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Cablegate: Insurance: Delay of Japan Post Ipo Likely

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RR RUEHFK RUEHGH RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #2079 2520701
ZNR UUUUU ZZH
R 090701Z SEP 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 6067
INFO RUEHBJ/AMEMBASSY BEIJING 0887
RUEHFR/AMEMBASSY PARIS 6562
RUEHUL/AMEMBASSY SEOUL 7548
RUEHFK/AMCONSUL FUKUOKA 6367
RUEHHK/AMCONSUL HONG KONG 6840
RUEHNAG/AMCONSUL NAGOYA 3740
RUEHNH/AMCONSUL NAHA 8704
RUEHOK/AMCONSUL OSAKA KOBE 0183
RUEHKSO/AMCONSUL SAPPORO 6884
RUEHGH/AMCONSUL SHANGHAI 0609
RUEHIN/AIT TAIPEI 7465
RUEHBS/USEU BRUSSELS
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHDC
RUEATRS/TREASURY DEPT WASHDC

UNCLAS TOKYO 002079

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: DELAY OF JAPAN POST IPO LIKELY

1. (SBU) Japan Post watchers are trying to predict what will
happen to the privatization process as the Democratic Party
of Japan (DPJ) forms a coalition government with the People's
New Party (PNP), which strongly opposes the postal
privatization process, and the Social Democratic Party. The
coalition announced it would introduce a bill soon after
taking power to halt the sale of stock held by Japan Post
Group; under current law, the initial public offering (IPO)
must occur by 2011 at the latest, or if possible 2010. As a
member of the coalition government, PNP President Shizuka
Kamei is up for a cabinet-level position. Many believe he is
likely to be appointed Minister of Internal Affairs and
Communications (MIC) because of this ministry's influence on
postal matters and because of the single-issue focus of the
PNP.

INVESTMENT BANKERS BELIEVE PRIVATIZATION WILL CONTINUE

2. (SBU) Japan-based investment bankers, Morgan Stanley's
Robert Feldman, Credit Suisse's Hiromichi Shirakawa, and
CLSA's David Cotterchio, in a conversation with the DCM on
September 8 predicted that Japan Post privatization would
continue, but that the DPJ would delay the IPO. Feldman
argued the DPJ will not want to unwind the privatization
process because Japan Post employees are now private sector
employees and thus free of restrictions from engaging in
political activities (as of October 1, 2007, the official
date of privatization, Japan Post Holdings had over 240,000
employees on a consolidated basis). With an eye on winning
the Upper House election in 2010, DPJ kingmaker and Party
Secretary-General Ichiro Ozawa worked to mobilize these
workers in support of the DPJ election machine.

3. (SBU) Cotterchio agreed, adding that the DPJ will make
efforts to consolidate the post office (Japan Post Network)
and mail delivery (Japan Post Service) parts of the Japan
Post Holding Company into one firm so that 90 percent of
their employees fall under one company. This restructuring
will result in Japan Post effectively having three firms,
which Cotterchio believes could be more efficient. Feldman
agreed with Cotterchio that the reintegration of Japan Post
Network and Japan Post Service is likely, saying that this
would allow for easier cross-subsidization of the inefficient
Japan Post Network. He also believes the coalition
government will seek to remove the controversial head of
Japan Post Holdings Yoshifumi Nishikawa.

3. (SBU) Shirakawa agreed with both analyses, asserting the
DPJ stance to postpone the IPO is a concession to the PNP and
its anti-privatization policy. He believes the DPJ will
accommodate the PNP until the Upper House elections in June
2010, when, if results go according to the DPJ's plan, the
party will win a majority in the election. This will enable
the DPJ to jettison its coalition partners and their policy
objective of rolling back Japan Post privatization. The
investment bankers said they have all separately heard the
rumor that PNP President Kamei is likely to be appointed MIC
Minister, a concern for privatization supporters. All three
regret the negative effect halting privatization would have
and potential investors.

MINISTER NIKAI: "PRIVATIZATION CAN'T BE WALKED BACK"

4. (SBU) METI Minister Toshihiro Nikai, Prime Minister
Koizumi's Postal Privatization czar in 2005, told the
Ambassador on September 7 the DPJ can't "walk back"
privatization. He contends the process Prime Minister
Koizumi started is too far along and that the DPJ, which will
delay the IPO, has no intention of reversing course. It is
only one "small" political party that is opposed to
privatization and is not a large enough part of the DPJ
coalition to reverse the policy, he said.
ROOS

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