What’s the largest financial institution in the world? It may surprise you to learn that it’s Japan Post, whose insurance and savings businesses hold nearly $3 trillion in deposits.
It goes without saying that this has an enormously distorting effect on the Japanese economy, tying up vast sums of capital in the hands of the government and serving as a tremendous resource for patronage. Among other things, Japan Post is the biggest buyer of Japanese government bonds. This cozy arrangement has helped to keep the ruling Liberal Democratic Party in power since 1955 (excepting a gap between 1993 and 1996).
Prime Minister Junichiro Koizumi had made the privatization of Japan Post a centerpiece of his administration. Today his postal reform bill was defeated in parliament, leading Koizumi to call a snap election that he might actually lose. What this means for the future of Japan Post, and of Japan, is uncertain.