- - Sunday, November 8, 2015

ANALYSIS/OPINION:

This week Japan Post Holdings, where many Japanese put their household savings, began the privatization of one of the largest accumulations of capital in the world. The 144-year-old Japanese postal system, originally modeled after state corporations in France and Germany, sold shares in Japan Post Bank, which holds $1.5 trillion in Japanese household savings deposits, and Japan Post Insurance. Domestic and foreign buyers were so excited that the value of shares of Japan Post Insurance quickly surged 56 percent over the initial offerings.

Privatizing the banking and insurance operations of a network of 24,000 branches and 27,000 ATMs, reaching into every corner of the island country, is an enormous effort. The directors of postal bank operations have traditionally put savers’ deposits into Japanese government bonds, which at the moment yield a nominal interest rate of 0.315 percent. Very little of the portfolio had been invested in domestic companies, and the new managers say that figure will change dramatically.

For years, Japanese planners have looked hungrily at investment procedures and the higher interest rates abroad. One aim of the reordering of the post office is to invest widely in those places. Masatsugu Nagato, president of Japan Post Bank, says the country’s largest financial institution will now go “superglobal.” His “magnificent seven samurai,” a group of foreign investment consultants, will be expanded to 30. Ironically, Japan’s decision to move out into world capital markets comes when a general world economic downturn and “quantitative easing” by the U.S. Federal Reserve and other central banks, have reduced competitive investment rates worldwide.

Nevertheless, Mr. Nagano is ready to push its $500 billion investment fund towards global risks. Describing his strategy as one of “survival,” he says “we are going to invest in the world market deep, various and wide. We want to be one of the very sophisticated and largest institutions for global investment.” Japan Post Bank has created a “satellite portfolio,” a special fund intended to diversify the mix of the bank’s investments to which enormous sums have been allocated, with plans to make the portfolio grow. Japan’s leadership is taking new risks, but the risks have, as usual, been thoroughly vetted. The rest of the world can warmly welcome a new player.

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