The government's committee on postal service privatization has formally decided on a written proposal that calls for the deposit cap on Japan Post Bank accounts to be doubled from the current 13 million yen to 26 million yen.
The change is planned to take effect from April 2019 after a government ordinance is revised.
This will be the first increase in the deposit limit since April 2016. The committee, which is chaired by Kazumasa Iwata, made the decision Wednesday.
Under current rules, the cap is set at a combined 13 million yen for ordinary savings accounts and fixed-term and fixed-amount deposit accounts. In line with the proposal, the bank will for the first time introduce a "separate management framework" that would set a separate limit of 13 million yen on deposits in ordinary savings accounts and on deposits in fixed-term and fixed-amount accounts.
"This will eliminate an inconvenient set-up and make these services easier to use," Iwata said at a press conference after the committee's meeting.
The Internal Affairs and Communications Ministry and Japan Post Holdings Co. have both called for the deposit limit on ordinary savings accounts to be scrapped. However, the Financial Services Agency and financial industry groups had opposed the planned increase due to concerns funds would shift to Japan Post Bank and thus place pressure on the management of private-sector banks. After some coordination within the government, the committee crafted a compromise under which it would accept the "separate management framework" but not allow the deposit cap on ordinary savings accounts to be abolished.
In exchange for doubling the deposit cap, the proposal demanded Japan Post Holdings and other entities end an incentive system that becomes available when they acquire deposits. Furthermore, in consideration of concerns that the changes could disadvantage private-sector banks, the proposal attached conditions -- including getting Japan Post Holdings to sell shares in Japan Post Bank until its 89 percent stake falls below two-thirds of total equity -- to any further easing of the cap on deposits in ordinary savings accounts.
The deposit cap issue was considered as part of a comprehensive review conducted every three years on the postal privatization process.
On Wednesday, the Japanese Bankers Association and other groups issued a statement that said it was "regrettable" the committee's proposal expressed an opinion in favor of changing the deposit limit.
Eclectic plan
There were tough negotiations over Japan Post Bank's deposit cap between the two sides involved: those intending to abolish the limit for ordinary savings, such as Japan Post Holdings, the bank's parent company, and the Internal Affairs and Communications Ministry; and those opposing such a move, such as the Financial Services Agency and financial circles.
Both sides ultimately compromised, bearing in mind the political calendar, which includes the House of Councillors election next summer.
It is believed the bank's financial power will strengthen when the deposit cap is raised, but the bank is also facing challenges, such as giving consideration to regional financial institutions and improving the transparency of its management.
"The gap in opinions was huge, but we have made every effort to close it," said Kazumasa Iwata, who heads the government's committee on postal privatization, at a press conference Wednesday.
The committee, which comprises experts from the private sector, has been discussing how to review the limit on savings from the viewpoint of making competition with the private sector fair.
In spring, the committee tried to put an end to the matter by abolishing the deposit limit on ordinary savings accounts, in line with what the ministry and Japan Post Holdings wanted.
Japan Post Holdings claims that by abolishing the limit, convenience would be improved for people in regional areas where there are few financial institutions. In addition, the company insists that abolishing the limit would lighten the burden of clerical work required to notify depositors whose savings have surpassed the deposit limit.
However, there was strong opposition from the agency and the financial sphere, which feared possible outflows of deposits from regional areas, saying the bank's expansion would suppress the private sector.
The two sides failed to reach agreement in their discussions.
The last-minute decision, which will go into effect from April 2019, is based on an eclectic idea to raise the cap to up to double the current amount. The negotiations were brokered by Finance Minister Taro Aso, Chief Cabinet Secretary Yoshihide Suga and other Diet members with influence over postal issues.
Aso was initially opposed to the proposal, saying the increase was too large. But he decided to accept it on certain conditions, including that Japan Post Holdings -- in which the government has a more than 50 percent stake -- should have less influence over the bank when the deposit limit is reviewed again. In this, Aso seemed to be showing consideration for the financial industry.
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