The ruling Liberal Democratic Party wants to raise the deposit limit at state-owned Japan Post Holdings Co.’s lending arm before a planned initial public offering later this year, according to a lawmaker who is backing the change.

A higher ceiling than the current ¥10 million cap for individuals will narrow the gap between Japan Post Bank Co. and private banks, LDP member Hiroshi Moriyama said in an interview Wednesday.

Moriyama, who is secretary-general of an LDP committee discussing the revision, said the group will seek opinions from financial companies as the matter requires “careful consideration.”

Japanese banks have opposed past attempts to raise the ceiling, which could drain savings from private lenders into an institution that already holds more deposits than any other in the nation.

This discussion is taking place as Abe carries out plans conceived by former Prime Minister Junichiro Koizumi’s administration a decade ago to privatize a behemoth that held ¥295 trillion in assets in December — more than Italy’s annual gross domestic product.

“Japan Post doesn’t receive any special treatment from the government, so the question is why there’s the deposit limit,” Moriyama said, adding that the bank pays corporate taxes and follows the same deposit insurance system as private financial institutions.

Japan Post is seeking ways to boost profitability before the banking, insurance and mail giant sells shares to the public as early as September. The government, however, is required to retain at least a third of Japan Post.

Moriyama did not give a specific level that the deposit cap should rise to. The increase was part of the LDP’s policy platform in last year’s election, which was won by Prime Minister Shinzo Abe’s party amid the lowest voter turnout on record.

Because of its state backing, Japan Post has faced other restrictions to its business.

The banking unit is still waiting for regulatory approval to start operations such as residential and corporate lending, a move that private lenders also oppose.

Last month, the postal group, led by President Taizo Nishimuro, clinched a deal to buy Australian freight company Toll Holdings Ltd. for $5.07 billion and signaled a shift from investing in government bonds to riskier assets to spur returns.

Japan Post Bank had ¥179 trillion in deposits as of Dec. 31, more than the ¥149 trillion held by Mitsubishi UFJ Financial Group Inc., the country’s largest publicly traded lender.

Japanese Bankers Association Chairman Nobuyuki Hirano said in February that he opposes increasing the deposit limit and allowing the postal group to lend as long as it maintains ties with the government.

“That would have a big impact, especially on regional financial institutions, because of its funding advantage backed by the implicit state guarantee,” said Hirano, who is also president of Mitsubishi UFJ. “What’s important is to ensure fair competition with private lenders. At a minimum, the state bank must show a clear path to full privatization.”

The holding company and its banking and insurance units will list as separate entities on the Tokyo Stock Exchange, and the Finance Ministry expects to raise as much as ¥2 trillion from the IPOs.

The government is required to retain at least a third of Japan Post. The holding company plans to keep 50 percent of the banking and insurance units for the time being.

“We’re in an era where Japan Post and financial institutions need to collaborate,” said Moriyama. “There shouldn’t be any emotional conflict between the two parties.”

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