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Thursday, Oct. 29, 2009

Q&A

Japan Post, with new boss, returning to public roots


Staff writer

Bowing to calls to resign, most adamantly by Shizuka Kamei, state minister in charge of postal services, charismatic former banker Yoshifumi Nishikawa officially stepped down Wednesday as president of Japan Post Holdings Co. and was replaced by former Vice Finance Minister Jiro Saito.

Experts say replacing Nishikawa is a turning point in the long-troubled postal privatization process.

Why is the Democratic Party of Japan-led government trying to overturn the privatization scheme, and why was it going to be privatized in the first place?

Here are some questions and answers about the controversial and politically complex group that encompasses the national postal network and two gigantic financial institutions:

Why did Nishikawa have to resign?

Nishikawa said Oct. 20 at his last news conference that he would step down because he and the current administration had fundamental differences over how Japan Post should operate.

Nishikawa wanted to transform the former public institution into a profitable private company by streamlining money-wasting operations and launching new businesses that would rake in the profits.

But the new administration wants the post office network to remain basically intact, including in low-population areas that may not be profitable. Observers say the administration wants Japan Post to shift back to being a public entity.

The ruling coalition also criticized Nishikawa for playing a key role in Japan Post's bid to sell its inns around the country at fire-sale prices to Orix Corp., although he counters that there was nothing illegal about the deal.

There is also an emotional factor in play.

In August 2005 when then Prime Minister Junichiro Koizumi's postal privatization plan did not clear the Diet, he dissolved the Lower House to seek the voters' judgment. He ousted LDP lawmakers who opposed the privatization, including Kamei, who went on to set up Kokumin Shinto with other ousted LDP members.

As it turned out, Koizumi won a landslide victory and his privatization bill cleared the Diet that October.

But four years on, Kamei's party is in the ruling bloc and he's spearheading the move to reverse Koizumi's pet project.

Why does changing the president matter, and who is Jiro Saito?

The appointment of Saito, a former high-profile bureaucrat in the Finance Ministry, and the ouster of Nishikawa is as emblematic as anything that the DPJ-led administration wants to veer away from the policies of former governments.

Saito joined the ministry in 1959 after graduating from the University of Tokyo and held several key posts, including director general of the Budget Bureau.

In May 2000, he took the helm of the Financial Futures Exchange, which was converted into a stock corporation in April 2004. It took its current form in September 2007 to handle trading of more comprehensive financial products. Saito is reportedly close to DPJ Secretary General Ichiro Ozawa.

Other lineup changes include naming two former bureaucrats as vice presidents, signaling the entity will have a more public nature.

Meanwhile, the LDP branded the DPJ as inconsistent because it had opposed appointing former bureaucrats to lead government institutions.

The appointment process itself also drew criticism.

"I was struck speechless by the way the government forcefully appointed the president of the company that has an appointment committee," Heizo Takenaka, who was a member of the Koizumi Cabinet, said on a Web site Oct. 21.

Why did the postal group have to be reformed in the first place?

The biggest reason is the huge amount of money pooled by the group's two financial units and the inefficient ways they invest it.

In 2007, when the 10-year road map for privatization was started, two units — Japan Post Bank Co. and Japan Post Insurance Co. — had savings and insurance policies worth a whopping ¥335 trillion.

About 90 percent of the money was invested in central and local government bonds and extended to government projects as loans, which academics criticized as unnecessary public spending. These expenditures were not only inefficient but also lack transparency, because they were made through government-affiliated organizations.

This kind of investment also leads to lower returns to holders of the accounts and policies than that of many other financial products.

Bankers and insurers have also criticized Japan Post as a behemoth hampering the private sector. More money is in postal savings than in any other Japanese bank's outstanding accounts, and postal insurance has more policies than any private insurer.

Another reason why experts say the postal group needs to be reformed is because postal delivery services are not profitable.

According to a report in 2007 by the internal affairs ministry, which supervises postal services, about 70 percent of profits earned by Japan Post Service Co. came from services related to the group's two financial units. Experts say the postal service unit has to find ways to stand on its own feet.

What has happened since the 10-year road map kicked off and what is the DPJ's reform plan?

To make its business more efficient, for example, Japan Post has been closing down unprofitable post offices in rural areas. But as a result, some people have lost their only access to a financial institution.

What the administration hopes to do is maintain the nationwide post office network so people in rural areas can still benefit from postal, particularly banking, services.

An outline of postal reform endorsed by the Cabinet on Oct. 20 says the postal network should be used as a "one-stop base for administrative purposes" where residents can, for instance, get residential certificates instead of having to go to City Hall.

The outline further stipulates that Japan Post will be reorganized and obliged to further disclose information and become accountable.

The government is expected to submit a bill based on the outline during the current extraordinary Diet session.

Is Japan unique in privatizing its postal services?

A number of countries have gone the privatization route, and not always smoothly.

Countries that privatized their postal services include Germany, New Zealand, Holland and Argentina.

Among them, Argentina privatized its postal services in 1997, but after the number of post offices fell sharply and postage fees jumped, the public entity was restored in 2003.



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