The reawakening of Japan's economy following more than a decade of decline comes after a series of major economic reforms, but the biggest change may be yet to come.
Privatization of Japan's massive postal savings system, which holds savings and insurance assets valued at $3 trillion for 85% of Japan's population, is set to take place over the next 12 years. The proposal, overwhelmingly endorsed by voters in a September special election, will shift a mountain of assets from government control to private markets. Wharton faculty say the long timetable for carrying out the plan -- which stretches to 2017 -- may help blunt political opposition that is likely to continue, even after the process starts.
Olivia Mitchell, Wharton professor of insurance and risk management, predicts that postal savings reform will be another major step in unwinding the Japanese government's control over the nation's economy. By freeing money up for more private-sector investment, savers could reap better returns and businesses are likely to find more capital available for expansion and other financing needs.
"The Japanese postal service is one of the biggest financial institutions in the world; some people say it is the biggest," says Mitchell. "What's clear is that it is an institution with very far-reaching tentacles throughout Japanese society and the Japanese economy. So discussion of privatizing it bodes well for the modernization of financial markets in Japan."
The reform plan calls for Japan Post to be divided into four pieces: over-the-counter service, mail delivery, savings and insurance. The division would not take place until 2007 and even then, the four parts could remain owned by a holding company that would be 100% controlled by the government for another decade.
In 2017, according to the new law, the savings and insurance units would be released from government control and become private corporations through the sale of their assets on the stock market.
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