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Japan Post goes public, shares soar above offering prices

by

Staff Writer

The final phase of government plans to privatize the nation’s postal services got off to a good start Wednesday as shares in three newly private companies soared above their offering prices they went live.

In the first phase of a planned three-stage release of shares in Japan Post Holding Co. and its banking and insurance units, shares in the holding company fetched an initial quotation of ¥1,631, up a brisk 17 percent from the initial offering price of ¥1,400. Japan Post Bank Co. and Japan Post Insurance Co. shares were initially quoted at ¥1,680 and ¥2,929, respectively 16 percent and 33 percent higher than their sticker prices.

The initial quotations place the combined market capitalization of the three companies at over ¥16 trillion, making this the second-largest IPO of a former public corporation after Nippon Telegraph and Telephone Corp., which reached ¥25 trillion at its February 1987 listing.

Although the three remain partially publicly held, Taizo Nishimuro, president and CEO of the holding company, said the conversion of the three firms into private-sector players will “contribute to invigorating the nation’s economy.”

“I think we need to implement measures to have our post office staff, who form the foundation of our post office network, strive to improve profits,” he told a news conference following the listing ceremony at the Tokyo Stock Exchange.

Also Wednesday, Chief Cabinet Secretary Yoshihide Suga said the shares’ brisk performance showed the public had “a positive view” of the three companies.

In the end, the holding company’s shares closed the day at ¥1,760, up 26 percent from the offering, while the banking and insurance units ended up 15 percent and 56 percent, at ¥1,671 and ¥3,430, respectively.

The surge was so strong the shares of Japan Post Insurance triggered the stock exchange’s circuit-breaker in afternoon trade, which aims to limit price fluctuations on any one day.

The favorable investor response was to be expected as the company continues to receive government backing, said Keio University professor Hideki Ide.

“It’s hard to imagine the shares will decline significantly, either,” Ide said. “The holding company will continue to hold 50 percent in the (banking and insurance) units, and that will ensure (the ailing mail delivery unit) Japan Post Co. will get sufficient support (from the two other subsidiaries).” Japan Post Co. remains 100 percent owned by the holding company.

But he added: “Japan Post Co. will need to show viable strategies to take advantage of its real estate assets and expand overseas logistics operations.”

The listing brings the former public corporations face to face with shareholders, to whom they are required to show paths to growth, even as they remain tied to legal obligations such as operating post offices — their retail outlets — even in remote areas and upholding a deposit cap of ¥10 million in their banking business.

The government hopes investors will continue to value the shares highly as it plans to release more by fiscal 2022 in a bid to raise a total of ¥4 trillion for reconstruction in areas devastated by the March 2011 earthquake and tsunami.

The success of the IPOs is some relief for the government, which is haunted by the listing of the NTT shares. The initial batch of shares in the former communications public corporation, released at the height of the asset-inflated economic bubble in Japan, attracted significant investor interest, and in two months shares nearly tripled in price to ¥3.18 million each from the initial offering price of ¥1.197 million. But the shares declined thereafter, making it difficult for the government to release the rest of its holdings.

The closely watched IPO of three postal companies, collectively representing the nation’s biggest this year, marks the start of the final stage of a privatization policy initiated by Prime Minister Junichiro Koizumi in 2005, when he put it on the agenda as he dissolved the Lower House for a snap election — a bet he won as the ruling coalition secured a majority.

Under the plans, the government will continue to sell its portion in Japan Post Holdings until its remaining stake is diluted to a little more than one-third. The holding company plans to sell its stakes in the two units until only half of each remains.

The government hopes the offerings of the shares, many of them sold to retail investors, will also encourage households to shift financial assets largely dormant in bank deposits to stocks, contributing to economic growth.

In his statement posted on the holding company’s website, Nishimuro said the listing was aimed at raising the group’s independence and freeing up its management while it remains partially under government control.

“The listing of the shares is not our goal,” the statement said. “As a listed company, we will work on management reforms early, and continue to make group-wide efforts to provide products and services through our nationwide network of post offices.”

Information from Kyodo added

  • disqus_vBekJrf7g5

    They make it sound like a ‘feel good’ all-Japanese ‘success story’.
    But the truth is this;
    The J-Government sold off the tax-payers property at 17% below its true value, hence the 17% rise in stock value as soon as it hit the market.
    Japanese tax-payers should be outraged that their property was sold (to who exactly? Whose rich friends got in on this?) for 17% less than its real value!

    • tisho

      The postal service is not the tax-payers property. Nobody wants to pay for that failed monopoly. Privatizing it means one failed institution deduced from their taxes.

      • disqus_vBekJrf7g5

        Yes it is. It’s the property of the nation, not Abe and his crony pals.

      • tisho

        It is property of the government of Japan, it is funded by the tax-payers. There is a big difference between owning something and just funding it.

      • disqus_vBekJrf7g5

        And the government of Japan are supposed to serve the people of Japan, not the Abe kleptocracy school of Mugabenomics.

      • tisho

        Every individual is driven by self-profit and defending his own self interests. That includes the people in the government. They are defending their own self interests. It is naive to think otherwise, they are just regular people just like me and you, driven by self profit and self interests. That’s why the US was meant to be a constitutional republic and not a democracy. A constitutional republic with very small government, with very small and limited powers, constrained by the constitution. The constitution is not there to empower the people, people are empowered by themselves, the constitution is there to restrain the government and protect the people from the government. Unfortunately as we see in the United States, eventually the government finds a way to convince the people to give them more power, and once they remove the barriers that are holding the government from getting more power, from there on the government just keeps growing and growing, as the individual liberty and free market keeps shrinking and shrinking.

      • http://www.sheldonthinks.com/ Andrew Sheldon

        Clearly the constitution is a failure, and for good reason; its a piece of dogma.

      • disqus_vBekJrf7g5

        Well, that’s quite the loop you’ve tied your ‘logic’ into; the government is selling off the nations silver, so the constitution should be scrapped to allow Japan to fight America’s wars.
        Not impressed.

      • http://www.sheldonthinks.com/ Andrew Sheldon

        Its a thesis or proposition. There was no logic expressed. The govt is always selling ‘silver’. On most days is selling your soul. A cheap sanction called an election, and you buy into it. The constitution was an instrument imposed by America. You’re the one fighting American wars silly. lol.

    • 99Pcent

      How would you compare this story to Mugabe winning the (hahahaha) CCP noble prize?

  • Steve Jackman

    The Japan post IPO illustrates two things to me. The first is how far Japan has fallen. This country used to be known for its technical innovation, but now the biggest IPO in 30 years in Japan is that of a bloated and inefficient government bureaucracy that is Japan Post. Second, it shows the misplaced enthusiasm of foreign investors for the Japanese market. This is a company which is almost completely domestically oriented in a country with terrible demographics, where wages have been falling every year, and it has zero chance of growing its business internationally. So, what exactly is the appeal of this IPO?

    As an American businessman who lives in Japan, I have had frequent interactions with Japan Post and am familiar with its banking and insurance arms, in addition to mail delivery service. Japanese service companies outside of manufacturing are inefficient, lack innovative products and services, have very low productivity and are extremely low tech in their operations. Japan Post and its banking and insurance arms are even worse than the average Japanese company in this regard, due to it being government owned. It has for decades had a captive audiences of Japanese households, where it has used its mail delivery service to force people to buy its uncompetitive bank and insurance products (often using high pressure sales tactics).

    An example of how backward Japan Post Bank is that they still have no 24 hour ATMs, since their ATM hours are extremely limited. The insurance and banking units also provide next to nothing in terms of online services. As for their physical presence, walking into a Japanese post office even in central Tokyo is like stepping back in time. Japan Post saying that they want to expand banking and insurance services internationally is like someone’s ninety year old grandpa saying that he’ll move to a different country he knows nothing about and will start a new successful business there. Time for a reality check (the President of Japan Post Holdings is actually 79 years old).

    The culture at Japan Post is based on the worst type of bureaucracy and such corporate culture in Japan does not change even after decades of privatization, due to the Japanese aversion to change and risk-taking. One can look at prior cases such as Japan Railways and NTT, which were both privatized long time ago, yet to this day are still run as insular, bloated and inefficient government bureaucracies. Japan Post cannot be an exception to this.

    One of the benefits of privatization can be the increased shareholder scrutiny, yet this will not happen in the case of Japan Post. Fully 80 percent of the shares are allocated to domestic investors, with heavy emphasis towards retail investors. These retail investors have little knowledge and no interest in challenging management to change the status quo, so these companies will continue to be run the way they have been in the past as government entities.

    Lastly, with no prospect for international growth, where is growth going to come from, given that the Japanese population is shrinking, most financial assets are held by the elderly who are in many cases in the draw down stage and no longer in their asset accumulation phase, and that younger people in Japan have very little in terms of financial assets. I think I’ll be staying away from the IPO.

    • tisho

      Every institution that is run by the gov. is inefficient and unproductive. There is no surprise there. By privatizing it, and getting these services into private hands, private investors who put their own money into this business, you can expect to see improvement. Investors put their own money into it, they want the business to stay profitable and successful. So, i would expect to see some changes and possibly even expansion into the foreign markets. One thing i did not understood is whether now creating your own postal service is legal or not, it used to be illegal. If it is legal, then that puts the JP on an equal playing field on the free market, it creates competition, you have to better yourself to stay competitive. if it’s still illegal, then the JP will remain a monopoly, because there will be no competition on the domestic market. And as a monopoly, i don’t expect to see a good quality service. Having your own postal service used to be illegal in the United States in the 80s, if you tried creating a business on postal delivery, you would’ve been arrested. I don’t know how it is today. Most of the Japanese institutions were privately owned until the 60s, then the gov. began a massive regulations campaign, they became protectionist, and as one would expect ,their standards of living went down, and soon came the big bubble.

      • 99Pcent

        Wow, every single comment from you concerning Japan seems to be anti Japan and pro Korean/China. I am beginning to wonder if you are a Korean troll or CCP 50 center.

      • http://www.sheldonthinks.com/ Andrew Sheldon

        Well, he’s not Australian. Hugh Jackman’s brother is Ralph.

      • Steve Jackman

        Me Hugh Jackman’s illegitimate brother from Vulcan father.

      • Steve Jackman

        You right. Me no American. Me Vulcan.

    • 99Pcent

      What is with the constant vitriol on Japan?

      • Steve Jackman

        Yo, read much? Know anything about business? Even the Nikkei, Japan’s venerable business newspaper, expressed doubts about the Japan Post IPO. Are you accusing the Nikkei Asian Review of vitriol also, because on November 5, 2015, they published a story with the headline, “Japan Post IPO Growth to remain challenge once afterglow fades”. It states the following:

        “Yet the group is struggling on the earnings front. Japan Post Holdings expects net profit to tumble 23% to 370 billion yen in the year ending next March owing to less earnings from its breadwinner bank. Mail delivery and logistics unit Japan Post, the laggard left out of the IPO, is burdened by a mandate to provide the same range of services throughout its nationwide network.

        Back in 1987, NTT shares debuted 30% higher than their IPO price. But the telecom group now trades at a 40% discount to its opening price, once adjusted for stock splits.”

        Is the Nikkei anti-Japan also? Clueless posters like you make me laugh!

    • Secret Guest

      Easy. The appeal is the MONEY. You see the Japan Postal System isn’t just a postal system. It works as a bank. The investors are looking at the saving in the system.

  • tisho

    Very good news. I see the Abe administration is taking some ideas from the UK. David Cameron privatized the British Postal services in his first year in office, and is now planing on privatizing the healthcare services too. Japan needs a massive deregulation campaign, they need to privatize everything they can and leave those institutions to the free market, as oppose to gov. bureaucrats.They need to cut spending, and then cut taxes. I am skeptical but looking forward to see what will happen next.

  • GBR48

    As someone who lived through the Thatcher years, the failed PR stunt that was the ‘share owning democracy’ and then the vastly increased bills and reduced services from privatised companies…

    Privatisation is primarily a mechanism used by politicians to move publicly held state assets to their chums in the private sector at a discount, in return for continued support for the ruling party and a nice comfy sinecure of a directorship to retire to. It will do very little for the economy.

    A nationalised company can operate far better than a privatised one if you put competent people in charge of it (which is quite rare, admittedly). Without the need to chase profit at the expense of services or give dividends to shareholders, and with resources available whenever necessary from state funds, it can operate much more effectively and ethically than a private company. For example, if you want a really fast internet infrastructure to support the national economy, you can build it quickly if you have a state telco. If you have privatised telcos, you will only get good bandwidth where there is profit to be made, in areas of high population. That’s the other aspect of privatisation: instead of a good service for all, you will get a choice of (expensive) premium services if you are wealthy enough to afford them. If you are not, your services will decline and you bills will go up.

    Japan Inc. needs to reform itself. Giving them some free public money by indirect means such as this will just allow them to ignore the need for reform for longer, paper over the cracks and allow the rot to set in even more deeply. Most right-wing commentators see private industry as more dynamic than state-run industries. This is not always true and this is Japan remember. Japan Inc. is not particularly dynamic at the best of times because of the way Japanese corporates are structured and the way decisions are made. Look at Sharp or the Japanese banks. Sharp couldn’t fight their way out of a paper bag without a zillion Yen bailout and 3 years of meetings, whilst the Japanese banks are still operating like it is 1984, hobbling the economy by making it difficult to move money around easily and quickly.

    Most individuals who buy discounted shares at a privatiation will sell them asap and pocket the difference between the artificially low sale price and the real value. In a very short space of time, most of the shares will be held by large financial institutions, some of them (whisper it) foreign! The figure for longer term share retention may be higher in Japan than it was in the UK for cultural reasons, but all this does is place the financial well-being of ordinary (if quite well-off) Japanese citizens at risk.

    Flogging the shares rapidly makes sense if you are an individual, as shares are a poor investment. They rarely go up by very much in raw percentage terms but can lose their value remarkably quickly if you aren’t keeping an eye on them (cue photo of unhappy Chinese investor). So take your money and run, and either put your cash in a bank for safety or do something far more lucrative with it like starting a business, or flogging stuff to Japanophile gaijins on ebay.

    Or spend it in love hotels and chocolate shops – you can’t take it with you, after all.

    Even in Japan the internet will reduce letter use, whilst remote areas will become even more remote as the population ages and declines, so the costs of maintaining an universal service will rise. In the West this has been offset by an increase in parcel services based upon etailing (Amazon, ebay etc), higher fees and a poorer service. Japan’s letter post may be a protected monopoly but I’m pretty sure Japan has private courier services, so profitability there will depend upon cut-throat price competition with them. Aside from the quakes, in an ageing country, insurance profitability faces a worrying demographic too.

    Sensible Japanese corporates are using some of the added wealth they have obtained courtesy of Abenomics-derived higher share prices to buy profitable foreign companies (often at crazy mark-ups). This may become typical to shore up profits and hide structural deficiencies within a reform-resistant Japan Inc.

    The one privatisation the government should push through is Japan Tobacco, on ethical grounds as much as anything else. OK, nobody in government or the financial services understands the concept of ‘ethics’ but if they know what irony is, then they could use the proceeds to shore up public health services for Japan’s increasingly elderly citizens. Globally, people in developed countries are adding years to their lives. Unfortunately, these are economically unproductive years filled with the illnesses of old age, requiring a huge increase in support and medication. And none of that is cheap – especially if you are running out of taxpaying youngsters to foot the bill.

    Smoking is declining in developed countries. Depending on the third world puffing their way into an early grave may look good on the balance sheet, but eventually all of those third world countries might start to regard a Japanese state monopoly on premature death as a twisted form of parasitic colonialism akin to the 19th century opium trade and start taking the same court action against producers as has happened in the US, but with a political, nationalist twist. That won’t end well. Leave the rapacious and unethical pursuit of other peoples’ money via addictive substances to the private sector – the private tobacco industry and other drug dealers. It ill befits a nation state to increase addiction-related premature death statistics and support the waste of good farm land growing tobacco and cocaine in a hungry world.

    As for Japan Post. In the 1980s, a nationalised British Post Office offered two deliveries a day, one before everyone went to work. The service was reduced to make it acceptable to the private sector in the run up to privatisation, and now the UK gets one delivery any time between noon and 3.30pm. The cost of sending a letter was controlled and rose with inflation until, in preparation for privatisation, price controls were relaxed and letter rates are now high. We used to have a lot of post offices. Now we have far fewer, and many have been moved into shops. Staff numbers have been cut so there is little cover, and there are days when some routes have no postal delivery at all.

    So Japan, in the interests of private sector profitability, don’t be surprised if your service declines and your postal rates increase.

    • 99Pcent

      Goodness me you didn’t have to blurb a book to convey your shortsighted opinion, a paragraph would have been fine.

      • http://www.sheldonthinks.com/ Andrew Sheldon

        Can you summarise it for us. I just skipped over it..when it ran off the page.

    • Stephen Kent

      Well said mate, I agree with basically everything you said there.

  • 99Pcent

    steveJackman and @disqus_vBekJrf7g5:disqus are going out of their way to post negative comments on any Japan story in the Japan times comment section. What is with that? I wonder what their agenda is, do they hate Japan so much? What happened to them?

  • 99Pcent

    Let the Japanese people and government decide whether this is a wise move or not. I don’t think we Gaijin need to poke our noses into this. I hope this is a good move for Japan as it has been through some tough times recently, not to mention two decades of rebuilding after the war.

    • disqus_vBekJrf7g5

      Who are these ‘we gaijin’?
      I’m a non-Japanese resident, married to a Japanese, with two Japanese kids. As a husband and a father, I have a responsibility to speak out when the government robs the property of my family (and others).

      • 99Pcent

        You seem to be “speaking out” on every single Japan related issue in the negative, not just this story. Even genuinely positive reports, and innocent at that seems to attract your vitriol. Are you that disgusted with everything Japanese and Japan? I really dont believe for a second who you claim to be. Most likely you are a bitter 50 cents army personnel, Korean hater or really messed up Gaijin. Either way, people like you who write such hate filled comments get ignored anyway, so Hasta la vista baby.

    • disqus_vBekJrf7g5

      Who are these ‘we gaijin’?
      I’m a non-Japanese resident, married to a Japanese, with two Japanese kids. As a husband and a father, I have a responsibility to speak out when the government robs the property of my family (and others).

    • http://www.sheldonthinks.com/ Andrew Sheldon

      Which people? You are conveying a trust in extortion to resolve issues. Maybe you should join a gang bang to appreciate the ethics of that system, and gauge its results. ‘We gaijin’ = ‘you weak vulnerable one’. Your hopes aren’t going to feed anyone. Why do you suppose Japan has gone through ‘bad times’? Black out?

    • Steve Jackman

      Your apathy is pathetic. Why are you even in Japan if you don’t care about what happens to this country?

  • 99Pcent

    Let the Japanese people and government decide whether this is a wise move or not. I don’t think we Gaijin need to poke our noses into this. I hope this is a good move for Japan as it has been through some tough times recently, not to mention two decades of rebuilding after the war.

  • Roy Warner

    “It’s hard to imagine the shares will decline significantly, either,” Ide said. “The holding company will continue to hold 50 percent in the (banking and insurance) units, and that will ensure (the ailing mail delivery unit) Japan Post Co. will get sufficient support (from the two other subsidiaries).” In other words, these companies will not really be privatised and will face little to no pressure to innovate and improve.

  • Roy Warner

    “It’s hard to imagine the shares will decline significantly, either,” Ide said. “The holding company will continue to hold 50 percent in the (banking and insurance) units, and that will ensure (the ailing mail delivery unit) Japan Post Co. will get sufficient support (from the two other subsidiaries).” In other words, these companies will not really be privatised and will face little to no pressure to innovate and improve.