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Japan

Feb 26, 2005

Postal privatization to boost profit: Government

TOKYO - Postal privatization, which is set to begin in April 2007, will raise postal operations' annual profit by roughly 600 billion yen (US$5.7 billion) after 10 years, according to estimates the government provided during a meeting Thursday with the ruling Liberal Democratic Party (LDP).

The estimates are aimed at allaying concerns among LDP lawmakers who oppose the postal privatization plans.

According to the government's figures, the privatized postal entities will generate a pretax profit of about 1 trillion yen in fiscal 2016. This runs counter to some LDP members' contention that earnings will deteriorate after privatization and spur closures of regional post offices operated by independent contractors.

But the figures, which are based on plans for new businesses such as international distribution and loans, tend to be somewhat optimistic. For instance, even if the privatized postal entities pursue international distribution - an area in which European and US businesses already have a head start - earnings may be hard to come by.

The postal savings entity is expected to sell relatively risky financial products, such as asset-backed securities, but its ability to market products that it currently does not handle remains a question mark.

Also, the government based its estimate on a scenario of full-fledged privatization. But under the postal privatization law slated for submission to the current Diet session, the business operations of the postal savings and postal insurance arms are to be restricted in certain areas due to indirect government financing that will remain for 10 years.

In response to the estimates, LDP officials at the meeting criticized the government's assessment as self-serving.

The government plans to issue new figures at a meeting scheduled for next week.

(Asia Pulse/Nikkei)

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