Japan postal reform creates world's largest bank

[HenryTo]

Old article but I definitely think this should be something to keep track of going forward. If the bill goes through, then the Nikkei could potentially blow through 12,000.
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Japan postal reform creates world's largest bank
The Associated Press
TUESDAY, JULY 5, 2005


TOKYO Japan’s powerful lower house of Parliament narrowly approved hotly contested legislation Tuesday to create the world’s largest bank by privatizing the sprawling state-run postal savings and insurance system by 2017.

The 233-228 vote, which reflected deep divisions in the ruling Liberal Democratic Party, was a bittersweet victory for Prime Minister Junichiro Koizumi, who had made the reform the centerpiece of his government since winning re-election last year.

Japan’s postal service controls 330 trillion yen (US$3 trillion; ?1.8 trillion) in savings and insurance deposits, and reform proponents say privatization would make more efficient use of those funds for investment.

Passage by the lower house sends the bills to the upper house. But even rejection by the upper house would not block the legislation, since the lower house can override that with a second vote.

‘‘It was a close match, but I’m relieved now that the bills were passed without disruption,’’ Koizumi told reporters. ‘‘There were more of those who were against the bills than expected.’’

The vote, which followed a sometimes raucous debate, came amid fierce infighting within Koizumi’s LDP, pitting calls for reform to streamline the financial system against fears that privatization will reduce jobs and services.

The bills were opposed by many of the country’s 400,000 postal system employees, a powerful lobbying group. Some 3,000 workers, fearing that privatization threatens their jobs, protested against the plan on Monday in downtown Tokyo.

The closeness of the vote — the plan garnered only one vote above the minimum 232 needed for passage — illustrated how divisive the legislation was. The Cabinet decided to dismiss four dissenting LDP lawmakers from administrative posts after the vote.

Opponents accused Koizumi of ramming the bills through Parliament, and they vowed to take their fight to the upper house.

‘‘Within the Liberal Democratic Party, opinions were divided but the prime minister does not care. Can you call this democracy?’’ said Chuji Ito, of the opposition Democratic Party. ‘‘Prime Minister Koizumi’s political tactics are those of dictatorship.’’

The bills, approved by a Parliamentary committee on Monday, would privatize the postal system by 2017. They call for dividing state-run Japan Post into separate businesses for mail delivery, banking services and insurance starting in 2007. A fourth company would handle employee salaries and manage post office properties.

All four companies would be grouped under a holding company at first, but the umbrella organization would have to sell its shares in the banking and insurance enterprises by 2017.

Proponents say privatization would improve postal services by making them more competitive and give the market a greater say in how to efficiently use the massive deposits now in the state-run system.

Critics, however, fear that postal services will be reduced in rural areas, some of the country’s 400,000 postal system workers will lose their jobs, and the mammoth bank created will drive existing private financial institutions out of business.

Katsuya Okada, the leader of Japan largest opposition party, the Democrats, called the vote a failure for Koizumi and demanded his resignation.

‘‘The bills were approved as a result of all kinds of threats but with only an extremely slim margin, and this is the equivalent of no-confidence vote,’’ Okada said.

Japan Post boasts savings deposits of 211 trillion yen (US$1.9 trillion; ?1.6 trillion) — some three times those of Mitsubishi Tokyo Financial Group Inc., which at 67 trillion yen (US$600 billion; euro505 billion) is Japan’s biggest private holder of deposits.

The postal system has some 25,000 branches around the country, while Japan’s seven nationwide banks combined have only 2,606 branches.

U.S.-based Citigroup Inc. is the world’s largest bank in terms of assets. But shareholders of Japanese banks Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. last month approved a merger that will pave the way for creation of a bank with 190 trillion yen (US$1.7 trillion; euro1.4 trillion), surpassing Citigroup.

[HenryTo]

The "smart money" is betting that the vote will not go through the Upper House. But what if it does go through? My guess is that the Nikkei will blow through the 12,000 resistance level in a very convincing way.
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Japan postal reform vote delayed until next week
Thursday 4 August 2005, 8:39pm EST

TOKYO, Aug 4 (Reuters) - A vote by Japan's upper house of parliament on contentious bills to reform the postal system has been delayed until Monday or later, media reported.

Prime Minister Junichiro Koizumi has said rejection of the bills, opposed by many in his ruling Liberal Democratic Party

(LDP), would be tantamount to a vote of no-confidence, a tacit threat to call a snap general election.

The upper house vote, originally expected on Friday, has been put off to Aug. 8 or later, the Nihon Keizai financial newspaper reported on Thursday. It said the delay was apparently due to worries among party officials that the bills might not pass.

"This would increase the time that lower house lawmakers, worried about the chance of an election, would have to try to persuade opponents," an LDP official was quoted as saying.

Lawmakers have repeatedly said the vote was impossible to predict.

The bills passed the lower house last month by a scant five-vote margin and could be rejected in the upper chamber if 18 LDP members and all the opposition lawmakers vote against them.

Legislation to privatise the postal delivery, savings and insurance system, including the world's biggest deposit-taking institution, is the centrepiece of Koizumi's reform platform.

Postal savings have been a key source of funds for public works projects that LDP lawmakers have used to woo voters for much of their half century in power. A large number of LDP lawmakers also rely on rural postmasters to get out the vote.

Many of them therefore oppose the privatisation bills, which would split up Japan Post and sell off its shares by 2017.