Japan Post Bank: Can Banking Company Improve Its Financial Services?

Editorial

13:59 JST, March 4, 2025

How can the strength of the nationwide network of post offices be utilized to improve its financial services? Japan Post Bank Co. should take the opportunity of gaining greater freedom in its management to come up with a new growth strategy.

Japan Post Holdings Co. has announced that it will sell part of its holding in Japan Post Bank within this month. Its percentage of shares will fall from over 60% to below 50%. The sale is expected to raise about ¥600 billion.

Japan Post Holdings, which is partly owned by the government, is required not to put too much pressure on the management of private financial institutions. For this reason, the company’s subsidiaries, Japan Post Bank and Japan Post Insurance Co., are subject to “additional regulations” under the Postal Service Privatization Law that limit their management flexibility to a certain extent.

When Japan Post Holdings’ percentage of shares falls to 50% or less, these additional regulations will be partially eased. The holding company’s share in Japan Post Insurance has already fallen below this threshold. The sale of Japan Post Bank shares will result in the easing of restrictions on the banking company.

Specifically, Japan Post Bank will no longer be required to obtain government approval to enter new business areas and will only need to provide notification.

Since the privatization law was established in 2005, the management of Japan Post Bank has experienced ups and downs, but it can be said to have reached a turning point.

The strength of Japan Post Bank lies in the fact that it provides daily financial services from the counters of about 24,000 post offices, and it has a high level of trust among local communities.

The outstanding balance of postal savings totals about ¥190 trillion, one of the largest savings reservoirs in the country. However, as it earns most of its profits from investments in government bonds and foreign bonds, diversifying its revenue sources is an issue it needs to address.

With eased restrictions, it will likely be important for Japan Post Bank to make use of the network of post offices to focus on business succession for small and midsize companies in rural areas that are struggling with a lack of successors, as well as on support for startup companies.

As financial institutions consolidate and close their branches across the country, a situation where financial services are underprovided in rural areas has emerged. Japan Post Bank has a significant role to play in providing such services to local residents. And to this end, it is essential that the company’s management be stable.

The management challenge for Japan Post Holdings, the parent company of Japan Post Bank, is that the postal service of its subsidiary Japan Post Co. is suffering chronic losses, and the majority of the holding company’s profits are earned by its two financial subsidiaries, the banking and insurance companies.

It is important for Japan Post Holdings to invest the funds from the sale of the banking company’s shares in growth areas, such as logistics, to create new sources of revenue.

The privatization law stipulates that Japan Post Holdings should sell off shares in the two financial companies as soon as possible.

The Liberal Democratic Party is considering a revision to the privatization law in light of the changing times. How can the struggling postal business be rebuilt and the post office network be maintained? Discussions on the future of Japan Post Holdings should be deepened.

(From The Yomiuri Shimbun, March 4, 2025)