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    Lesser of two evils

    This editorial from the Nikkei raises good, albeit depressing, questions about the plans the two major parties have for Japan Post:

    The DPJ plan would maintain Japan Post as a semi-public corporation but lower the cap on savings account balances for a single depositor from the current 10 million yen to 7 million yen by next year, and from there down to 5 million yen over several years, so that the approximate 220 trillion yen now held in postal savings would shrink by half. There would also be some sort of method used to decrease the number of new policyholders for insurance. The party touts its plan as a way of realizing a more definite transfer of capital from the post offices to private banks and insurance companies than the LDP plan would: “A change in the flow of capital from public to private.”

    That’s one way of thinking, but it leaves more than one question open. If the amount of capital contracts greatly, not all of the 26000 regular employees of Japan Post will be needed, but the DPJ plan doesn’t say anything clear about personnel reductions. The party says, “Personnel levels will, of course, be adjusted as more workers reach mandatory retirement age,” but to the extent that the Japan Post unions and other organizations, which are antipathetic to personnel reductions, are expected to form a layer of support for the party, the plan lacks persuasiveness without concrete proposals for personnel management.

    The DPJ plan maintains Japan Post as a semi-governmental corporation but says that it will investigate the full spectrum of options, including integration with federal financial institutions. Privatization is also included among the options. However, if the option of not privatizing Japan Post outright is not selected for now, then there will be no choice but to use money from the profitable deposit and insurance divisions to make up for losses by the postal services division if it once again becomes unprofitable as trends such as e-mail cut into its business. In extreme cases, it’s possible that tax money will need to be used to rescue postal services.

    Of course, it’s not a sure thing that the LDP’s privatization plan is going to bring us salvation, either:

    On the other hand, the privatization bill to be resubmitted by the LDP would split postal services, savings, and insurance into three separate corporations, then establish a fourth for counter services that would absorb the majority of current post office employees. A holding company would manage these four organizations. Government guarantees on postal savings and insurance would be abolished.

    This is privatization in outline, but as a result of compromises with the former Mori faction, added provisions mean that in substance, the three divisions will continue to function as a single monolithic body, and furthermore, and significant government interests will remain.

    For example, the holding company is a public entity for which the government will provide more than a third of its capital. On top of that, the holding company will be able to continue to hold shares in the savings and insurance corporations even after March 2017, when the transition to privatization is to be completed. That means there is a real worry the flow of capital from public to private hands will not be effected: government interests in the organizations’ financial operations, including where capital is allocated, will remain all along.

    This isn’t new–I’ve discussed everything in the above paragraphs in scattered posts from time to time, but it’s a good summary.

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