With the Diet’s Oct. 14 passage of the postal-services privatization bills, Prime Minister Junichiro Koizumi has reaped a reward for his daring decision to dissolve the Lower House. But the postal privatization is only the first of many issues that the government has to address to streamline its operations and prevent the country from going bankrupt. Since Mr. Koizumi appears to be determined to step down as prime minister in September 2006, he must present to the public as soon as possible a timetable and road map for his agenda so that sufficient public debate can be held on the issues.

In the previous Diet session, the Lower House passed the postal reform bills by a margin of just five votes and the Upper House killed them by a margin of 17 votes. A mere two months later, a vastly different picture has emerged in the current Diet session, testifying to the strong power base Mr. Koizumi gained through his overwhelming victory in the Sept. 11 snap elections. The Lower House passed the bills by a margin of 200 votes and the Upper House by a margin of 34 votes. The Diet members who changed their mind over the bills before and after the elections now face criticism for their opportunism. The Upper House’s decisions before and after the elections differed even though the composition of the chamber has remained virtually the same, raising questions regarding its trustworthiness in its relations with voters and its stability as a legislative body.

Although the enactment of the postal reform laws is a dream come true for Mr. Koizumi, the legislation will not necessarily lead to complete freedom in operation for companies that emerge from the privatization of Japan Post. In October 2007, half a year later than the original bills envisaged, Japan Post will be divided into four firms — mail, savings, insurance and network operation — and placed under a holding company. By the end of September 2017, the holding company will dispose of its shares in the savings and insurance companies. But it can buy them back. The government will possess at least one-third of the shares of the holding company. The network operation company, a wholly-owned subsidiary of the holding company, also can buy shares in the savings and insurance companies.

The government hopes that some of the 330 trillion yen in postal savings and insurance will find its way into the private financial market, helping to stimulate the economy. Depriving the postal workers of their status as public servants, meanwhile, is supposed to contribute to the realization of small government. Revisions to the laws may become necessary in the future if the huge savings and insurance companies suppress business opportunities for other financial companies, and also if closings of post offices in depopulated areas inconvenience local residents.

After the passage of the postal reform bills, one issue after another waits to be addressed — reform of the eight government-affiliated financial institutions, reduction of the nation’s medical spending, integration of different pension systems, abolition of some government subsidiaries and a transfer of money from the central government to local governments, reductions in the number of public servants and a transfer of revenues from special-purpose taxes for road improvement to a general account. Resistance from bureaucracy and vested interests is expected as discussions deepen to touch on the details of each issue.

Such resistance has already surfaced in the issue of abolition of government subsidies, for example. The government wants to reduce such subsidies by 4 trillion yen and free up 3 trillion yen for use by local governments. Decisions have already been made on the transfer of 2.4 trillion yen. The focus is now on a reduction of subsidies that match the remaining 600 billion yen. Six associations composed of people linked to local government operations, including governors, have proposed a reduction of 1 trillion yen in subsidies. But the government ministries concerned have replied that they will not reduce any subsidy in question. It is clear that they do not want to lose their money and power.

Mr. Koizumi will have to exercise his leadership when necessary. But at the same time, he must be careful and avoid excesses. For example, he is calling for reducing the number of public servants at the central and local governments by 20 percent in 10 years. Utmost care should be taken to avoid a deterioration in services carried out by the public sector. If a drastic cut in personnel does not work, a drastic reduction in wages for public servants may be another solution — this is what many private-sector workers have experienced. Waste in government must be eliminated. But higher taxes may also be necessary. Even so, reforms should be advanced in a manner that gives the people a strong sense of security for their future.

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