One of the big news items here in Japan over the last several months has been the reform and privatization of the Postal Service. I haven’t avoided it for fear of boring you–though it’s not the sort of topic likely to make you a hit at dinner parties. It’s just that there’s been so much back-and-forth. It is, though, a very, very important issue here in Japan, because Postal Savings accounts hold a lot of the wealth of Japanese households and put it at the disposal of Ministry of Finance project managers. This editorial (subscription only–sorry) from last week’s Nikkei English on-line edition delineates pretty well how things have developed:

The privatization plan will divide Japan Post into four companies respectively operating the mail, savings and insurance services as well as the nationwide network of post offices, but the four operators will remain under the integrated management of a holding company.

The holding company will sell its shares in the savings and insurance units to turn them into private businesses, but it is not clear what percentage of the stock will actually be sold. Moreover, the government will continue to own at least one-third of the holding company, allowing it to maintain its involvement in the savings and insurance companies, at least to some extent, unless the holding company sells its entire interest in them.

The mail and network management entities, which will remain under the full ownership of the holding company, will be required to provide uniform services nationwide in exchange for receiving special treatment, including a continued monopoly in the mail delivery business.

The branch network management company will inherit post offices and workers from Japan Post. The government appears to be intent on ensuring that the other three new postal companies will use the offices and workers of the network firm to protect these politically important jobs. Such forced dependence on the existing post office network will frustrate the new companies’ efforts to refashion themselves into more efficient and profitable players.

This scheme — creating an entity to take over Japan Post’s infrastructure and virtually forcing the other postal companies to use it — seems to be simply a ploy to avoid radical changes in postal operations while making the reorganization look like a reform, just as the plan adopted to privatize public road corporations based on a two-tier structure was merely a scheme to keep building new roads.

The envisioned savings and insurance companies are unlikely to achieve management independence as long as they are tethered to the infrastructure operator, which will not be freed completely from government control. This is not a formula that lends itself to independent and transparent accounting at the postal companies.

The basic design of the privatization will certainly cause this crucial reform initiative to go awry and it will do nothing to further privatization’s primary goal: ending the government’s stranglehold on a big chunk of private savings that is causing serious distortions in the financial markets and undermining fiscal discipline. Achieving this goal requires a swift and complete end to the government’s involvement in the privatized postal companies.

If you’ve got a sense of déjà vu here, you may be thinking of what happened to California’s energy providers, which taught us all the difference between privatization and deregulation. (And I must note, in fairness, that unlike the USPS, the Japanese Postal Service provides mail handling of pretty much unexceptionable quality.)

Added an hour later: Because I’m distracted by the Vertigo DVD and am also a scatterbrained idiot, I forgot to note why I’m finally bringing up the Postal Service reform in the first place: It’s what drove the selection of new appointees in the cabinet reshuffle Prime Minister Koizumi announced today. Heizo Takenaka, who’s going to end up with more joint appointments than Stanley Fish soon, will still be in charge of economic policy and fiscal administration, and he’s also been named the head of Postal Service privatization and reform. That’s a new, ad hoc post, of course.

Foreign Minister Yoriko Kawaguchi, who has distinguished herself largely by not having a big mouth like her predecessor Makiko Tanaka, is outgoing; she’d been reappointed in the last cabinet change. Her replacement is MP Nobutaka Machimura, who apparently has lots of connections in the US. He was Minister of Education back when (1) that’s what the position was called and (2) there was last a flap over Japan’s government-approved social science textbooks. More directly related to diplomacy, he was State Secretary of Foreign Affairs under…uh…Obuchi? Japanese PM’s sprang up and died like Mayflies in the late ’90’s, so I don’t remember. I wonder whether he was picked not just for his US ties but also because he’s somehow seen as being a good figure to guide the Japanese push for permanent membership on the UN Security Council? I mean, he would almost have to have been, but I haven’t seem him cast in that light in the preliminary reports.

This entry was posted on Sunday, September 26th, 2004 at 19:41 and is filed under Japan Post, misc. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.