Lawmakers Reject Bid to Divide, Sell Japan Post
The showdown could shake the ruling Liberal Democratic Party's grip on power, since defections from Koizumi's LDP helped defeat the postal plan on a 125-108 vote in the upper house of Parliament.
Koizumi has long sought to privatize the postal service's savings and insurance businesses and open their $2.9 trillion in deposits to private investors. He hoped the move would boost the struggling economy, which only now is emerging from a decade-long slowdown.
The legislative package would have created the world's largest private bank, but opposition was strong among lawmakers who said the measure would cut postal services to rural areas and lead to layoffs among the 400,000 postal system workers. They also said the huge new private bank would drive other financial institutions out of business.
Parliament's lower house approved the postal bill last month by a thin margin. The package would have privatized Japan Post by 2017, dividing it into private companies handling mail delivery, banking and insurance.
The $2.9 trillion in savings and insurance deposits held by the postal service have financed the massive public works projects that are central to the LDP's pork-barrel system, while the network of unionized postal workers has long been a bastion of support for the party.