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Postal Privatization Plan Revamped Fears Voiced Over Huge Yucho Funds by Hiroshi OKABE the Planned Privatization of Japan’S Nesses

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Postal Privatization Plan Revamped Fears Voiced Over Huge Yucho Funds by Hiroshi OKABE the Planned Privatization of Japan’S Nesses TOPICS Postal Privatization Plan Revamped Fears Voiced over Huge Yucho Funds By Hiroshi OKABE The planned privatization of Japan’s nesses. At that time, the government the government will effectively guarantee postal system has changed course. At hoped a greater sum of yucho funds deposits up to 20 million yen because it the end of April, the government of then would flow into the private sector under will remain the postal bank’s major Prime Minister Yukio Hatoyama, who the newly created financial framework. shareholder. This stirred deep concerns doubled as president of the Democratic Yet, things changed dramatically with the among commercial banks that the dou- Party of Japan (DPJ), approved a bill to birth of the DPJ-led government in bled postal deposit cap would prompt scale back the privatization process. The September 2009. As the privatization pro- depositors to shift their money to the bill calls for reshaping the current five- gressed, concerns grew that regional postal bank. The higher deposit limit is company structure of the Japan Post postal services would be undermined if “absolutely unacceptable,” said Masayuki Holdings Co. group into three companies the privatization was pursued as initially Oku, chairman of the Japanese Bankers on October 1, 2011. It also obligates the projected, eventually leading to revamp- Association and president of Sumitomo postal group to offer “universal” banking ing the postal privatization program. Mitsui Banking Corp. Echoing the view, and insurance services throughout the On top of the managerial reorganiza- Tadashi Ogawa, chairman of the country on top of mail services. With this, tion of Japan Post Holdings, the bill calls Regional Banks Association of Japan the government intends to revitalize flag- for boosting the deposit cap and the life and president of the Bank of Yokohama, ging regional economic activities. insurance coverage limit to 20 million yen said such a step “could greatly affect Although the political situation is uncer- and 25 million yen, respectively, from 10 smaller financial institutions and damage tain with the Hatoyama Cabinet stepping million yen and 13 million yen. Further, stability in the regional financial system.” down, the review of the postal system the insurance unit is allowed to offer new Also, there are problems with ways of reform appears to be on course. The insurance products such as cancer insur- operating the huge postal funds. realignment, however, invited criticisms ance. Moreover, the bill seeks to signifi- Currently, 80% of postal savings and 70% that the postal bank will “oppress private cantly ease requirements for Japan Post of postal insurance premiums are invest- companies” since it calls for raising the Bank and Japan Post Insurance to ed in government bonds, and thus yucho bank’s deposit cap – the upper limit on launch new services; all they have to do funds have played a certain role in ensur- postal savings subject to implicit govern- is to undergo examination by an indepen- ing stable market absorption of massively ment guarantee – to a level double the dent panel of experts and simply report to issued government bonds. However, this cap at private banks. Commercial banks the government, rather than seek its means that household financial assets are worried that a huge amount of yucho approval. The government will keep more are left unused for effective economic (postal savings) money could distort the than one-third of Japan Post Holdings activities. To rectify the situation, the gov- flow of funds. shares for the time being while putting on ernment is studying the possibility of For a lengthy period, Japan’s mail, hold earlier plans to fully privatize Japan appropriating yucho funds for three main postal savings and postal life insurance Post Bank and Japan Post Insurance. areas: helping finance infrastructure businesses had been run by the govern- The holding company will continue own- improvement projects, largely abroad, ment, led mostly by the conservative ing more than one-third of the equity in such as construction of high-speed rail- Liberal Democratic Party (LDP). About a each of the two financial units, permitting way networks, purchasing foreign bonds, decade ago, however, Junichiro Koizumi, them to keep operating under its wing. and extending loans to individuals. then prime minister and LDP president, Japan Post Bank and Japan Post Of these, however, foreign investments spearheaded a privatization drive under Insurance are mammoth financial institu- and loans could become irrecoverable, the slogan: “Let the private sector do what tions, with their combined financial and investments and loans for public it can.” In line with this policy, the LDP-led resources amounting to about 300 trillion facilities in Japan may be criticized as the administration in October 2007 adopted a yen. The assets of Japan Post Bank revival of the Fiscal Investment and Loan management system under which four alone exceed the combined sum of two Program (FILP). Often called the nation’s companies – Japan Post Service Co., Japanese megabanks – Mitsubishi UFJ second budget because of its large size, Japan Post Network Co., Japan Post Financial Group and Sumitomo Mitsui FILP used to channel money from postal Bank Co. and Japan Post Insurance Co. Financial Group. Under the so-called savings and public pension funds into – operate under the umbrella of Japan payoff scheme, the government guaran- public works projects and loans, some of Post Holdings, which is fully owned by the tees bank deposits of up to 10 million which turned out unrecoverable. With a government. This was meant in part to yen per person per bank in the event of host of touchy issues in the background, avoid enormous yucho and life insurance bank failures. As for Japan Post Bank, the realignment of the postal privatization funds from being used for inefficient busi- depositors have a sense of security that program was off to a rocky start. 2 JAPAN SPOTLIGHT • July / August 2010 TOPICS Offshore Wind Energy Worth 10 Nuke Plants Eyed under Japan’s New Energy Strategy A high-powered Japanese govern- on a broad range of industries from steel ment panel has drafted a plan calling for to machinery and shipbuilding. the establishment by 2020 of massive Offshore wind farms do not pose typi- offshore wind farms capable of produc- cal hazards such as low-frequency noise ing at least 10 million kW of electricity, associated with windmills on the ground, equivalent to roughly 10 typical nuclear but they are thought to cost much more power plants in Japan. This plan means in installation and pose technological more than 2,000 windmills, each with a challenges in working out measures large rotor 120 meters in diameter, will against earthquakes and typhoons, and be in operation. It also envisages the in ensuring stable operation. If they are development of energy technology such to be built near a fishing ground, negoti- as power generation by oceanic waves ations will also be necessary with local and tidal current. fishermen. The plan, to be put into practice from In Japan, 14 windmills are now at 2012, is intended to reduce greenhouse work in the town of Setana on the north- gas emissions and reinvigorate econom- ernmost main island of Hokkaido and operators of offshore windmills. Also ic activity in coastal regions. The panel – other locations. But their combined out- under consideration is a plan to obtain the Comprehensive Ocean Policy put is still at a low level of about 11,000 assistance from laboratories and busi- Headquarters headed by Prime Minister kW, leaving Japan far behind European nesses experimenting with power gener- Yukio Hatoyama – is planning to work nations with combined power capacity of ation from waves and current. out financing aid and other specifics of more than 2 million kW. The US government plans to increase the plan in about one year. Oceanic wind The government’s financing support the power generation capacity of off- farms require technological expertise, will include subsidies and loans for shore wind farms up to the equivalent of including the development of large-scale research and development as well as for 54 nuclear power plants by 2030. The windmills and specialty vessels for construction of power generation equip- British government also has drafted an undertaking offshore construction. They ment. It may also envision a market for offshore windmill plan designed to cre- are thought to have a far-reaching impact power companies to buy electricity from ate 70,000 jobs. Racing for Asian “Beauty Markets” Major Japanese Cosmetics Firms Japan’s cosmetics giants are advanc- rock-solid one,” Shiseido President important to break into Asia’s beauty ing into emerging markets in Asia and Shinzo Maeda says. The company’s markets. other regions at an accelerating pace to plant in Vietnam got into full swing in It is in Russia that Japanese cosmet- gain a foothold for growth. By launching April to become a manufacturing base ics companies are pinning hopes on a brands exclusively for local markets, for its products aimed at Asia. slice of the pie as foreign rivals have not they are striving to grab market share Kanebo Cosmetics Inc. has also mar- come in yet, unlike in China where com- from European and US rivals that made keted brands intended exclusively for petition with European and US firms is earlier inroads. China and plans to increase sales there intense. Pola Inc., which established a Shiseido Co. has expanded its prod- to 8 billion yen in 2010 from 5 billion in subsidiary in Russia in 2007, opened uct portfolio for China. In March, the firm 2009. Similarly, Fancl Corp. plans to nine specialty stores there at the end of launched its DQ brand exclusively for double sales in China and Hong Kong to March.
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