Prime Minister Junichiro Koizumi’s top policy panel unveiled plans Friday to split Japan’s mammoth postal operations into four separate entities by 2017 at the latest.

The Council on Economic and Fiscal Policy said it will seek to create a holding company to oversee earnings and branch placements for the four businesses: mail delivery, postal savings, “kampo” insurance and over-the-counter services.

The council also agreed to strip Japan Post employees of their civil servant status at an unspecified time, according to a 10-point guideline penned jointly by Economic and Fiscal Policy Minister Heizo Takenaka and posts minister Taro Aso.

But while the council agreed that privatization would begin in April 2007, the process may not be “final” until 2017.

Takenaka and Aso represent two opposing sides of debate within the Council, with Aso counseling caution about dismantling the government-backed Japan Post. The guidelines are a list of compromises that leave many questions unanswered, both said.

“We have yet to agree on how postal services should be reorganized in 2007,” Takenaka told a news conference.

For his part, Aso said: “I believe I gave in on many counts. I’m sure Mr. Takenaka believes that he conceded more.”

But in the long battle ahead to pass laws to bring about the privatization, Aso’s participation in penning the guideline was absolutely essential, a Cabinet Office official said.

Aso serves as a bridge to politicians opposed to postal privatization, an issue that threatens to dislodge a vital Liberal Democratic Party support base, he said.

While keeping its eye on the financial market situation to minimize risk, the council will study ways to put postal savings and kampo insurance, which together are entrusted with a quarter of the nation’s 1.4 quadrillion yen in personal financial assets, under the same regulations as private financial institutions.

In debating each step, council members will have to override fierce opposition — from Japan Post, which took over the government’s postal services in April last year, and the LDP, which has a strong support base in post office chiefs across the country.

Privatization also has Finance Ministry officials worried, since Japan Post is currently a willing buyer of 140 trillion yen in Japanese government bonds, a quarter of all outstanding JGBs, issued to finance the nation’s debt.

The heat is likely to get worse as the council takes on tougher issues before creating a privatization blueprint, expected at the end of this month.

Japan Post employs some 280,000 public servants, of whom 19,000 can effectively pass on their post to chosen heirs, and 120,000 part-time workers. Japan’s public servants enjoy virtual lifetime employment as long as they obey the Public Servant Law.

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