UPDATE 2-Divisions deepen within govt over Japan Post plan

* Banking minister’s plan not a done deal -govt spokesman

* More debate needed on overhauling Japan Post – PM

* Mess over Japan Post minus for PM before election -analysts

(Adds comment from prime minister, background)

By Tetsushi Kajimoto

TOKYO, March 25 (BestGrowthStock) – Divisions deepened on Thursday
over a proposal by Japan’s banking minister to scale back the
privatisation of Japan Post, adding to the woes of a government
struggling in the polls ahead of a mid-year election.

Shizuka Kamei, the country’s outspoken banking minister,
announced a plan on Wednesday to allow Japan Post to double the
limit on deposits to 20 million yen ($217,200) per person, a move
that could trigger an inflow of deposits from private banks.

But other cabinet ministers quickly called for more
discussion on the proposal, reflecting concerns that it could be
a ploy to get Japan Post — the world’s largest financial
conglomerate — to buy more government bonds and subsidise a jump
in the country’s already mammoth public debt.

National Strategy Minister Yoshito Sengoku called for a
rethink on doubling the deposit limit, while Motohisa Furukawa,
senior vice minister for the economy, questioned whether the
government had thoroughly discussed the plan. [ID:nTKB006762]

Dithering over the plan, which must be approved by the
cabinet and parliament, could deal a blow to the Democratic
Party-led government, which wants to win a majority in the upper
house poll, expected in July, to avoid policy stalemate.

Prime Minister Yukio Hatoyama acknowledged that the handling
of the matter had been less than adept.

“This was announced before things were coordinated,” he told
reporters, adding the cabinet would decide the plan. “I think
that was unfortunate, so I will coordinate firmly from now on.”

Analysts said the latest policy confusion risked eroding
support for Hatoyama’s six-month-old government, already sagging
due to concerns over funding scandals and doubts about the
premier’s ability to make tough decisions.

“Opinions that have not gained a consensus have popped up one
after another. This leaves an impression that the cabinet is
falling apart,” said Takahide Kiuchi, chief economist at Nomura
Securities.

“Kamei’s party may want to raise its presence within the
coalition, but this will further lower support rates and be
negative to the Democratic Party.”

FISCAL POLICY CONFLICT

Kamei’s People’s New Party (PNP), a tiny coalition partner,
has also called for 11 trillion yen in fresh stimulus to boost
the economy, even with the national debt already nearly twice the
size of the country’s gross domestic product. [ID:nTOE62N07T]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on Japan fiscal woes http://link.reuters.com/qeg59h
What analysts say about the Japan Post plan [ID:nTOE62M0A4]
More stories on the Japanese economy [ID:nECONJP]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

“The real root of the conflict (between cabinet ministers) is
what to do about this country’s fiscal situation,” said
independent political analyst Hirotaka Futatsuki.

“Kamei wants to be able to issue government bonds to finance
a big stimulus package and there needs to be a buyer for those
bonds or else interest rates will rise. Basically, Kamei wants
Japan Post to become a receptacle for buying deficit-financing
JGBs.”

Futatsuki added that if Prime Minister Yukio Hatoyama can’t
resolve the conflict in his cabinet, support rates for his
government — already less than half the 70 percent enjoyed when
he took office in September — will fall further.

Japan Post, which provides postal, banking and insurance
services, holds about a third of the 700 trillion-yen government
bond market.

The plan to raise the limit on deposits has also been
criticised by private banks, which are worried that they will
face unfair competition with the state.

“The cabinet has not yet discussed the concrete substance of
the plan. It will be up to discussion from now on as the content
of legislation has not been put forward to a cabinet meeting,”
Chief Cabinet Secretary Hirofumi Hirano told a news conference on
Thursday.

“We must fully pay heed to concerns that the plan would lead
to hinder fair competition and deprive the private-sector of
business opportunities.”

Investment Basics

($1=92.09 Yen)
(Additional reporting by Linda Sieg, Yuko Yoshikawa and Yoko
Kubota; Editing by Nathan Layne)

UPDATE 2-Divisions deepen within govt over Japan Post plan