The Lower House on April 12 passed a bill that will essentially reverse the privatization of postal services, despite growing U.S. criticism that the legislation would violate the proposed Trans-Pacific Partnership free trade agreement.
Prime Minister Yoshihiko Noda has been pushing for Japan to join the TPP. But the postal services review bill, expected to be enacted by the end of April, presents another obstacle in his quest.
In a meeting about the TPP in Washington on April 10, U.S. Trade Representative Ron Kirk told Foreign Minister Koichiro Genba that Congress and the U.S. insurance industry were strongly concerned about Japan’s postal privatization review bill.
The current postal privatization law, which took effect in 2005 under the administration of Prime Minister Junichiro Koizumi, requires Japan Post Holdings Co. to divest of all its shares in two financial subsidiaries under its umbrella--Japan Post Bank Co. and Japan Post Insurance Co.
But the review bill makes that provision a nonbinding target, meaning Japan Post Holdings can retain its shares in the companies.
The Japanese government can also retain its clout in Japan Post Holdings, in which it holds more than a one-third stake, enabling Tokyo to continue having indirect control over the two financial operators.
The United States fears that U.S. insurance companies will be put at a disadvantage in the Japanese market if a competitor is partly owned by the government.
“We have ensured consistency with our international pledges, including those with the World Trade Organization," Genba told Kirk.
However, the two sides remain far apart. They pledged to continue discussing the issue.
Within hours of Kirk's meeting with Genba, the review bill was approved in Tokyo by the Lower House Special Committee on Postal Reform.
The Lower House plenary session on April 12 passed the bill with a majority of votes, including those by the ruling Democratic Party of Japan, the main opposition Liberal Democratic Party and smaller opposition party New Komeito.
The three parties had jointly submitted the bill.
The Upper House is expected to pass the bill and enact it into law by the end of this month.
"The review bill may be an obstacle for joining the TPP," Koichi Yamauchi of Your Party said during the Lower House special committee session on April 11. "Has the Noda administration given up on joining? The moves are contradictory."
The review bill will also allow Japan Post Bank and Japan Post Insurance to enter new business ventures. The companies will only be required to notify the government of such plans, instead of obtaining government approval, after Japan Post Holdings has sold off more than half of its shares in the two companies.
Japan Post Bank and Japan Post Insurance will be able to expand their businesses as private companies do, while remaining under tacit government support and guarantees.
Such a system could lead to government business pressure in the private sector, a sharp contrast to what was originally envisioned under Koizumi’s postal privatization program.
During Japan-U.S. preliminary talks on Tokyo's participation in the TPP negotiations, Washington criticized the Japan Post Group for breaching the fairness of competition terms. Along with agriculture and the auto industry, the United States has counted the Japan Post Group issue as one of its three central domains of concern.
Japan Post Insurance is eager to sell products in the potentially lucrative cancer insurance sector, and the end of the government approval requirement will speed up that move.
Aflac Inc., the largest provider of supplemental insurance in the United States, has more than a 70-percent share in the cancer insurance market in Japan. The United States does not want that share come under threat from Japan Post Insurance.
(This article was compiled from reports by Shigeki Tosa, Satoshi Daiguji and Takashi Fukuyama.)
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