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. Last Updated: 07/27/2016

Koizumi Bets on Postal Reform

TOKYO -- Japanese Prime Minister Junichiro Koizumi staked the future of his government Wednesday on the battle to privatize the massive postal savings system, saying rejection of the package by the upper house of parliament would equal a no-confidence vote.

Legislation to split up and sell off the postal system, which handles trillions of yen in savings and insurance deposits, narrowly passed the powerful lower house on Tuesday amid deep divisions in Koizumi's ruling Liberal Democratic Party.

The LDP has a firm majority in the lower house, but the battle was expected to be tougher in the largely ceremonial upper house, where the Liberal Democrats dominate only by virtue of a coalition with the Komeito party.

When asked by reporters Wednesday whether rejection of the package by the upper house would be tantamount to a no-confidence vote on his government, Koizumi said: "Yes."

"I expect lower house members will make preparations while I'm away so that we can enter full deliberations on the bills beginning next week, after I return," Koizumi said before boarding a plane to Scotland, where he will attend the Group of Eight summit. He returns to Japan on Saturday.

Rejection in the upper house would not doom the legislation, since the lower house is powerful enough to override that.

But Koizumi has vowed to push the measures through in the current session, which ends Aug. 13. A last-minute defeat in the upper house would embarrass the prime minister and mean the bills would have to wait for an extraordinary session of parliament.

Japan's postal service controls 330 trillion yen ($3 trillion) in savings and insurance deposits, and reform proponents say privatization would make more efficient use of those funds for investment.

The bills would privatize the postal system by 2017. They call for dividing state-run Japan Post into separate businesses for mail delivery, banking services and insurance starting in 2007. A fourth company would handle employee salaries and manage post office properties.

All four companies would be grouped under a holding company at first, but the umbrella organization would have to sell its shares in the banking and insurance enterprises by 2017.

The package has deeply divided the LDP, and the bruising battle over the reforms could erode Koizumi's standing.

"Such a large-scale revolt in a vote is unheard of, and it could even lead to a weakening of the prime minister's political base," Japan's largest daily, Yomiuri Shimbun, said in Wednesday's editorial.

Excluding its insurance accounts, Japan Post boasts savings deposits alone of 211 trillion yen ($1.9 trillion) -- some three times those of Mitsubishi Tokyo Financial Group, which at 67 trillion yen is Japan's biggest private holder of deposits.

The postal system has some 25,000 branches around the country, while Japan's seven nationwide banks combined have only 2,606 branches.