Postal services minister Shizuka Kamei, a key figure in the ruling triumvirate, stirred more controversy Wednesday by unveiling a plan to effectively maintain the government’s grip on the postal financial system and thus dilute the full privatization previous administrations put in place.
But the plan drew fire from other Cabinet ministers as well as private-sector financial firms, prompting Prime Minister Yukio Hatoyama to suggest later in the day that Kamei’s plan may be revised.
“(The plan) has not been endorsed by the Cabinet,” Hatoyama told reporters in the evening in an apparent bid to contain fallout over the latest tack taken by the head of Kokumin Shinto (People’s New Party), a junior coalition partner of Hatoyama’s Democratic Party of Japan. “It still needs more discussion within the Cabinet.”
It wasn’t immediately clear how Kamei’s plan will be revised after facing scrutiny by the Cabinet. But some government sources hinted its basic framework may stand.
Releasing an outline of a bill to change the postal privatization plan earlier in the day, Kamei, who also serves as the financial services minister, said the government should retain more than one-third of its shares in Japan Post Holdings Co., with the holding company keeping stakes in its banking and insurance units.
If Kamei’s plan prevails, the Hatoyama government would largely overturn the 2007 privatization plan spearheaded by ex-Liberal Democratic Party Prime Minister Junichiro Koizumi, the champion of structural reforms for a more market-oriented economy.
Under the previous plan, Japan Post’s financial units were to be fully released from government control by 2017.
Kamei’s plan would also double the maximum amount of deposits Japan Post’s banking unit can accept per person from the current ¥10 million to ¥20 million and raise postal insurance coverage from ¥13 million to ¥25 million.
The coalition plans to submit the bill to the Diet next month, according to Kamei.
But Cabinet ministers, including national strategy minister Yoshito Sengoku, later voiced objection, saying, “I learned (about Kamei’s postal plan) first by media reports. No discussion on the matter was held within the Cabinet.”
Allowing Japan Post’s banking and insurance units to expand their business while the government keeps effective control will not sit well with commercial banks and insurance companies.
Katsunori Nagayasu, chairman of the Japanese Bankers Association, said Tuesday he opposes raising the deposit cap because it may spark an outflow of funds from private banks, dampen lending to smaller firms and hurt regional economies.
Regional Banks Association Chairman Tadashi Ogawa also said last week customers may unfairly favor Japan Post Bank in times of financial uncertainty because of its government ties.
By holding more than one-third of Japan Post, the government will have the power to veto any major management decisions at the holding company.
Focus of bill set to roll back postal system reform
• The deposit cap at Japan Post’s banking unit would be doubled to ¥20 million.
• The deposit cap on postal insurance payments would be raised to ¥25 million from ¥13 million.
• The government would maintain a stake of more than one-third in Japan Post.
• Japan Post Holdings Co. would merge mail and parcel delivery unit Japan Post Service Co. with post office operator Japan Post Network Co.
• Japan Post Bank Co. and Japan Post Insurance Co. would be brought under the wing of the newly merged company.
• The Japan Post group will be obliged to offer uniform banking and insurance services throughout the nation, in addition to mail service.
• The government will allow Japan Post’s insurance unit to engage in wider operations, such as sales of cancer insurance products.
• The government will exempt Japan Post from about ¥50 billion in consumption tax per year for transactions within its group.
“We crafted the bill’s outline with the aim of ensuring that Japan Post will sufficiently offer universal services throughout the nation,” Kamei said. Once an LDP member under Koizumi, Kamei has been a key foe of Koizumi’s postal reforms.
Japan Post is the biggest holder of Japanese government bonds, with ¥158.5 trillion in JGBs at the banking unit and ¥67.7 trillion at the insurer, according to data in December and January.
“If deposits rise, Japan Post will have more room to buy Japanese government bonds,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co. “That’s how things will likely turn out. Japan Post Bank and Japan Post Insurance will end up taking the risk, and that’s not necessarily good.”
Kamei has also sought to grant regular employment status to about 100,000 of Japan Post group’s approximately 200,000 nonregular workers, saying it is necessary to stabilize their employment.
To achieve this, however, a major issue for Japan Post has been how to boost its earnings to cope with the rise in personnel costs.
The government is planning to allow Japan Post’s insurance unit to engage in wider business operations, including sales of cancer coverage, and exempt Japan Post from about ¥50 billion in the consumption tax per year for transactions within its group.
Japan Post Bank, with ¥177 trillion in deposits at the end of December, is the world’s biggest by this measure. The bank does not provide loans.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.