Japan Post to challenge banks in mortgage market with $3 trillion cash pool
October 2, 2007
By Finbarr Flynn and Shingo Kawamoto
Tokyo - Japan Post Holdings became the private company with the world's biggest pool of cash yesterday, threatening to grab business from banks by entering the mortgage market for the first time.
Japan Post has been split into four units to handle deliveries, savings, insurance and counter services under a holding company that remains fully government owned for now. Together they have about $3 trillion (R20 trillion) in savings and life insurance policies, making the group the world's biggest financial institution, with the bank alone sitting on ¥188 trillion (R11 trillion) in deposits.
The split is the initial step in a decade-long process that counts as the first major privatisation in Japan since the 1987 break-up of the national railway. The overhaul was at the core of former premier Junichiro Koizumi's reform agenda to streamline the bloated public sector.
Japan Post president Yoshifumi Nishikawa said last week that he aimed to offer mortgages next year with Suruga Bank, which operates in and around Tokyo. Suruga Bank broke ranks with other regional banks, which oppose ties with Japan Post on concern that it will be able to dominate the mortgage market through its 24 000 branches.
"If they really start doing mortgages, it's going to impact all the banks," said Graeme Knowd, an analyst at CLSA Asia Pacific Markets.
Competition has stopped banks passing on the full effect of higher interest rates to borrowers, contributing to profit declines. Mitsubishi UFJ Financial and Mizuho Financial, Japan's biggest banks, reported drops in first-quarter earnings as credit costs surged and income from lending fell.
Nishikawa has said Japan Post would focus first on loans to individuals rather than companies. It did not plan to tie up with Japan's largest banks.
Under legislation pushed through by Koizumi in October 2005, the government is to sell stakes in Japan Post's banking and insurance units. They may be listed on the stock exchange as early as 2010. The government will sell all its holdings in the two units by October 2017. - Bloomberg
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