[stop-imf] Japan's Postal Privatization Appropriate: IMF

[Robert Weissman]

The Japanese post office is a far more wide-reaching operation than its
counterpart in the United States, though the US postal service
historically offered some of the financial services available through
the Japanese system. Postal systems in developing countries often
provide crucial access to financial services.

Japan is now going through a political crisis in the wake of the defeat
of a proposal to privatize at least the financial service arms of the
postal service.

The IMF it turns out, to no great surprise, has been a supporter of such
moves.

Here, two stories:

1. Japan's Postal Privatization Appropriate: IMF
2. Do or Die on Postal Reform (describing the overall political debate
in Japan related to the postal service)

Japan's Postal Privatization Appropriate: IMF
2005-08-09
Jiji Press English News Service




Sharebuilder
<http://ad.doubleclick.net/click;h=3Dv5%7C32d0%7C0%7C0%7C%2a%7Ck;13318333;0=
-0;0;9032755;933-120%7C600;10914448%7C10932344%7C1;;%7Esscs=3D%3fhttp://www=
.sharebuilder.com/about_us/jump/be30/?www>


Washington, Aug. 8 (Jiji Press)--A Japanese plan to break up and
privatize Japan Post, with massive savings and insurance arms, "was
viewed as appropriate," the International Monetary Fund said Monday.

In the IMF's 2005 Article IV consultation with Japan concluded in late
July, its mission "underscored the importance of taking timely steps
ahead of full privatization to ensure fair competition with private
institutions," a report on the consultation said.

The appropriate steps would include "phasing out exemptions from deposit
insurance premia and taxes as stipulated in the draft bills," the report
said.

The report was compiled before Japan's House of Councillors killed the
postal privatization bills in a vote on Monday, which prompted Prime
Minister Junichiro Koizumi to call a snap election on Sept. 11.

The IMF offered support for Koizumi's structural reform policy, saying
Japan will be able to boost its potential economic growth rate, now
estimated at an annual 1.5 pct, through reform efforts.

"Deregulation, particularly to allow the private sector a larger role in
areas traditionally dominated by the government, can also help to boost
long-run growth," the report said.END


------------------------------------------------------------------------
Print this page <Javascript:printable()>
*Do or die on postal reform*
Peter Alford, Tokyo correspondent
10aug05

"I WANT to ask the voters if they think postal privatisation is needed,
even though the upper house voted the bills down," Junichiro Koizumi
insisted on Monday night after a rebellion in his own party scuttled his
postal reform legislation in the upper house.

The 63-year-old Koizumi is literally the only Liberal Democratic Party
leader who wouldn't have resigned or been driven from office after
suffering such a defeat.

Instead, he called a snap House of Representatives election and promised
to disendorse the 37 LDP members who voted against the postal package
when it narrowly passed the lower house last month.

Even at the risk of a party split which would impair the LDP's chances
of returning to office, he intends the election to be a referendum on
the privatisation of Japan Post in particular, and his "Koizumi reforms"
in general.

But even in the unlikely event the LDP wins a clear mandate for postal
reform on September 11, the currently hostile upper house remains in place.

The one possible way Koizumi might steer a new set of postal bills
through the upper house, LDP officials privately suggest, is by offering
his resignation as Prime Minister and party leader - the ultimate price
of satisfying what some LDP officials privately describe as an obsession.

But even veteran Diet watchers struggle to recall when and how the
obsession arose. Some suggest it stemmed from an ancient grudge between
the finance zoku (tribe) in the Diet, which Koizumi joined as a young
MP, and the postal zoku.

Koizumi's zeal certainly gained a sharper edge in 1992 when he was
appointed posts and telecommunications minister only to be frozen out by
his senior bureaucrats who were angered by his call for privatisation to
be put on the government's agenda. An official in the Prime Minister's
office declined to discuss origins but said: "He has always had the
interest ever since he joined the Diet (in 1972)."

There is no mystery, however, why Koizumi wants to break up Japan Post
and wholly privatise its postal bank and postal insurance operation. His
justifications are pretty much the same reasons many in his party - even
among those who have remained loyal - and the senior bureaucracy want it
kept together.

Koizumi argues that Japan Post's savings bank and personal insurance
businesses, with total investment assets of Y340 trillion ($4 trillion),
seriously distort the financial system by capturing funds that should
flow through commercial banks into the private sector.

But the postal bank, with its unique network of 25,000 post office "shop
fronts", its low costs and relatively high interest rates for savers,
has squeezed other banks out of the savings market. An estimated 80 per
cent of Japanese private savers have postal accounts.

Instead of being lent for commerce, private construction and home
mortgages - areas currently forbidden to the postal bank - the funds
Japan Post collects as deposits and insurance premiums are channelled,
by way of massive purchases of government bonds and direct loans, into
public projects operated by government corporations. Japan Post's 2004
accounts show the post bank and insurance company have lent the public
corporations and local government authorities more than Y210 trillion.

Koizumi sought to gradually privatise the postal bank and insurance
company - a process that was to start in 2007 and end a decade later -
to put them on the same footing as the rest of the financial services
industry and to place their funds beyond the government's reach.

In his view, this is also necessary for the cleansing of his own party,
which during its 50 years of virtually permanent government has become
deeply enmeshed in the "iron triangle" of bureaucratic, business and
political interests.

While the post office and, to a much lesser extent, public pension funds
provided public projects with a virtually unlimited pool of funding, LDP
politicians, bureaucrats and in-the-loop contractors furiously
back-scratched each other to ensure work was distributed in mutually
beneficial ways.

Koizumi also wants to break the nexus between LDP parliamentarians and
the postmasters who canvass votes for them.

"Why are the post office staff, members of the Posts and
Telecommunications Ministry, not criticised for election campaigning
when other public servants are forbidden," he challenged his own party
in 1999.

Then as now, his LDP colleagues resented what they viewed as Koizumi's
reckless attacks on the country's most trusted public institution and
undermining their own local power bases.

In the fierce lobbying that preceded this week's upper house vote, the
Diet offices were besieged by hundreds of delegates from Zentoku, the
postmasters' national association, warning LDP members they risked
losing the association's support if they voted for the Koizumi legislation.

The main opposition group, the Democratic Party of Japan, which opposed
the legislation in both houses, is closely linked to the main postal
workers' union, which fought the privatisation plan just as adamantly.

DPJ leader Katsuya Okada argued the bills were unacceptably flawed
because they did not protect postal savers and insurance policyholders
from fraud and mismanagement when their funds were transferred to
private sector management.

The fundamental question now raised by the postal bills' defeat and
Koizumi's response is whether it creates a politically unstable
environment that makes further structural and fiscal reform in Japan
difficult or even impossible.

Several issues of arguably more pressing urgency than postal
privatisation have yet to be confronted. They include a completely
inadequate tax base that leaves a general government deficit amounting
to 7 per cent of GDP and a public retirement savings system which, in
spite of unpopular government tinkering last year, is still heading for
collapse. Those are two issues where Opposition Leader Okada has
promised to be braver than the Government.

The real uncertainty now about structural reform in Japan is whether
whoever becomes prime minister after September 11, even if it's Koizumi
again, will have the authority he marshalled over the past four years to
push through difficult change. While LDP colleagues acknowledged him as
their shield from electoral defeat, Koizumi could negotiate with the
party conservatives from a position of strength, attack bureaucratic
resistance and protect the backs of reformist ministers such as Heizo
Takenaka and Sadakazu Tanigaki.

Now that his most radical reform bid has split the LDP and exposed it to
the risk of defeat, Koizumi is no longer a leader apart. Even if he
returns with another mandate for postal reform, his party won't trust
him again with a free hand.

Okada comes across as a respectable market liberal, but he doesn't
pretend to be a fire-breather, nor has he been forthcoming so far about
his economic program.

One shortfall of the Japanese system is an obsessive media focus on
politicking, particularly within the LDP and the senior bureaucracy,
which leaves scant room for careful scrutiny of policy issues.

Hardly anyone outside political and administrative elite has a clear or
detailed idea of how Koizumi's postal proposals affected them and if
Okada set out an alternative plan for Japan Post it wasn't reported.

What is obvious is that his party is as fissile as Koizumi's has become,
spanning the range from former LDP right-wingers to market-wary
ex-socialists.

Add to those elements a likely new party of conservative ex-LDP rebels
committed to punishing Koizumi, plus New Komeito, the LDP's present
coalition partner, which has been perfectly behaved so far, but isn't
ideologically comfortable with Koizumi's restructuring policies.

It all amounts to a prescription for political instability.

privacy <javascript:void(0)>       terms <javascript:void(0)>      =A9 The
Australian