Japan Post, which holds a quarter of the nation's savings, will have to compete with banks, insurers and other deposit-takers starting in 2007, said Heizo Takenaka, minister for economy and fiscal policy.
"We'll be privatizing Japan Post in 2007," Takenaka said on state-run NHK television.
"Privatizing means that it has to compete completely on its own with the private sector," Takenaka said.
Japan Post, which doesn't pay any taxes, will have to compete like any other bank or insurer in the country for the benefit of the public, Takenaka said, without giving details. The state-run service, which combines mail delivery with selling insurance and government-guaranteed savings, may have to break up, said Japan's guild of corporate executives.
Japan Post "is too big" and is almost a monopoly, said Kakutaro Kitashiro, the chairman of IBM Japan Ltd and also head of the Japan Association of Corporate Executives. Unless its businesses are split up, "the private sector won't be able to compete," he said.
Japan's postal service held ?208 trillion (US$1.91 trillion) of savings at the end of March, ?124 trillion of insurance policies, ?110 trillion of government bonds -- and it operates more branches than the nation's banks.
It must be sold because its inefficiencies are costing the public, said the 53-year old Takenaka, who has been leading the government's push to turn Japan Post into a private company.
The Japanese Bankers Association, a group representing the nation's lenders, proposed in February that Japan Post terminate some of its deposit-taking services, limit the amount of savings it can take and discontinue offering loans.
The government may end its policy of exempting the postal service from paying taxes and may alter its collection of insurance premiums, the Nikkei English News said in March.
Japanese Prime Minister Junichiro Koizumi has been planning to reorganize and sell Japan Post since he came into office in 2001.
Takenaka did not provide any details on how the sale of Japan Post would take place.
The nation's post offices will remain, he said.
The public wants the postal service to improve its services, extend the hours of the post office outlets and cut costs, Takenaka said.
"We have to clarify what demands there are from the public toward the postal savings service, what abilities Japan Post has in the area and secure a business model that can endure," he said on the NHK program.
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