How to privatize postal services is the biggest issue in the regular Diet session. The government plans to introduce a privatization package in mid-March, and Prime Minister Junichiro Koizumi has vowed to “get it through the current session at all costs.” But with many members of the Liberal Democratic Party up in arms about it, a showdown looms between Koizumi and his own party.

The issue has a direct bearing on the lives of people, yet it is drawing far less public attention than the deployment of Self-Defense Forces personnel in Iraq. That’s because the public does not yet fully understand that privatization is key to structural reform in Japan. Koizumi has yet to produce specific reform plans and explain them in plain language.

The prime minister’s confrontational stance has been criticized by Mikio Aoki, head of the LDP caucus in the Upper House. “If you want to push reform, you have to listen to what other people have to say,” he said during a plenary question-and-answer session.

Aoki worries that a political crisis might develop over the handling of the privatization package. So he is trying to build a bridge between the prime minister and the LDP. The ruling coalition has 138 seats in the Upper House — 114 for the LDP and 24 for New Komeito. With a total of 242 seats in the Upper House, the package will not become law if 18 LDP members vote against it.

Many Upper House LDP members have connections with industry groups that would be affected by Koizumi’s structural reforms. Thus if privatization legislation is introduced without prior LDP approval, it will probably be aborted in the Upper House. Political unrest would follow.

The Cabinet last September approved “policy guidelines for postal privatization” without LDP endorsement. The guidelines call for splitting the postal system into four business units: mail, savings, insurance plus a company that would run the post-office network that provides these services. All four would come under the control of a holding company wholly owned by the government. Postal employees, numbering 280,000, would cease to be national civil servants.

The primary aim of postal privatization is to change the savings and insurance systems — which funnel 350 trillion yen into inefficient public corporations and public-works projects through the fiscal investment and loan program — to a new mechanism that puts these funds to efficient use in the private sector.

In his policy speech to the Diet, Koizumi described postal privatization as “the heart of structural reform.” Privatization of postal services indeed “means boldly carrying out the administrative and fiscal reforms indispensable for realizing smaller government,” he said. “Opposing the privatization is equivalent to demanding that someone swim with his hands and legs bound together.”

Katsuya Okada, president of the Democratic Party of Japan, reacted sharply: “The fact is, the people don’t understand exactly why privatization is necessary.” The government’s guidelines, he pointed out, do not provide a clear picture of how the savings and insurance systems, and the post-office structure, will change.

Post offices nationwide number 24,000, of which 19,000 are small “special” offices that depend on financial services (savings and insurance) for their revenues. If these services are managed efficiently after privatization, many offices could disappear as a result of mergers.

Privatization could have a considerable impact on local economies, particularly those in sparsely populated regions. To gain public support, the government needs to produce specific privatization plans as soon as possible, including the new rules for establishing post offices.

The LDP’s counterproposal — “Policy for Postal Reform” — adopted in December flies in the face of the privatization principle by mandating “universal services” nationwide not only for mail but also for savings and insurance services, and by keeping the number of post offices at at the present level. In other words, those in the LDP with postal interests want to maintain the status quo.

The LDP policy represents a major retreat from its campaign commitment. In the November 2003 Lower House election, the party promised that it would “reach a conclusion by autumn 2004 on the basis of the government’s basic policy of privatizing the postal services starting in April 2007.” It made a similar campaign promise in the July 2004 Upper House election. Its efforts to protect interest groups after elections mocks the wishes of the people.

The DPJ, meanwhile, lacks ammunition with which to attack the government. The largest opposition party, which is backed by related labor unions, is having difficulty working out its own privatization plan. Compounding the difficulty is continuing internal divisions.

Japan’s population in 2050 is expected to be 18 million, or 14 percent, less than it was in 2000. On the other hand, the proportion of elderly people (65 and over) is projected to grow from 17 to 36 percent. Such a rapid demographic change cannot be effectively addressed without a long-term vision for national revival. The LDP lacks the big picture.

In his policy speech, Koizumi said, “The engine for these reforms is every one of the people of Japan, and the success or failure of the reforms rests with the firm resolve and energy of the people.”

But to obtain public support, Koizumi must work hard to explain clearly where these changes will lead and how the nation should change, for public opinion constitutes the primary source of his strength.

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