Privatisation will also take time: postal savings and insurance have to be scaled down first.
ECONOMIST: Glacial moves in the reform of the postal savings giant
The report criticizes back-tracking on the earlier (Koizumi government) decision to privatize the Japan postal savings system.
Even splitting postal savings into 20 pieces would create big institutions that would dwarf many regional banks.
ECONOMIST: Glacial moves in the reform of the postal savings giant
Another large chunk (3.7 trillion rupees) is in postal savings and pension funds, on which the government guarantees a high fixed return.
With the looming privatization of its postal savings bank (and let's have it be a real privatization, with open competition for savings), this is Japan's moment.
The main reason is that, fearful of the health of the banks, Japanese savers have increasingly been squirrelling money away in the (government-guaranteed) postal savings system instead.
" Postal Savings in Japan and Mortgage Markets in the US", by Thomas Cargill and Hall Scott, Federal Reserve Bank of San Francisco, Economic Letter March 2006.
But privatising the postal savings and insurance business was seen as the best way to wrestle these vast funds away from the finance ministry's Trust Fund Bureau.
To which we can add government-run entities that compete with or have effectively crowded out private sector competitors (most egregiously the state-run postal savings bank and insurance entities), and the direct spending on public works.
But the ideas that have leaked into the Japanese press suggest that the government intends to obtain funds mainly by borrowing from the state-run postal savings system, and to use them in two different ways.
Ironically, the government's failure to restore public confidence in banks may be good news for its own postal savings system, which, as the world's biggest financial institution, controls about a third of the savings market and is badly in need of reform.
This avoids enraging 1.8m postal-savings depositors, or breaking a law prohibiting lending to the private sector.
Even Germany's postal-savings bank is making noises about becoming an Internet-finance leader.
It would be able to borrow money, with a government guarantee, either from the Bank of Japan or from the finance ministry's trust-fund bureau, which manages postal-savings money.
Any attempt to end the privileges of Japan's farmers, shopkeepers or postal workers (the privatisation of the post office, with its vast savings deposits, is a pet project of Mr Koizumi's) will not go down well.
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