TOKYO: Many in Japan’s ruling party hate it, voters find it worthy but dull, and critics say an obsession with the topic is distracting Prime Minister Junichiro Koizumi from pressing matters such as deteriorating ties with China. Nonetheless, Koizumi is staking his political legacy on achieving his dream of privatising the postal system — including the world’s biggest bank — for reasons that are a complex weave of reformist economic logic and decades-old political rivalry.

“He’s been talking about postal reform since long before he took office,” said James Barber, a political analyst at Barclays Capital. “A failure of that would be pretty symbolic of a failure of his reforms. It’s a symbol of all he wants to change.”

Boasting a network of almost 25,000 post offices, more than 260,000 employees and 350 trillion yen ($3.2 trillion) in assets, Japan Post does more than deliver mail.

Japanese savers have made it the world’s biggest deposit-taking institution, and its life insurance business equals that of Japan’s four biggest private insurers combined.

Government bills submitted in April would split Japan Post into four units under a state-owned holding company in 2007 and require the sale of its savings and insurance businesses by 2017.

But with rivals inside Koizumi’s party firmly opposed to reforms they fear would threaten their support base, parliament voted on Friday to sit for another 55 days to debate the topic, avoiding a showdown that could trigger a snap election.

Many ruling-party lawmakers have relied on postmasters, influential in rural areas, to turn out votes, and they have used public works projects funded by postal savings to woo support.

The prolonged political fuss has prompted charges that both Koizumi and his rivals are letting other policy problems fester.

“It must be pointed out that due to this flap, many domestic and foreign policy issues have been slighted,” said a weekend editorial in the Mainichi Shimbun newspaper. “Postal privatisation is not the only issue for public policy.”

Japan’s ties with China and South Korea have chilled due to the Asian countries’ perception that Tokyo hasn’t owned up to its militarist past, while Tokyo’s campaign for a seat on the United Nations Security Council faces rough going and an old territorial dispute has delayed a promised visit by Russian President Vladimir Putin.

Koizumi sprang to power in 2001 on a wave of public support for his pledges to wean his Liberal Democratic Party from the wasteful public spending that won votes from vested interests but spawned repeated scandals and inflated government debt.

Postal privatisation fits clearly into that agenda.

The key debate is less over the mail delivery system, which will stay committed to uniform service, than about whether the financial units become truly separate businesses that compete with the private sector on a level playing field.

Set up in 1875, Postal Savings sucks up private savings and funnels the funds through a Fiscal Investment and Loan Programme — Japan’s “second budget” — into public works projects.

Japan Post is also the biggest buyer of government bonds and as such has helped the government to inflate its debt to the highest level among advanced industrial countries.

Critics charge that Japan Post distorts the financial sector because of an unfair advantage over private banks due to its geographical reach — the nearest post office is on average less than a kilometre away — and government guarantees.

That said, there is more than a hint of political vendetta in Koizumi’s quest to privatise the postal system.

Koizumi, 63, began in politics as a protege of the late prime minister Takeo Fukuda, arch rival of “shadow shogun” Kakuei Tanaka, a populist premier who perfected the art of Japanese pork-barrel politics.

Tanaka’s prowess at dispensing public largesse to voters helped create a huge LDP faction that dominated politics for decades, although its clout has waned since his death in 1993.

“For Koizumi, the privatisation of postal services has been a fight against the enormous clout wielded by the legendary Tanaka,” the Nihon Keizai business daily said in a commentary.

Most pundits expect Koizumi to succeed in enacting the legislation, but only by making further fuzzy concessions to his LDP opponents.—Reuters