EDITORIAL: Review of postal reform

Concerns have risen that the administration of Prime Minister Yukio Hatoyama will roll back the reform of the nation's postal services and reverse the trend toward privatizing public businesses. The government has released the outline of a draft bill to review the process of postal privatization.

The administration is stressing the public nature of postal services as justification for the review. But the government's argument reflects the misguided hope that the public will accept further expansion of the bloated postal savings service.

The proposed blueprint would widen the scope of Japan Post's nationwide universal services to include its financial operations--postal savings and insurance. The uniform services for all parts of the nation have been limited to the postal operations.

The government is also considering raising or scrapping the limits on the amount of money the savings and insurance businesses can accept from each individual customer. These measures would make the services more convenient for consumers.

But the proposals also raise some serious concerns.

The plan is aimed at increasing the earnings of the Japan Post group by expanding its savings and insurance services, which have long been criticized for their large scales. This strategy itself is a source of worry.

The primary purpose of the postal reform should be rebuilding the unprofitable mail business and restructuring the entire operation to prevent a future burden on taxpayers. At the same time, it is vital to rectify imbalances in the nation's financial system by downsizing the mammoth public financial services to ensure a fair competitive environment in the sector.

Japan Post's two financial units--Japan Post Bank Co. and Japan Post Insurance Co.--have the huge power to collect money but are poorly equipped to use the money for profitable investments, such as loans to companies. Expanding the operations of these two units would put additional strains on private-sector financial institutions and thereby undermine the overall functions of the financial system.

The proposed changes may help the government finance its swelling budget deficit if Japan Post's financial arms increase the already huge purchases of government bonds. But it could create serious structural flaws that make the nation's bond market susceptible to a crash.

Under the plan, Japan Post Holdings Co. would continue to control its two financial units after absorbing its two mail services arms--Japan Post Network Co. and Japan Post Service Co.--to replace the current structure of the holding company owning four subsidiaries.

It is debatable whether this reorganization would really enhance the profitability of the group.

The government says it would provide tax exemptions and other financial aid to help Japan Post cover the costs of the public services offered by post offices and the money-losing parts of other universal services. This approach, however, risks making the Japan Post group highly dependent on the government.

The spread of the Internet has dimmed the prospects for postal services. But the Japan Post group should focus on efforts to secure new revenue sources, such as further expansion of its distribution businesses and diversification into new areas like convenience stores and other retail businesses.

There are also concerns about Japan Post developing cozy relations with politicians. If the proposed measures would make the services provided by post offices more public in nature, Japan Post's employees should be required to maintain political neutrality.

Even after the changes, if the employees are allowed to get involved in political activities freely, as they are now, Japan Post's lending and other operations could be vulnerable to political patronage and exploitation. That would go against the public nature of the operations.

If Japan Post puts priority on local communities in its procurement and investment policies, all possible measures must be taken to enforce a ban on election campaigns by Japan Post employees and influence peddling by politicians for contractors, which were common when the postal services were run by the government.

--The Asahi Shimbun, Feb. 11