EDITORIAL: Postal reform proposals

We cannot help but raise questions about drastic proposals the government announced Wednesday to review the postal privatization process. It seems that the administration of Prime Minister Yukio Hatoyama has not seriously considered the risk of allowing the gargantuan Japan Post Bank to grow even bigger.

The government plans to double both the ceiling on postal savings the bank accepts from each depositor and the upper limit on postal insurance benefits Japan Post Insurance promises to pay to each policyholder.

This proposal is aimed at helping the Japan Post group carve out a viable future by increasing the earnings of its two financial units amid a bleak outlook for its mail business.

The plan indicates the government is determined to keep the nationwide network of post offices intact, apparently in line with demands of the postmasters of former tokutei post offices, who are a powerful lobby.

If the postal savings and insurance businesses, which are already too big, expand further, the nation's financial system will become even more skewed.

Due to its insufficient loan screening ability, Japan Post Bank invests most of the deposited assets in government bonds. Expansion of postal savings could hamper the efficient flow of money that could finance companies' investments in plant and equipment, sapping the nation's economic and social vitality.

For the future of the nation's economy, the government should not raise the upper limits on postal savings and insurance benefits.

In reviewing postal privatization, the government has shown its intention to put priority on the public roles post offices play by offering uniform financial services across the nation. This thinking is also behind the government's decision to maintain its indirect investment in the banking and insurance arms through Japan Post Holdings Co.

The government's continued involvement gives Japan Post Bank a competitive advantage over its private-sector rivals by making postal savings look safer than commercial bank deposits, even though deposit insurance coverage is capped at 10 million yen ($110,000) for both.

In particular, it seems impossible to ensure a level playing field with small regional financial institutions that should play a key role in revitalizing the local economy.

The government should end its capital ties with Japan Post Bank and Japan Post Insurance by having Japan Post Holdings divest its stakes in these units. Even if the step is taken, the two financial units will be able to maintain their business ties with the Japan Post group as long as their operations are based on the network of post offices.

One of the government's justifications for expanding the Japan Post group is the need to keep financial services available in depopulated areas where the local post office is the only institution to provide them.

But the government could identify problematic areas and find a solution by working with other financial institutions.

The proposals include exempting business transactions within the Japan Post group from the consumption tax. The step would save the group 50 billion yen in tax payments to cover part of the cost of maintaining universal services across the country.

This would be another misguided approach. Japan Post should first make every possible effort to cut costs and increase earnings. After that, if additional taxpayer money is still needed, a separate, clearly visible way should be figured out.

Shizuka Kamei, minister in charge of postal reform, has also proposed to turn the Japan Post group's 100,000 nonregular workers into regular employees. It is good to increase the number of regular employees, and we welcome the government's commitment to narrowing the employment gap.

But the step would increase the group's labor costs by several hundred billion yen. The added cost would be a huge financial strain and make it difficult for the government to sell its Japan Post shares.

If the administration goes ahead with delivering on its election promises concerning Japan Post, which are not backed by any plan for greater management efforts, it will be accused of doling out jobs to garner votes in the summer Upper House election. The government should pursue bona fide reform of Japan Post.

--The Asahi Shimbun, March 25