The government Monday accepted a set of demands from top executives of the Liberal Democratic Party to further water down Prime Minister Junichiro Koizumi’s contentious postal privatization plan.

The move means the government managed to clear one hurdle for Koizumi’s Cabinet to submit related bills to the Diet by the end of this month, as pledged by Koizumi, despite tenacious resistance within his own party.

However, the LDP leaders will still have to win approval from rank-and-file members at its Executive Council on Tuesday — the party’s top decision-making body and another major hurdle for Koizumi to clear before introducing the bills to the Diet to get his pet project off the ground.

Among the compromises the government has accepted is doubling a 1 trillion yen fund to help maintain post offices in rural areas.

As of Monday night, some opponents still claimed that the party executives did not follow necessary procedures to form a party consensus on policy matters and said they won’t obey the party leaders’ order to support the bills on the Diet floor should they forcibly submit them to the Diet.

“The procedures have been so abnormal that we cannot think there should be any obligation for us to vote” for the government-sponsored bills, said Hisaoki Kamei, a key member of an association of LDP lawmakers opposing postal privatization.

Kamei told reporters that the association might separately submit alternative legislation to the Diet, which would promote streamlining Japan Post while retaining its status as a state-run public corporation. Koizumi has indicated his Cabinet will submit the bills even if he can’t win a consensus in the party.

With Monday’s agreement between the government and the LDP executives, the focus of the intraparty conflict will shift to whether Koizumi will be able to get the LDP rebels to back the government-sponsored legislation in the Diet.

Under Koizumi’s plan, postal services will be split into a quasi-governmental holding company and four privatized units each separately dealing with over-the-counter services, mail delivery, postal savings and postal insurance.

The government would be obliged to own more than one-third of the holding company, which would own 100 percent the over-the-counter service and mail delivery firms.

All shares in the postal savings and insurances companies would be sold off in the market by 2017 following a 10-year transition period after the privatization process begins in 2007.

On Monday, the government struck a compromise with the LDP leaders, paving the way for the holding firm to maintain shares of the postal savings and insurances companies by buying back an unspecified amount of stocks immediately after they are sold on the market.

The government also agreed to allow the savings and life-insurance firms to maintain “stable agency contracts” with post offices, including those that lose money, which would belong to the over-the-counter service company.

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