Japan PM's postal reform plans set to clear final hurdle
(AFP)
Updated: 2005-10-14 10:27

Plans to privatize Japan's three-trillion-dollar post office are set to clear a final hurdle as upper-house lawmakers vote on the core of Prime Minister Junichiro Koizumi's reform agenda.

The bills, the trigger for last month's election here, sailed through the more-powerful lower house three days earlier in the face of a weakened opposition and with support from former postal rebels in Koizumi's own party.

If the bills are enacted, as widely expected, Japan Post will be privatized in October 2007, ending a decades-long campaign by Koizumi.

Japan's Prime Minister Junichiro Koizumi speaks at a special parliamentary committee on postal privatisation at the upper house in Tokyo October 13, 2005. The upper house is expected to pass bills on Friday to privatise Japan Post, which includes the world's biggest deposit-taking institution.[Reuters]

Even as a young parliamentary vice minister of finance in 1979, Koizumi championed privatizing the post office, whose 25,000 branches are used by many Japanese to deposit savings and insurance.

The 63-year-old premier sees the legislation as essential to his wider efforts to slim down a bloated bureaucracy, open up government-dominated sectors to competition and stimulate the economy after a decade-long slump.

Japan's public debt is now equivalent to over 160 percent of national output after the government pumped trillions of yen into the economy with a series of fiscal stimulus packages after the "bubble economy" burst in the early 1990s.

On Wednesday the lower house approved the bills by a large majority, a month after the maverick prime minister trounced his opponents in a snap election that doubters at first said was political suicide.

On his first attempt, Koizumi's postal plans squeaked through the lower house by just five votes but were shot down by upper house rebels in his own Liberal Democratic Party.

This time round it looks like a different story, with a significant number of former rebels backing the bills in the lower house, which approved the resubmitted bills by 338 to 138.

As well as delivering mail, Japan Post is in effect the world's biggest financial institution. Most of the money is invested in Japanese government bonds, helping fund often wasteful public-works projects, Koizumi argues.

Economists say the legislation could reduce the extent of wasteful expenditure as the flow of money into government bonds could decrease after privatization.

But some express concern that the pace of the reform may be slow as sustained government guarantees could continue to help the privatized entity attract household savings.