The White Peril 白禍

You have got to be kidding me (Japanese, English):

Postal workers' jobs are to be safeguarded in the privatization planned for 2007, with the new postal entities to keep the same employment levels, government sources said.

After all, that is the point of privatizing an inefficient government organization--improve operations by not changing anything.

Regarding the establishment of a fund to maintain universal postal savings and postal services in remote areas, the postal services holding company will save a portion of its revenues each fiscal year, as stipulated by an ordinance, until the sum reaches 1 trillion yen.

The bills state that the fund cannot be tapped, with the exception of a situation in which the revenues alone cannot support the holding company's universal service obligation, the sources said.

The six bills are designed to privatize postal services, establish a postal services holding company, a mail delivery company, an over-the-counter service network firm, and an independent administrative organization for postal savings and kampo life insurance, and to pass laws related to the privatization.

Increasing the number of organizations involved sounds like a great move toward streamlining, too, though that structure's been part of the proposal forever. Good grief.

The LDP will ask the government to provide 2 trillion yen to ensure that universal service is maintained. This is double the previous recommended amount:

The government will accept a request from the Liberal Democratic Party to increase a fund to maintain universal banking and insurance services by at least 1 trillion yen in negotiations on postal privatization bills, government sources said Wednesday.

The government also is expected to study the need to raise the amount to be stated in the bills from 1 trillion yen to up to 2 trillion yen.

The government also will not ensure capital ties among postal saving, kampo insurance and other new companies in the bills.

The editorial in this morning's Nikkei was about Japan Post reform and addresses several sticking points:

Prior [to the release of the plan] the LDP compiled a document called "Modes of Thinking for Japan Post Reform." In it, there were several problems with the government's proposal indicated, including (1) the corporation that will be financed by the government will be state-owned and privately-managed, and so there are fears that its projects will fall prey to corruption, (2) the division of Japan Post into four companies simply increases the number of positions available for 天下り (amakudari: lit., "descent from the heavens"), (3) it has not been proven that the four new companies (posts, savings accounts, insurance, and counter services) will really be independent.

Amakudari is similar to what we'd call a revolving door: the system in which high government officials retire to semi-public management or "consulting" jobs in which they can use their accumulated connections and influence to manage resources. Civil servants make less than they could with equivalent credentials in the private sector because the assumption that they'll retire in their mid-50s and take more-lucrative jobs related to their fields. Government officials have complained about attempts to reform the system because--and it's hard not to sympathize with them to some degree--they've all gone through their entire careers with the understanding that things would work this way. On the other hand, the number of redundant positions boggles the imagination, and attempts at reform are seen as suspect by the Japanese people.

Those planning the privatization of Japan Post talked this weekend about selling off in stages the remaining government-held stake in the two new firms that will handle postal savings and life insurance. Some were still balking at the idea of offloading the entire government stake in ten years, but an agreement appears to have been reached: all government shares are to be sold by the end of March 2017. The government will unveil its basic proposal tomorrow after presenting it to the leaders of the LDP and Shin-Komeito.

BTW, people occasionally ask me how much money we're talking about here. The answer: a WHOLE LOT OF MONEY. There are about ¥230 trillion (US $1.9 trillion) in postal savings accounts. That's between one-third and one-half of the personal savings in Japan, and the "bankers" that manage it are in a special department of the Ministry of Finance. Much of it has been invested in government bonds that no one else is buying, much of the remainder serves as a sort of slush fund for favored government projects, and the rest is invested elsewhere. This Q&A-style piece from The Japan Times last fall gives some of the figures and major problems (consider that I haven't discussed the insurance money). I'm in favor of privatization, but--like bank, pension, health care, and social insurance reforms--it's going to be painful.

Added at 19:20: PM Koizumi has announced his joy over the completion of the proposal. Something I've kept forgetting to mention, though it's at the bottom of most articles about the issue: if the new computer systems aren't ready in time, the beginning of the switchover will be delayed by up to six months.

Added on 5 April: The Ministry of Internal Affairs and Communications, naturally, was not looking forward to the loss of control--its objections are not surprising. The somewhat thornier issues involve how to ensure that mail delivery continues to isolated communities, and they've been around for months. There are still questions about the plan that raise California-energy-fiasco-type worries. From the Yomiuri:

After the two units are fully privatized, the holding company will be allowed to buy back some of the shares it sells. In addition, the outline includes a provision that allows the four postal entities to hold shares in each other after the privatization process ends in 2017.

The outline also stipulates the creation of a 1 trillion yen fund to cover the privatized entities' potential losses in providing postal savings and life insurance services in less populated areas as part of their universal service obligations.

So they're being privatized but only partially deregulated. From what I can tell, the opening is also made for a version of 持ち合い (mochiai: "mutual-shareholding"), a Japanese business practice that may, as that page states, "[create] a sense of shared responsibilities and obligations of each other's business success" but also makes you wonder what the point of having four separate companies would be.

Japan Post reform is still in process. Yesterday morning, the big news was of PM Koizumi's growing impatience with the reform panel:

The outline is based on a plan to place the postal services under a holding company in April 2007 after dividing them into four units--mail delivery, counter services, postal banking, and postal insurance.

Government shares in the postal bank and the postal insurance firm would be sold by the end of March 2017.

The outline also includes the following points to gain LDP support in the negotiations:

-- The related bills will spell out that post offices will be established around the country to provide nationwide services and a ministerial ordinance will be issued to require post offices in remote areas not to close.

-- To maintain financial services, the postal bank and the postal insurance firm will be required to contract the counter services firm as their agent for the time being as a condition for receiving a license. After 2017, a fund to cover deficits in provincial areas will be established.

-- A system will be introduced to select postmasters for special post offices.

How to divide up Japan Post's current services has been one of the major remaining sticking points. The proposal is supposed to be submitted to the LDP on Monday.