Japan Post Bank and Japan Post Insurance Co. are expanding operations under the revised postal privatization law, opening the door to criticism from private financial institutions that fear they will lose customers on an unlevel playing field.
The original postal privatization law permitted the postal bank and life insurer to start new businesses depending on the progress of the privatization of the postal services.
But as the privatization process has been shelved as a result of the 2009 change in government, the expansion of operations by the postal bank and insurer has been frozen.
The revised legislation, which sailed through the Diet in April, enables the government to sell off its shareholdings in the two financial institutions after dropping the deadline of 2017 set by the original law in 2005, paving the way for them to launch new operations.
The postal bank and insurer are the cash cows of the Japan Post group. Recently, however, they have struggled to halt an exodus of customers.
The outstanding balance of deposits at the postal bank totaled ¥176 trillion on March 31, the end of fiscal 2011, down more than 30 percent from its peak at the end of fiscal 1999. The postal insurer had 39.04 million insurance policies in force at the end of fiscal 2011, less than half of the peak number at the end of fiscal 1996.
It is impossible for the bank and insurer to rebuild their customer bases in the face of increasing competition with other financial institutions. To prevent a further deterioration, the two believe it is imperative to offer loans with large profit margins and introduce insurance products that meet customer needs.
Japan Post Holdings Co. is 100 percent owned by the government and proceeds from the sale of shares in the holding company of the Japan Post group will be used to finance reconstruction work in areas devastated by the March 2011 earthquake and tsunami.
It is “our biggest task” to make high-priced sales of Japan Post shares possible, stressed Jiro Saito, president of the holding firm, which plans to work out a management plan, including new operations, as early as this fall.
The postal bank and insurer need to win approval from the government to launch new services, while Japan Post retains a stake of 50 percent or more. The two units will soon apply for government approval of mortgages and low-premium school expense insurance without death benefits.
While the government’s postal privatization committee will screen the applications upon receiving them, Hidetoshi Sakuma, chairman of the Regional Banks Association of Japan, said the “ultimate principle” of public financial institutions is to complement private institutions.
A key feature of financial services in the Japan Post group that is unavailable to other financial institutions is a nationwide network of 24,000 post offices.
Taizo Nishimuro, chairman of the privatization committee, said a focal point of the new services planned by the postal bank and insurer is whether they can “capitalize on the network closely linked to household finances.”