2013 Reports

Japan Post Insurance: Unjustified Favoritism

Lincoln, Edward J.

Japan Post Insurance is the largest insurance company in Japan - indeed, in the world when measured by assets ($1.1 trillion in March 2013). Beyond the market power of sheer size, government ownership results in undue benefits because it enables inappropriate cross-subsidization, results in inefficiency and heightened risk, and violates international principles of national treatment for foreign firms participating in the domestic market. In short, government ownership raises issues of a tilted playing field. Further, economic theory provides no justification for the existence of Japan Post Insurance (JPI) as a government-owned institution. The obvious conclusion is that JPI needs to be completely privatized in both form and substance. That is, not only should the government-owned Japan Post Holdings sell all shares of JPI to the public, the rules and regulations pertaining to the privatized firm should be identical to those for the rest of the insurance industry. If JPI is not privatized, then the government should regulate it in a manner that avoids the distortions analyzed in this paper.