US, EU irked by stalled Japan privatisation

May 21, 2010
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, TOKYO, May 21 – Japanese, US and EU trade officials were due to meet in Geneva on Friday to discuss "level playing field concerns" about the sprawling Japan Post group, US officials said.

The centre-left government that took power in Japan last September has slammed the brakes on a plan by previous conservative leaders to privatise the group, which boasts massive banking and insurance arms.

The US Ambassador to the World Trade Organization Michael Punke and EU Charge d\’Affaires John Clarke were to meet Japan\’s WTO Ambassador Shinichi Kitajima, said the Office of the US Trade Representative.

The aim of the meeting is "to discuss level playing field concerns with respect to Japan Post in light of Japan’s WTO obligations," the USTR said.

The USTR, pushing to make Japan\’s insurance market more competitive, opposes Tokyo\’s plans to scale back the privatisation plan and is considering filing a suit with the WTO, Japan\’s Kyodo News agency has reported.

Japan\’s former conservative prime minister Junichiro Koizumi made splitting up and privatising Japan Post his signature free-market reform, aimed at streamlining a bloated public sector.

Japan Post, with trillions of dollars in savings and life insurance policies, has in effect long been the world\’s biggest bank, with a strong competitive advantage in Japanese savings and insurance products.

Critics of Koizumi\’s push worried for the survival of many of the 24,000 post offices, especially in country areas, where small-town postal workers often deliver medicine and pension payments to the elderly.

Koizumi\’s reform drive led to the break-up in late 2007 of the organisation into the Japan Post Holdings Company and four subsidiaries — the Japan Post Service, Network, Bank and Insurance Companies.

However, the government kept full ownership, with plans for the bank and insurance units to privatise and sell all their shares to the public over the following decade.

The new government of Prime Minister Yukio Hatoyama\’s Democratic Party of Japan has frozen that plan, with a bill last December stopping the government from selling any shares in Japan Post Holdings.

Hideyuki Araki, a Resona Research Institute economist, said the United States and Europe had long had "hopes that privatisation would bring various business opportunities" in Japan.

Japan Post\’s banking and insurance sectors had long benefited from being identified as \’public\’ in the minds of the Japanese people, Araki said.

"People don\’t have to worry about bankruptcy at all and feel … the units are part of the same family as the postal service," he said.

Araki said it was unlikely that Japan\’s postal reform will go back to the scheme designed in the Koizumi era — in part because Japan Post\’s massive holdings have long paid for government spending.

"Fiscal deficits are likely to rise," he said. "The government counts on postal savings, which are a major source of government bond purchases."
 

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