Noriyuki Morimoto's Blog
Japan Post has More Value than Japan Post Bank
Sep 07, 2015
Does the allocation of businesses between Japan Post Bank and Japan Post make sense in the first place? The Postal Service Privatization Act, which separated Japan Post Bank and Japan Post, is rather a result of compromises to settle a major political conflict than a product of rational design.
Sales activities of investment trusts and government bonds are actually being run by Japan Post, not Japan Post Bank. These businesses were allocated to Japan Post Bank, not due to much consideration, but because of a general assumption that the bank should have the same business scope (including the loan business) as regular banks in the private sector.
However, as long as Japan Post Banks lacks the capability to provide loans, it is essentially not a bank but an investment company. Therefore, while Japan Post currently offers investment trusts and government bonds on behalf of Japan Post Bank, the structure would be much easier to understand if those activities directly come under Japan Post’s responsibility.
Going one step further, payment services (e.g. cash remittance) don’t have to be operated by Japan Post Bank either. The best direction for Japan Post is to create a seamless system encompassing product sales, logistics and payments as a non-bank institution. Meanwhile, Japan Post Bank can shift many of its businesses to Japan Post and focus on its role as an investment company.
By doing so, Japan Post should be able to create significant corporate value as the sole entity to remain in the Japanese postal service, while Japan Post Bank may create its own value as an institutional investor.
Sales of investment trusts and government bonds, as well as payment services, are currently allocated to Japan Post Bank simply for the purpose of securing revenues. This is resulting in unproductive costs within the organization, and rationalizing this structure can help to increase social value.
Japan Post Bank is essentially an investment company that gathers deposits and invests in the capital market. It should transfer the other businesses to Japan Post, so that the latter can directly manage the sales of investment trusts and government bonds. That will cause funds to move from Japan Post Bank’s deposits, and Japan Post Bank should be able to slim down to a size suitable for an investment company.
Chief Executive Officer, HC Asset Management Co.,Ltd.
Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (Tokyo Office) in 1990, where he was Director & Consultant for 13 years. His responsibilities also included Benefit consulting and Financial Services consulting. Prior to joining Watson Wyatt, he was responsible for foreign fixed income investment, asset allocation and investment strategy at Mitsui Life Insurance Co., where he managed assets for the company’s variable life products and group annuities as a fund manager. He spent 2 and half years in London managing fixed income assets. He started his investment career as Japanese equity analyst at Mitsui Life in 1983. Bachelor of Arts (Philosophy), University of Tokyo (1981)