Japan Postal Administration – Drastic Policy Change from Former Koizumi Administration

Japan Postal Administration Business to be Revised – The Government Expected to Successfully Coordinate with Related Parties and Overcome Challenges

Tuesday, September 22, 2009 – Osaka, Japan

Nikkei, Japan's leading newspaper specialized in economy and politics, reported on September 21 that the new Hatoyama Administration earnestly started to revise Postal Administration Business that former Koizumi Administration had been aggressively initiating, and it is clear that this would give direct and extreme impact on related industries/companies operating in Japan.

Mr. Kamei, the new Minister of Posts and Telecommunications as well as Finance explicitly said his policy that bill of freezing selling stocks of Postal Administration Business will be submitted in the upcoming ad-hoc Diet to be held this autumn. This means that the future direction of the business revision will be composed as “Fundamental Law of Postal Administration Business Reform”, including how divisional companies are to be formed and how the government is to hold stocks.

Postal Administration Business of Japan, consisting of 4 businesses of post offices, postal business, banking/finance, and insurance, had been privatized in October 2008, and the selling of stocks held by the government is to start as soon as the latter half of 2010 and to complete in the end of September 2017 (government to remain holding 1/3 of stocks for post offices and postal business).

This was the biggest topic and initiative under Koizumi Administration. It is because of this timeline that Mr. Kamei is in a hurry to submit the bill. And the reason for freezing the selling of stocks is anxiety of maintaining post office network. Post office management is dependent on banking/finance and insurance business because their revenue is generated from commission fee of contract business from the two businesses. This means that if relationship in capital is abolished, it is possible that business contract is cancelled. The new government is also to review services of postal administration business.

There are many possible options regarding how divisional companies are to be formed and how the government is to hold stocks, which are the discussion points in drafting the bill. It may well take time to come to an optimum option with consensus with all related parties; in fact, it is not clear whether related parties can really discuss in detail to come to concrete action plan in limited time. Having said that, what is quite possible is that the government is to invest 50%+ of stocks in order to maintain control of the management.

With the above, it is quite possible that freedom of Postal Administration management such as business alliance and starting new business shrinks, and it would become more difficult to a develop sustainable business model while successfully coordinating with industries that are to be directly impacted. Such industries/companies are of course banking/finance, insurance, postal and telecommunication industries/companies, the most impacted being banking/finance industry/companies. This is because the banking/finance branch network and business of Postal Administration is as big as the total of all Japanese major financial institutions of private sector, and although at present the limit of saving at Postal Administration banking/finance is 10 million yen (no limit for private sector) to control the power of Postal Administration.

However, government’s control over Postal Administration would imply unbalanced power between public sector of Postal Administration and private sector. For this reason, successful coordination of competition requirements with private institutions would be the key.

To the author, this issue is closely linked with the complicated issue of Mr. Nishikawa, who became the head of the privatized Postal Administration Business in October 2008, and whether he should resign or not had been a big issue, leading to resignation of Mr. Hatoyama, the former Minister of General Affairs (brother of the new Prime Minister), and still is under hot discussion by the new government members. It is quite possible that the new policy intends also to solve this problem.

It is highly desired that the government drafts the policy and action plan that would lead to sustainable growth for all parties thus building Win-Win relationship with all related parties with fair process; i.e. through discussion and coordination with related parties. The bill drafted with such process would surely be successfully passed in the ad-hoc Diet to become an official law, and executed smoothly.