Officials at Kasumigaseki Post Office serve customers in Chiyoda Ward, Tokyo.
The postal reform bills aimed at transforming Japan Post Group into three entities are certain to be shelved until the next ordinary Diet session as it has become impossible to pass them during the current session, which ends on Aug. 31.
How the bills will be handled in the next Diet session under a new administration after Prime Minister Naoto Kan resigns remains very fluid.
The delay is expected to further hinder the management of Japan Post Group.
The Democratic Party of Japan and People's New Party have been reviewing the postal system for some time with the aim of drastically modifying changes made under the administration of former Prime Minister Junichiro Koizumi of the Liberal Democratic Party.
The government submitted the bills to an ordinary Diet session in April 2010, aiming to pass them into law in June of the same year. But the bills were set aside when the Social Democratic Party left the ruling coalition over the issue of the U.S. Futenma military base in Okinawa Prefecture.
The government submitted the bills to the Diet again in October, but deliberations were postponed following stiff resistance from opposition parties and the March 11 disaster.
The central pillar of the bills is to integrate Japan Post Service Co. and Japan Post Network Co. into their parent corporation, Japan Post Holdings Co., and place Japan Post Bank Co. and Japan Post Insurance Co. under the umbrella of Japan Post Holdings.
Japan Post Service, which delivers letters, postcards and small packages, posted 89 billion yen in ordinary losses in fiscal 2010, which ended in March 2011, and the Japan Post Network, which earns commissions by handling over-the-counter operations of Japan Post Service, Japan Post Bank and Japan Post Insurance, saw its ordinary profit decrease to 58.2 billion yen in fiscal 2010, down 25 yen billon from fiscal 2008.
The bills would allow Japan Post Bank to double its current deposit cap to 20 million yen, and Japan Post Insurance to increase the upper limit on postal insurance payouts by 12 million yen to 25 million yen per policy.
The government has decided to take these steps as the two companies earn sizable profits. Japan Post Bank posted an ordinary profit of 526.5 billion yen, and Japan Post Insurance posted 422.2 billion yen in profits in fiscal 2010.
The bills also allow them to begin new business activities such as mortgage lending and medical insurance for cancer and other diseases.
The government hopes to raise the profit of the Japan Post Group itself, and aims to maintain the nationwide network of post offices, which represents a secure support base for an election.
Meanwhile, it is unclear if the PNP will remain in the ruling coalition given that a plan has been floated to form a grand coalition of the DPJ, LDP and New Komeito.
As the bills remain stalled, Japan Post Bank and Japan Post Insurance are experiencing severe management problems.
The number of Japan Post Insurance policy subscriptions have dropped by about 50 percent to 41.68 million as of the end of March, compared with 10 years ago.
"If the number of policies drop below 30 million, it will become difficult to pay expenses [such as personnel expenses]," Japan Post Insurance Chairman Josuke Shindo said.
One factor behind the decrease is the growing share of the market taken by major banks and other institutions selling savings-type insurance and investment trust products, while interest paid by Japan Post Insurance on old-age endowment policies--a key product--remains low.
Cash in reserve in postal savings, including unpaid interest, was 175 trillion yen as of the end of March, down more than 30 percent from its peak at 260 trillion yen at the end of March 2000.
After high interest-yielding postal term deposits mature, the money flows into products of major financial institutions.
In fiscal 2010, the ordinary profit of the Japan Post Bank was 526.5 billion yen, nearly 80 percent of the ordinary profit of the Bank of Tokyo-Mitsubishi UFJ, which posted 657.9 billion yen on nonconsolidated basis in the same fiscal year.
However, the bank, which uses about 80 percent of its funds to buy government bonds, earns most of its profit by buying and selling the bonds.
Therefore, if the bond market worsens, the bank's revenue will plunge.
If the postal reform bills are passed into law, Japan Post Group is expected to increase its earning capacity by offering financial services such as mortgage loans through the post office network.
However, there is already intense competition in the mortgage loan market, which includes Internet banks.
If the reforms are delayed further, Japan Post Group may lose a chance to increase its earnings.
The early passage of the bills is crucial for Japan Post Group's management.
