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Banking

Yucho: ‘Whale in a pond’ makes a break for open waters

The privatization of Japan Post means that a huge store of capital will be unleashed into the private sector. Lawrence White travelled to Tokyo to find out what progress has been made, and to assess the likely effects of this historic IPO on the global capital markets.

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IT IS THE largest piggy bank in the world. Yucho, the postal savings arm of Japan Post, has $2 trillion in assets, most of which is Japanese citizens’ money stored in accounts yielding little more than 1%. Now this vast store of dormant capital is set to be unleashed on the private sector: the IPO is set for 2011, but the bank will begin reorganizing its portfolio under supervision from next August. Many have welcomed the reform, which promises to have the dual effects of curbing the questionable practice of converting savers’ money into funding for useless infrastructure projects and stimulating the country’s sluggish economic reform. Japanese citizens should start to get better returns on their savings as the bank diversifies away from low-yielding Japanese government bonds. Large-scale borrowers worldwide will be considering with some excitement how to tap this vast new pool of funds. Japan’s private sector will be reinvigorated: the architect of the reform, former prime minister Junichiro Koizumi, always pitched the project as the first step in a total overhaul of the economy aimed at weeding out inefficiencies, corrupt practices and bureaucracy.

This, at least, is the theory.

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