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UNCLAS SECTION 01 OF 03 TOKYO 002246 
 
SENSITIVE 
SIPDIS 
 
USTR FOR AUSTR CUTLER, BEEMAN, LEE, AND HOLLOWAY 
NSC FOR LOI, RUSSELL 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV JA
SUBJECT: INSURANCE:  DPJ'S FIRST STEPS ON POSTAL REFORM 
 
REF: A. TOKYO 2079 
     ¶B. TOKYO 1329 
     ¶C. TOKYO 1106 
     ¶D. TOKYO 706 
     ¶E. TOKYO 555 
 
SENSITIVE BUT UNCLASSIFIED.  CONTAINS BUSINESS SENSITIVE 
INFORMATION. 
 
¶1.  (SBU) SUMMARY:  The Democratic Party of Japan (DPJ)-led 
government appears likely to take several steps to halt, and 
in some cases reverse, the postal privatization process. 
Although no official statement has been made, by all accounts 
the government plans to pass a bill in the extraordinary 
session of the Diet, which will most likely occur in mid to 
late October, to stop the sale of stock for Japan Post 
Holdings, Japan Post Bank, and Japan Post Insurance.  The 
coalition government also plans to submit a bill at an early 
stage to conduct an overall review of postal services.  The 
Embassy continues to make clear in its discussions with GOJ 
officials the USG does not take a position on postal 
privatization, but that we remain concerned about how changes 
in the privatization process could affect the competitive 
environment for banking, insurance, and delivery services and 
further delay GOJ commitments to create a level playing field 
for U.S. and other private companies.  END SUMMARY. 
 
PNP PUSHES TO LEAD ON POSTAL ISSUES 
----------------------------------- 
 
¶2.  (SBU) Just two days after Japan's new coalition 
government, led by the DPJ, took power, conflict arose 
between DPJ Minister of Internal Affairs and Communication 
(MIC) Kazuhiro Haraguchi and People's New Party (PNP) leader 
and Minister for Financial Affairs and Postal Reform Shizuka 
Kamei.  Haraguchi, whose ministry has the statutory authority 
to regulate postal issues, in a live television broadcast on 
the night of September 17, presented a plan for review of the 
postal service privatization.  Kamei retorted in an interview 
following a Cabinet meeting the next day that he is the one 
in the Cabinet responsible for postal matters.  In response, 
Haraguchi reportedly said that his plan was just one example 
of what could be done.  The early conflict between Kamei and 
MIC Minister Haraguchi caught most observers by surprise, 
since Haraguchi was rumored to be one of the DPJ members 
closest to the PNP and to have similar views as the PNP on 
postal reform.  Both Haraguchi and Kamei are apparently in 
agreement, however, with PM Hatoyama in calling for the 
resignation of controversial Japan Post Holdings President 
Yoshifumi Nishikawa (Refs B-C). 
 
¶3.  (SBU) PNP Secretary General and Upper House member 
Shozaburo Jimi told the DCM September 22 the PNP planned to 
lead within the coalition as an "equal partner" to shift the 
course on postal privatization and to improve the lives of 
rural citizens.  Jimi claimed complete privatization of 
postal services would cause 10 million rural inhabitants to 
lose access to financial services and postal delivery. 
Although the PNP would ideally like to re-nationalize all 
parts of the postal business, Jimi said his party realizes 
this would not be possible.  Therefore, the PNP will work to 
make certain that integrated postal delivery, banking, and 
insurance are available nationwide. 
 
¶4.  (SBU) In a separate meeting with Emboffs, DPJ Upper House 
Member and Director of the Committee on Financial Affairs 
Tsutomu Okubo confirmed the DPJ's one-year economic and 
financial policy is aimed at capturing the Upper House next 
July.  He said halting the stock sale for the various postal 
corporations is a concession being made to the PNP to ensure 
consumer welfare measures rapidly pass in the Diet.  Okubo, 
who has been in touch with U.S. insurance representatives in 
Japan, explained the coalition government will focus on 
 
TOKYO 00002246  002 OF 003 
 
 
delaying the stock sale; restructuring Japan Post Holdings by 
integrating Japan Post Network (post offices) and Japan Post 
Service (mail and parcel collection and delivery) directly 
into the holding company while keeping Japan Post Bank and 
Japan Post Insurance as independent corporations under Japan 
Post Holdings; and removing President Nishikawa.  Although 
the PNP objects to any privatization steps, Okubo said the 
DPJ's plan is for 50 percent of the shares to remain with the 
government (COMMENT:  Press reports indicate the government 
plans to hold more than two-thirds of Japan Post Holdings' 
stock and for Japan Post Holdings to hold at least two-thirds 
of the stock of Japan Post Bank and Japan Post Insurance. 
END COMMENT.) 
 
U.S. INDUSTRY LOOKING FOR A SILVER LINING 
----------------------------------------- 
 
¶5.  (SBU) The DPJ made clear during the Lower House election 
campaign that it would take steps to halt and review postal 
privatization.  U.S. insurance industry representatives were 
therefore not surprised that the new government moved quickly 
to introduce a bill to halt the Japan Post Holdings, Japan 
Post Bank, and Japan Post Insurance stock sales.  Some 
believe, however, the complexity of legislation needed to 
reorganize Japan Post Holdings may take more time to develop 
and will not be ready until next year's regular Diet session. 
 Industry is looking for a silver lining in the changes.  One 
company's representative speculates the DPJ's stated 
intention to move from bureaucrat-led to elected-leader 
policy could be a positive development.  Some also hope the 
threat of new insurance products being approved for sale by 
Japan Post Insurance would recede during the review period 
while officials consider the various realignment options 
(Refs D-E). 
 
¶6.  (SBU) While U.S. industry expected Kamei to get a cabinet 
appointment, most thought it would be the MIC Minister 
portfolio (Ref A).  During the Koizumi Administration, Heizo 
Takenaka served as both the MIC Minister and the State 
Minister for Privatization of the Postal Services.  It 
therefore came as a surprise when Kamei was given the 
Financial Affairs portfolio in addition to the more expected 
State Minister for Postal Reform position.  Industry expects 
Kamei to push the PNP's single-issue agenda on postal reform 
aggressively, since it is widely speculated the DPJ will drop 
its coalition partners should it win an outright majority in 
the 2010 Upper House elections. 
 
BUREAUCRATS BIDING THEIR TIME 
----------------------------- 
 
¶7.  (SBU) Recent inquiries to MIC and the Financial Services 
Agency have been met with uncertainty and cautious replies 
that it will take time to see how postal reform proceeds.  A 
contact at the Office for the Promotion of Privatization of 
Postal Services (OPJP) was more forthcoming and said that 
since there has been no official plan released, there have 
been no instructions given to the various bureaucrats 
traditionally tasked with working on this issue.  They, like 
everyone else, are simply following the stories in the press. 
 The contact added there appear to be many competing plans, 
some advanced by parties, some advanced by individual 
politicians, to address postal reform.  He noted, however, 
that the three coalition parties had established a Postal 
Reform Consideration Team, but provided no further details 
about its approach or timelines for decision-making. 
 
COMMENT 
------- 
 
¶8.  (SBU) We continue to make clear in our discussions with 
GOJ officials that the USG does not take a position in favor 
or in opposition to the postal privatization, but we remain 
 
TOKYO 00002246  003 OF 003 
 
 
concerned about how changes in the privatization process 
could affect the competitive environment for banking, 
insurance, and delivery services.  We also continue to 
emphasize the importance of equal regulatory requirements 
between Japan Post Insurance and private sector companies, 
especially before Japan Post Insurance offers any new or 
altered products. 
ROOS