The Privatization Controversy — in Japan

Did you know that the Japanese postal service is the largest financial institution in the world? Neither did I. But the $3.6 trillion state-owned corporation, which offers insurance and banking services in addition to mail deliveries, is the subject of privatization reform. And, like social security here in the United States, it seems to be the third rail of politics:

Japan̢۪s Postal Privatisation May Face Delay (Financial Times)

Senior aides to Junichiro Koizumi, Japan̢۪s prime minister, have hinted that the timetable for postal privatisation could be allowed to slip, opening up the possibility of flexibility in negotiations with the ruling Liberal Democratic Party, many of whose members vehemently oppose postal reform.

Mr Koizumi has insisted until now that the post office should be split into four separate entities from 2007 to ensure that there are no cross-subsidies between the mail, insurance, savings and counter divisions.

The prime minister has made privatisation of the post office, the biggest financial institution in the world, the centrepiece of his final two years in office, and has threatened to call a snap election if the LDP refuses to back his drive.

A foretaste of the rocky time that Mr Koizumi may face during the next 150 days of the regular parliamentary session came on Monday when opposition members walked out of the Diet chamber in protest at his answers on postal privatisation.

The chamber was thrown into confusion when members of the Democratic Party of Japan suddenly stood up and left, accusing Mr Koizumi of being deliberately vague in his replies to questions about postal reform.

On Friday, in the opening parliamentary session, Mr Koizumi was barracked by his own party members, who accused him of endangering Japan’s social cohesion by eroding the post office’s “universal service†mandate. In the upper house he was greeted by stoney silence.

Many parliamentarians oppose splitting the post office into four because they fear it could lead to the suspension of unprofitable services, such as daily delivery in rural communities, parcel delivery and life insurance without health checks. There is also strong opposition to turning the post office̢۪s 290,000 public workers into private employees.

This four-month-old UPI analysis provides additional context. For instance, Koizumi has apparently been thinking about privatization since entering the political scene twenty years ago. One can probably make useful comparisons between the reform movements in Japan and America, but I’ll leave that task to more capable hands. I’ll simply note that the global financial industry and its lobbying arms will be pretty busy this year.

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Robert Garcia Tagorda
About Robert Garcia Tagorda
Robert blogged prolifically at OTB from November 2004 to August 2005, when career demands took him in a different direction. He graduated summa cum laude from Claremont McKenna College with a Bachelor of Arts in Philosophy, Politics, and Economics and earned his Master in Public Policy from Harvard's Kennedy School of Government.


  1. BigFire says:

    Even more so than FannyMae, the Japan Postal Saving System is an institution onto themselve, with practically no rules governing it. Most of the often quoted figure about Japanese citizen savings are tied up in this monstrosity that pays something like 0.00001% annual return. I know whatever my mutual fund is doing with my money, it’s doing more with it than the Japanese Postal is doing with their money.