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    California, here we come!

    While my attention has been diverted elsewhere, the Yomiuri has been following the Japan Post privatization proposal through its most recent travails (part 1, part 2, part 3). I’m remiss in not having drawn your attention to it earlier, because it’s a very good, accessible summary of where things are at this point. Predictable problems have been cropping up, since the bills have been submitted but have yet to go through the Diet.

    Part 2 in the series is the one that has the most concrete information about what’s being haggled over. Interestingly, if not exactly surprisingly given the political delicacy of the issue, Heizo Takenaka, who was hand-picked by PM Koizumi to be the minister in charge of orchestrating the Japan Post privatization, has dropped his usual habit of bluntness and bombthrowing and is taking a more oblique line.

    One contentious issue is how long the semi-governmental holding company will retain its shares in the four new companies that actually render services (package handling, savings, insurance, and window services). From Koizumi’s perspective, the idea is that the holding company is supposed to sell all its shares by 2017. The possibility that has now been raised is that it can buy them back the next year:

    LDP Policy Research Council Chairman Kaoru Yosano also said Monday, “The important thing is that the holding company will be a shareholder in 2017 and in 2018 as well.”

    Once the holding company sells all its shares in the postal savings and insurance companies, they will be considered as private entities, with no restrictions on their operations. If the sale is completed during the early years of the privatization process–which begins in 2007–the firms could take up new profitable businesses, such as lending.

    However, such a compromise may have a detrimental impact on existing private operators.

    Yes, they might actually have to compete for customers, and, sakes alive, we would NOT WANT THAT.

    Personally, I’m kind of wondering what reason a holding company that was incorporated for the express purpose of tiding the four new service companies over during the transition would have for existing after the transition was completed. You can tell I’m not a bureaucrat.

    Another, related problem (if you think in terms of free markets) is this:

    Also, the government and the LDP have been divided over a fund to be managed by the holding company with the aim of ensuring the uniform provision of postal savings and life insurance services nationwide.

    As the relevant bill submitted to the Diet stipulates the holding company can establish a fund of up to 1 trillion yen, the amount of the fund is unchanged from the initial government plan. But the government and the LDP agreed that the company could keep up to 2 trillion yen in the fund.

    The fund is intended to allow unprofitable post offices to continue providing financial services. The LDP’s request to increase its size is aimed at protecting the network of post offices by ensuring the universal service obligation applies not only to mail delivery, but also to banking.

    So now we’re going to pony up for banking services in every municipality from Chiyoda Ward to darkest Hokkaido, and we’re going to insulate the providers from feeling the heat for their bad investment decisions. I doubt it’s meant that way, of course; the idea is probably just to help far-flung outlets cover operations costs. But we’re talking about a large pile of government-guaranteed money here. You can bet the urn full of grandma’s ashes that it won’t take long for savvy operators to figure out how to make bad debt and money-pit investments look like the necessary ineffiencies of being the only post office at the top of an underpopulated mountain.

    Takenaka, as noted above, is waving all this away:

    Heizo Takenaka, the minister responsible for postal privatization, reportedly said he had no intention of revising the bill, and the issue of the fund would be a business decision to be made in the future.

    The issue could determine the basic scheme of privatization. Takenaka’s remark that the issue will be a business decision does not seem to reflect his real intention. Instead, he has just postponed dealing with the issue.

    Well, we all know how well it goes when you “privatize” a critical service by creating a soup of government guarantees and nebulous divisions of accountability and just kind of figure that logistics aren’t going to interfere, don’t we?

    6 Responses to “California, here we come!”

    1. John says:

      Heh, heh, heh. Want to bet me that the privatized Post won’t look something like this?:

      “Also in 1984, the Japan Tobacco Inc. law was passed which states that although JT should move towards privatization, the government’s stake in the company should not fall below 50%. Recently, the MOF sold some of its shares in JT, reducing its ownership to 66.6% in the first round of privatization and, in the most recent sale in 2004, to 50%. The MOF cannot sell any further shares in JT until and unless the law is changed.

      An MOF report issued in 2002 stated that it “will never fully privatize JT until the tobacco leaf issue is resolved.” This is a reference to the requirement of JT to purchase all domestically produced leaf, which is almost all produced by smallholders cultivating less than a hectare, who are able to sell everything they grow, regardless of the quality, to JT at prices up to four times higher than it would otherwise fetch on the international market. Obviously, this would be a troubling scenario for any potential investor, and JT has accordingly announced a buyout plan to reduce the supply.”

      From here.

    2. Sean Kinsell says:

      On the one hand, the government has managed to let go its death grip on stakes in JAL, JR West, and JR East (I think JR Tokai is still partially owned by the government); so it’s not as if full privatization were impossible. Then, too, JAL was founded as a semi-private company.

      And the thing is (John knows this, but readers without experience in Japan may not), no one cares about the postal service. Any bureaucrat who pretends to be lying awake at night fearing that, without the supervision of selfless, impartial public servants, Japanese citizens will not get their letters handled properly is a liar. Japanese private couriers are so sophisticated they make FedEx look like two guys with a wheelbarrow and a roll of foam rubber. Because a lot of people don’t have cars, and those who do often have trouble parking them where they’re taking their stuff, there are different schlepping services for just about everything. First-class mail poses problems of volume, sure, but the new corporations are going to be inheriting the Japan Post infrastructure.

      The only reason anyone outside Japan Post cares is the money from savings deposits and insurance premiums. And you’re right, there is no way the ministries are going to put that into private hands without fighting tooth and nail.

    3. John says:

      Exactly, it’s about money, which the rail and air services do not make at the same rate as tobacco. It’s also about the votes of the farmers.

      From the time the legislation was signed in 1984, it took the MOF twenty freaking years to divest the full amount of the JT stock allowed under the law. The first divestiture sold JT stock in bundles of at least 100, perhaps 1000 (my memory is a little hazy on this), so that ordinary Japanese could not afford it, thus diluting calls for fiscal responsibility from shareholders. The privatization of postal savings will be slower yet.

      It is true that the government was paying 0 – 0.5% on postal savings because it was investing the money and pocketing the difference. However, it is also true that, in order to stave off bankruptcy in inefficient industries, the government occasionally loans money at 0% interest as a political favor. No way they are letting go of that cookie jar without a shooting war.

      Yakkyubin rules! Do they still have the service where they deliver goods purchased on the Net to 7-11, so that Japanese who are nervous about paying by CC over the net can pay their friendly, local Conbini instead?

    4. Sean Kinsell says:

      I think so–I haven’t used it, so I’m not sure. You can order from amazon.co.jp COD still, though. Can you do anything COD in the States these days?

    5. John says:

      Nothing legal.

    6. Simon World says:

      Daily linklets 5th May

      Today is 05/05/05. In case you miss it, you only need to wait until 06/06/06. Spirit fingers is documenting the after effects of kissing Tom Cruise. ESWN notes another Hong Kong mainstream media outlet trivialising blogs. Self-criticism in modern times: just download it off the internet. So much for Beijing’s attempted rapprochement with the Vatican: seven Catholic priests were detained by Chinese authorities. First it was a direct bus, now it is curry powder crossing the India-Pakistan border. The yuan isn’t the cause of the US trade gap…says China. Howard French contemplates the anti-Japan protests in China and what it says about the CCP’s grip on power. The Muslim quarter of Xian and the terracotta warriors. Fons says not all guanxi are created equal. Connections do matter in Chinese business, but at the same timeit is easy for desperate Western businesses to be taken for a ride by…

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