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UNCLAS SECTION 01 OF 02 TOKYO 002432 
 
SENSITIVE 
SIPDIS 
 
STATE FOR E, EEB AND EAP/J 
NSC FOR LOI, RUSSELL 
USTR FOR AUSTR CUTLER, BEEMAN, LEE, AND HOLLOWAY 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV JA
SUBJECT: GOJ BACKTRACKS ON POSTAL PRIVATIZATION, CHANGE OF 
LEADERSHIP AT JAPAN POST 
 
REF: A. TOKYO 2246 
     ¶B. TOKYO 1329 
     ¶C. TOKYO 1106 
 
SENSITIVE BUT UNCLASSIFIED.  CONTAINS BUSINESS SENSITIVE 
INFORMATION. 
 
¶1.  (SBU) SUMMARY:  The GOJ announced plans to halt postal 
privatization and undo reforms undertaken by the Koizumi 
administration in 2007, following an October 20 cabinet 
decision.  Notably, the GOJ intends to introduce legislation 
in the regular Diet session scheduled for January 2010 to 
abolish the current law on postal privatization and to 
legally guarantee universal basic postal savings and postal 
life insurance services.  The cabinet decision led to the 
expected resignation of Japan Post Holdings Co. President 
Yoshifumi Nishikawa, who will be replaced by former Ministry 
of Finance Administrative Vice Minister Jiro Saito.  END 
SUMMARY. 
 
DOING WHAT THEY SAID THEY WOULD DO 
---------------------------------- 
 
¶2.  (SBU) The coalition Cabinet of PM Hatoyama announced a 
basic policy to reform Japan's postal service October 20, 
three days ahead of schedule.  Under the policy the 
government will make basic postal, postal savings, and postal 
life insurance services available throughout the country by 
means of the nationwide network of post offices; utilize the 
network of post offices as the base for one-stop 
administrative services; legally guarantee universal basic 
postal savings and postal life insurance services; review the 
current four-company system under a holding company and 
reorganize the business model while keeping the reorganized 
entity a joint-stock company in order to ensure flexible 
management; obligate the reorganized Japan Post Group to 
disclose more information and strengthen its accountability; 
and abolish the current law on postal privatization.  One 
press report said that enacting all of these changes will 
require amendments to hundreds of laws and could take nearly 
two years to complete. 
 
¶3.  (SBU) An insurance industry representative told Econoff 
the Democratic Party of Japan (DPJ) is "doing what they said 
they would do."  He characterized the changes as close to the 
hearts of DPJ policy makers, but he did think the DPJ 
leadership was letting People's New Party leader and Minister 
for Financial Affairs and Postal Reform Shizuka Kamei go a 
little further and faster than what had been expected. 
Industry representatives do not view the Cabinet announcement 
as all bad news.  The legislation will come early next year 
and will include an overall review of postal privatization. 
One representative said this will be a key time to drive home 
the point that a level playing field is required between 
Japan Post Insurance and the private sector. 
 
JAPAN POST GROUP LEADERSHIP CHANGE 
---------------------------------- 
 
¶4.  (SBU) After the Cabinet decision and as expected, 
Yoshifumi Nishikawa (71), President of Japan Post Holdings 
Company, announced he will resign his position October 28. 
Nishikawa's leadership became increasingly tenuous after he 
came under attack for the proposed sale of Japan Post's 
resort network early this year (Refs A-C).  Both Hatoyama and 
Kamei repeatedly called for Nishikawa's resignation after the 
DPJ took power.  In his press conference, Nishikawa, who had 
been appointed by former PM Koizumi, said he was resigning 
because of the "wide gap" between the company's business 
strategy as he had designed it and the new government's plans. 
 
 
TOKYO 00002432  002 OF 002 
 
 
¶5.  (SBU) On October 21, the government announced that former 
Ministry of Finance (MOF) Administrative Vice Minister Jiro 
Saito (73) will replace Nishikawa.  Saito is said to be close 
to DPJ Secretary-General Ichiro Ozawa.  Press reports say 
during Saito's term at MOF he devised a way to finance public 
works projects via the sale of government-owned Nippon 
Telegraph and Telephone Corporation shares.  This background 
would be consistent with Kamei's reported intention to use 
income from banking and insurance services to support rural 
regions and small and medium-sized businesses.  The 
opposition Liberal Democratic Party (LDP) and some in the 
press have said Saito's appointment is hypocritical since the 
DPJ opposed the appointment of another former MOF official as 
a Bank of Japan governor last year when it was the minority 
party.  Also noteworthy, Kamei reportedly said Saito would be 
good at developing new business for the companies in the 
group. 
 
COMMENT 
------- 
 
¶6.  (SBU) While the Cabinet's decision is consistent with 
prior statements, the breadth of the proposed changes 
regarding postal privatization comes as a surprise.  The 
Koizumi privatization reforms, including the promise of 
moving large amounts of resources from the public sector to 
the private sector, are dead.  The new DPJ-led government 
clearly believes that the Koizumi reforms were neither good 
for the people, nor what the people wanted.  As we have 
consistently said, this is a choice for Japan to make, and 
the USG neither favors nor opposes privatization.  During the 
review period, we must continue to emphasize the importance 
of a level playing field between Japan Post group companies 
and the private sector.  We must also remain vigilant 
regarding the approval of any new products during this 
tumultuous period. 
ROOS