Corrupt Postal Privatization 148
Govt orders freeze on public offerings for parent, banking, insurance units
By ANTHONY ROWLEY
|Staying put: A public sale of shares in Japan Post Bank or in its holding company, Japan Post, might prove to be a flop as wary investors steer clear of its major exposure to Japanese Government Bonds, analysts say|
THE privatisation of Japan's mammoth public postal savings, insurance and postal services empire - one of the biggest exercises of its kind ever proposed and a symbol of a former era of market-friendly reforms in Japan - is almost certain to be delayed and the exercise could well be abandoned.
This would leave the savings bank, insurance and postal services giant in government hands, reflecting how far the political and social mood has changed since former prime minister Junichiro Koizumi launched the controversial privatisation exercise in 2005.
Last week, Internal Affairs and Communications Minister Tsutomo Sato urged Japan Post, (holding company for the quadripartite corporate entity that the former Japanese state postal system has been converted into) to freeze an initial public offering of shares in itself and two of its key subsidiaries planned for the current fiscal year.
The banking and insurance arms of the postal complex, as well as up to two thirds of the holding company, Japan Post, which currently owns these financial activities plus mail delivery and post office operations, are currently due to be sold to private investors over a 10-year period that began in 2007.
Mr Sato's action was linked to the fact that Japan Post was recently issued with a business improvement order from the Japanese government after it was involved in a major controversy over the proposed 'fire-sale' sale of property assets that it holds.
But the privatisation exercise itself now has few friends and many enemies in Japan. With an August general election appearing likely, Japanese Prime Minister Taro Aso's Liberal Democratic Party seems to have no stomach for the politically unpopular move.
The main opposition Democratic Party of Japan led by Yukio Hatoyama, which polls suggest will emerge victorious from the election has 'drafted a law' to stop public sales of shares in the postal empire, Kobo Inamura, a former executive vice-president of Japan Post told The Business Times.Mr Inamura, one of a number of executives who resigned in protest at the original postal privatisation plan, on which Mr Koizumi fought and won an election to crush his opponents, said that Mr Hatoyama will very likely act to 'reverse' the privatisation once in power.
The political climate has changed in Japan as the Koizumi reforms have come to be seen as opening up social and income divisions while the onset of economic recession has made many Japanese hanker for a return to the 'social' market economy they experienced for decades after World War II.
But the Japanese government has other reasons to avoid privatisation of the postal empire, relating its own fast-deteriorating financial situation. 'The core problem is the huge asset of the postal system,' said Mr Inamura.
Japan Post Bank inherited on the liabilities side some 190 trillion yen (S$2.9 trillion or US$1.6 trillion) in deposits from the formerly homogeneous postal empire, and some 150 trillion of Japanese Government Bonds (JGBs) on the asset side, as well as direct loans to the government.
The idea was that Japan Post Bank would gradually sell off its huge bond holdings, in total amounting to some 20 per cent of total outstanding JGBs, and move more of its assets into mortgage and other more conventional bank assets.
But with so much debt outstanding (equal to some 170 per cent of Japan's gross domestic product) and the need to issue even more in order to keep Japan's recession-mired economy afloat, the government has little chance to dispose of the postal bank's holdings without hitting the JGB market.
A public sale of shares in Japan Post Bank or in its holding company, Japan Post, might thus prove to be a flop as wary investors steer clear of its major exposure to JGBs, analysts say.
Japan Post Insurance, which handles the huge insurance portfolio of the old postal complex, also has large holdings of JGBs.
On top of this, its services are seen to have 'deteriorated' since the privatisation plan was announced, according to Mr Inamura.
Japan Post was also supposed to sell off a chain of hotels it owns, known as Kampo no Yado, but after an attempt to do this recently at a knock-down price to a business group whose executives had been involved with the original privatisation plan, a public scandal erupted. Former internal affairs and communications minister Kunio Hatoyama (bother of the DPJ leader) then resigned in protest at Prime Minister Taro Aso's reappointment of former commercial bank head Yoshifumi Nishiokawa as head of Japan Post.][a minor misspelling of a Japanese name was fixed by this blog]