Postage Rate Increase: There Is An Urgent Need to Secure New Sources of Revenue

To protect an environment in which people can easily exchange letters and postcards, Japan Post Holdings Co. needs to make every possible effort in management to maintain stable postal services.

The Internal Affairs and Communications Ministry, which has jurisdiction over Japan Post Holdings, has submitted a draft proposal to a ministry council to raise postal rates. If approved, the plan will be implemented as early as this autumn.

The ministry intends to raise the postage rate for standard-size sealed letters weighing up to 25 grams by about 30% from ¥84 to ¥110, and also the rate for sealed letters weighing up to 50 grams from ¥94 to ¥110, thereby eliminating weight classifications. The price to mail a postcard will also be raised from ¥63 to ¥85.

Outside of price revisions due to hikes in the consumption tax rates, this will be the first postage rate increase for letters in 30 years and for postcards in seven years.

Even with the spread of email and social media, letters and postcards still remain an important means of communication. More than a few people look forward to getting letters and postcards from acquaintances and relatives.

However, mail volume continues to decline, with about 14.4 billion pieces mailed in fiscal 2022, dropping almost by half from the peak in fiscal 2001. Besides the spread of email, the digitization of various paperwork procedures is also having an impact.

While profits continue to decline, costs are rising for fuel and delivery workers’ labor. This has caused operating profits for the postal business, which is handled by Japan Post Co. under the umbrella of Japan Post Holdings, to fall into the red in fiscal 2022 for the first time since its privatization.

These are the reason why the postal rates are being raised. Even if some increase in the rates is inevitable, the issues facing the postal business should be thoroughly explained to users.

Although operating profits will be back in the black in fiscal 2025 with the postal rate increase, they are expected to fall into the red again in fiscal 2026 due to a decline in mail volume, and the company will be in the same predicament.

Japan Post is fundamentally structured in a way that makes it hard for it to generate revenue on its own, and it is dependent on commissions from financial products of Japan Post Bank and Japan Post Insurance Co. sold through post offices. To make profits on its own, the company needs to reform its business.

The company is working to reduce costs by streamlining delivery services using drones and robots, among other efforts, but there are limits to what it can do through such measures. It will be essential to secure new sources of revenue.

Logistics can be said to be a growth area due to the rise of online shopping, among other factors. Japan Post Holdings also has trumpeted a strategy to strengthen home delivery services by, for example, using its “Yu-Pack” parcels. However, it has not achieved sufficient results as it is struggling to compete with rival firms.

Since last year, Japan Post Holdings has partnered with Yamato Transport Co. to undertake the delivery of direct mail and other small particles, thin parcels and other items. It is important to incorporate demand for logistics such as by making effective use of the nationwide network of post offices.

Another issue will be how to expand the holding company’s real estate business by taking advantage of its many well-located offices.

(From The Yomiuri Shimbun, Jan. 12, 2024)