Japan broke up its sprawling post office yesterday, spinning off a bank with the world's largest savings at the start of a privatization process set to reshape the country's financial services industry.
Japan Post was split into four units to handle deliveries, savings, insurance and counter services. It was in effect the world's biggest bank, with some US$3 trillion in postal savings and life insurance policies.
The split is the initial step in a decade-long process that counts as the first major privatization in Japan since the 1987 breakup of the national railway.
PHOTO: AFP
Major post offices opened one hour earlier than usual to mark the overhaul, which was at the core of former prime minister Junichiro Koizumi's reform agenda to streamline the bloated public sector.
"We are facing a tremendous challenge," said the head of the post office's new holding company, Yoshifumi Nishikawa, a former head of Sumitomo Mitsui Banking. The government picked him to oversee the privatization.
Koizumi, who staked his leadership on postal privatization, joined other prominent politicians to cut the tape at the launch of Japan Post Holdings Co, the holding company 100 percent owned by the government.
"Before I took office, all parties were against privatizing the post office. It was thanks to people's support that we were able to realize" it, he said.
At Tokyo's central post office, some 350 people, many of them elderly citizens, lined up to buy commemorative stamps and other mementos.
The post office's assets are largely invested in government bonds, helping Japan to maintain huge public debts.
The government hopes that reform will boost competition in the financial services sector and reduce the flow of funds from Japan Post into popular but often wasteful public works projects.
Japanese Prime Minister Yasuo Fukuda said that the postal operator would strive to become more efficient.
Although a rapid revolution in Japan's financial services industry is unlikely, the stirring giant is likely to gradually venture into new business areas, ratcheting up the pressure on existing commercial banks, experts said.
But critics fear postal reform will lead to a focus on more profitable regions and the closure of some of the country's 24,000 post offices. Small-town postal workers often deliver medicine and pension payments in cash to elderly people unable to run errands for themselves.
Under the privatization plan, the banking and life insurance units could float on the stock market as soon as in 2009.
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