2008 Reports

The Economics of Japan's Postal Services Privatization

Kinoshita, Nobuyuki

Japan's privatization of its postal services -- which includes one of the largest financial institutions in the world -- is exceptional for its huge size and complex structure. This essay examines the economic background of these features, as well historical development, competitive environment, and lessons. The effect on management incentives of a soft budget is key in understanding the system's problems when it was operated as a government agency. The analysis suggests the privatized components should achieve higher profitability and greater efficiency, including recovering from the soft-budget problem.