What are implications of LDP move to raise limit on Japan Post deposits?
Is there any convincing reason for hastening an increase in the deposit limit at the state-owned Japan Post Bank Co.? The wisdom of raising the ceiling is extremely questionable.
The Liberal Democratic Party has worked out a set of proposals that would increase the per-person deposit ceiling for postal savings from the current ¥10 million to ¥30 million in stages.
The LDP has also set out a policy seeking to boost the maximum amount of life insurance coverage at Japan Post Insurance Co. to ¥20 million from the present ¥13 million. The party is calling for the government to put the proposals into force by the end of September this year.
The proposals say the current limit on postal savings is excessively low when taking into consideration such factors as convenience for depositors. However, the additional Diet resolution that accompanied the April 2012 enactment of the revision of the Postal Service Privatization Law stated explicitly that the deposit cap will “not be raised at least for the time being.”
This move by the LDP is clearly running counter to the spirit of the additional Diet resolution.
Japan Post Group is a state-owned, privately run enterprise with the government holding 100 percent of its paid-in capital. Should Japan Post Bank scramble to increase its total deposits on the strength of an implicit government guarantee, there could be a drain on deposits at private-sector regional financial institutions that compete with the postal bank.
It is only natural that the banking world is strongly concerned that an increase in the postal bank deposit cap would squeeze private businesses in the financial sector.
The proposed deposit cap increase is also inconsistent with the business strategy of Japan Post Bank, which aims to facilitate collaboration with regional financial institutions through such means as formulating business ties with them. The government should carefully consider the advisability of the LDP proposals.
Japan Post Group is scheduled to list the stocks of three companies, Japan Post Holdings Co. and two units under its umbrella — Japan Post Bank Co. and Japan Post Insurance Co. — at the same time this coming autumn or later.
Post offices’ vote-drawing power
The pace at which the three companies’ stocks will be put on the market remains unclear, however. Fully privatizing Japan Post Bank and the others by selling all their stocks is just a nonbinding goal to strive for.
Preparations for raising the deposit limit should be launched only after the specific path toward full privatization of the Japan Post Group firms is clarified, after the sale of their shares to the public gets on track.
The outstanding deposits at Japan Post Bank are estimated at ¥180 trillion, nearly double the figure for any one of the nation’s private mega-banks.
Its huge sum of government bond holdings, which account for more than half the assets of the postal bank, has excessively low interest rates, making it difficult for the postal bank to secure profits from holding them.
If the postal bank continues increasing its savings without any promising outlook for using them, it will become even harder for it to manage its deposits.
Japan Post Co. President Taizo Nishimuro said at a news conference in April that although he believes the deposit cap should eventually be eliminated, he wondered whether abolishing the ceiling “would really be a move in the right direction when viewed from the perspective of the financial world as a whole.”
However, the National Association of Postmasters (Zentoku), the nationwide organization of local post office chiefs, has been seeking a higher cap on the deposits, because raising the cap will increase commission revenues for individual post offices.
In the 2013 House of Councillors election, a candidate from Zentoku ran in the proportional representation contest on an LDP ticket and won with the largest number of votes of any LDP candidate.
The ruling party subsequently included a review of the postal bank deposit cap in the electoral platform in last year’s House of Representatives election.
The LDP may be eager to see post offices give full play to their vote-gathering abilities in next year’s upper house election as well.
The party’s recent proposals may have been designed to serve such a purpose.
(From The Yomiuri Shimbun, June 29, 2015)