International Industry Coalition Call for Equivalent Conditions of Competition In Japan's Postal Privatization Implementation

WASHINGTON, June 26 /PRNewswire/ -- A coalition of 9 associations from the U.S., Europe and Canada, representing a range of service industries, today jointly submitted comments to two Japanese government agencies calling on the government to ensure "equivalent conditions of competition" prior to any expansion by Japan's postal financial business companies.

In the comments, the coalition also called for "a clear, predictable, and transparent process" in the privatization of Japan Post.

The associations are the American Chamber of Commerce in Japan, American Council of Life Insurers, American Insurance Association, Association of British Insurers, Canadian Life and Health Insurance Association, Coalition of Service Industries, European Business Council in Japan, U.S. Chamber of Commerce, and U.S. Japan Business Council.

The Japanese government is currently preparing for privatization of Japan Post's three businesses, including Kampo (postal life insurance), and Yucho (postal savings), the largest financial institutions in the world. The successors to Kampo and Yucho, the Postal Insurance Corporation (PIC), and the Postal Savings Bank (PSB) respectively, will be placed under a 100% government-owned holding company starting in October 2007 as a result of legislation passed last year. The associations have long called for reform of Japan Post to be carried out to ensure that a level playing field is achieved for all market participants in Japan's marketplace prior to its business expansion.

Last month, the Financial Services Agency and Ministry of Internal Affairs and Communications, key Japanese government agencies charged with implementing privatization, released two draft cabinet orders to address some of the issues left unresolved by the Postal Privatization Law with respect to the business operations of the PIC and the PSB. The international industry coalition responded to a call for public comments with regard to these draft cabinet orders. The coalition's joint comments outline a number of critical concerns, among them:

  * "Ensure that equivalent conditions of competition between the PSB, the
    PIC, and companies engaged in like business operations, prior to any
    expansion of the PSB's or PIC's businesses," including:

    -- Fair and open opportunities to compete for the privatized Japan
       Post's distribution of financial products consistent with commercial
       best practices.

    -- Appropriate disclosure of the postal entities' financial and
       accounting practices to prevent cross-subsidization.

  * "Maintain a clear, predictable, and transparent process to ensure that
    interested parties are given meaningful opportunities to comment on
    measures that will change the competitive landscape ... before decisions
    regarding such measures are made final."

The submission also seeks to confirm and clarify the procedure for the PIC's new product approval, as well as the scope of PIC or other companies' insurance products offered by the PSB. A copy of the joint comment follows.

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 377 member companies account for 91 percent of the life insurance industry's total assets in the United States, 90 percent of life insurance premiums and 95 percent of annuity considerations. In addition to life insurance and annuities, ACLI member companies offer pensions, including 401(k)s, long-term care insurance, disability income insurance and other retirement and financial protection products, as well as reinsurance. ACLI's public Web site can be accessed at http://www.acli.com/.

                  American Chamber of Commerce in Japan
                    American Council of Life Insurers
                      American Insurance Association
                     Association of British Insurers
              Canadian Life and Health Insurance Association
                     Coalition of Service Industries
                    European Business Council in Japan
                         U.S. Chamber of Commerce
                       U.S. Japan Business Council

The list of organizations indicated above welcome this opportunity to submit comments regarding the proposed "Draft Cabinet Order to Partially Revise the Postal Privatization Law Enforcement Order" ("Draft Cabinet Order"). We understand that based on Article 138-1 of the Privatization Laws, the Draft Cabinet Order (Article 8-2) allows the Postal Insurance Company ("PIC"), without government approval, to underwrite the types of products that Kampo underwrites as of July 1, 2006. The Draft Cabinet Order also requires certain documentation be submitted by the PIC and Postal Savings Bank ("PSB") when applying to the FSA and MIC for approval to expand the scope of their respective businesses. Further, according to Article 3-2(3) of the draft Cabinet Order, from October 1, 2007, the PSB would be authorized to act as an agency soliciting insurance for the PIC for all products that Kampo is allowed to sell as of July 1, 2006.

As the Government of Japan applies these rules, the Organizations call on the Government of Japan to:

  * Apply Article 2 of the Privatization Laws so as to ensure that
    equivalent conditions of competition between the PSB, the PIC, and
    companies engaged in like business operations, prior to any expansion of
    the PSB's or PIC's businesses (including the introduction of new or
    modified PIC products). Specifically, the Government of Japan should
    ensure that:

    -- Private sector firms are given fair and open opportunities to compete
       for Japan Post distribution of financial products, and that the
       selection of companies is conducted in a non-discriminatory and
       transparent manner consistent with commercial best practices.

    -- Financials and accounting practices of the PIC, PSB, and other postal
       entities will be appropriately disclosed to prevent cross
       subsidization.

  * Maintain a clear, predictable, and transparent process to ensure that
    interested parties are given meaningful opportunities to comment on
    measures that will change the competitive landscape and a genuine seat
    at the table before decisions regarding such measures are made final.

    -- The Organizations wish to emphasize that it is difficult to
       appropriately comment on these draft orders without being able to
       examine the Implementation Plans and how those plans will affect the
       financial services sector. Therefore, it is vital that interested
       parties be given a meaningful opportunity to comment publicly on the
       outline of the Implementation Plans that will be submitted in July
       2006.

  * Confirm that the procedure for expansion of the scope of business of the
    PIC includes the modification or variation of currently existing Kampo
    products.

  * Confirm that from October 1, 2007, the scope of PIC's and other
    companies' insurance products offered by the PSB shall not exceed that
    allowed to be sold through private sector banks and shall be subject to
    the same regulations applied to the rest of the private sector.