarantees, the cap on savings, the balance with private financial institutions and charges that we are hurting the private sector,” he said.
According to the plan, the government would unload its shares in the postal entities in stages between 2007 and 2017.
While the postal savings and insurance units would be wholly privately owned in the final phase, the government would retain a more than one-third stake in a holding company overseeing the four entities.