Waking the world’s largest bank: Japan Post

Japan Post (JP), the world’s largest bank & insurer by assets became a group of private companies on October 1, 2007. Japan Post manages about US$ 3.3 Trillion in assets, about 40% more than Citigroup or HSBC and about 12 times more than the banking arm of Germany’s Deutsche Post.

Privatization of Japan Post would not have happened without former Prime Minister Koizumi in the driver’s seat, and the overwhelming mandate he obtained from the electorate in the spectacular September 11, 2005 election.

Japan Post is a “sleeping giant” about to be woken up by private sector CEOs: Japan Post holds about 1/4 of Japan’s US$ 13 billion in household assets, is the largest Japanese insurer, has one of the largest retail shop networks, and is a formidable transporter and deliverer. We expect the new CEOs of JP’s four new group companies to dramatically improve management of JP’s assets.

We believe that JP’s privatization has a very good chance to be successful – given the success stories of postal privatization in other countries, and the very successful privatization of Japan’s former national railways JNR.

JP Services
on second place in Japan’s parcel delivery industry, transports about 2/3 as many parcels as No. 1 Yamato. With about US$ 17 Billion in sales almost twice as large as Yamato and 1/2 as large as FedEx. International footprint is almost non-existent at this stage in contrast to much larger Deutsche Post/DHL.

JP Network with 24,700 Post Offices all over Japan, could challenge convenience store giant Seven & I Holdings (11,853 Seven-Eleven stores, and 33,000 stores in total).

JP Bank
manages YEN 231.6 Trillion (US$ 2.15 Trillion) in assets. 80% of these assets are postal saving accounts, of which about 79% are invested in Japanese Government bonds. By assets of similar size as Citigroup and HSBC and almost twice the size as Japan’s largest commercial bank Mitsubishi-Tokyo-UFJ, and almost four times the size by assets as Mizuho-Bank.

JP Insurance
with YEN 126 Trillion (US$ 1.17 Trillion) Japan’s largest insurer by assets held, more than twice the size of Nihon Seimei – Japan’s largest commercial insurer. JP Bank and JP Insurance combined hold about 1/4 of Japan’s US$ 13 Trillion of household assets.

Since October 1, 2007, each of the four JP group companies is headed by a new CEO from the private sector. We expect the new private sector CEOs to dramatically change the way JP assets are managed and allocated.

Citi, HSBC and UBS react to JP privatization

Citi is in the process of acquiring retail broker Nikko Cordial. Citi as the first foreign bank in Japan acquired a full banking license, mended the relationship with Japan’s Banking regulator FSA and is on expansion course in Japan.

HSBC has announced plans to open retail branches in urban centres such as Tokyo, Kobe and others to provide asset management services to private customers in Japan.

UBS has also been reported to plan expansion of private banking and asset management services to private customers.

Figure 1: Japan Post was privatized and split into four groups on Oct 1, 2007

Japan Post Bank and Japan Post Insurance together hold about US$ 3.3 Trillion in assets. Each of the four Japan Post operating companies is headed by a new CEO from the private sector

Japan Post group diagram
Japan Post group diagram

Figure 2: The world’s largest bank by assets…

JP Service is among the world’s largest delivery companies in terms of sales, JP Network has twice as many stores in Japan as Seven – Eleven, JP Bank is among the world’s biggest banks, and JP Insurance is twice as large in assets as Japan’s largest commercial insurer.


Japan Post divisions (logistics, distribution and financial) compared to competitors
Japan Post divisions (logistics, distribution and financial) compared to competitors

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Market caps of companies in mobile: global vs local

Google, Apple, Nokia, HTC, Vodafone and are winning the driver’s seat of the global internet revolution. DoCoMo, KDDI and SoftBank essentially stay inside Japan for now – limiting their growth prospects and leaving global opportunities to others.

Market caps of Japan's telecom operators compared to global telecom and internet companies
Market caps of Japan’s telecom operators compared to global telecom and internet companies

GOOGLE with Android and APPLE with iPhone are reaching for the driver’s seat of the global mobile data revolution. Global companies including GOOGLE, Vodafone, Apple and NOKIA grow to US$ 100s Billion valuations, while local companies NTT, DoCoMo, KDDI and SoftBank remain essentially limited to Japan’s market for now. Smartphone maker HTC increases impact – including in Japan.

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SoftBank and KDDI win market share, Docomo loses

SoftBank and KDDI win market share, Docomo loses share

SoftBank from 4th to 1st position within less than 12 months… SoftBank‘s turn-round of x-Vodafone-Japan, went faster than many expected. Within less than 12 months SoftBank went from last place to first place in customer sign-ups, overtaking even KDDI‘s super-popular AU.

Willcom recently suffers from SoftBank‘s revival, as well as from eMobile‘s flat rate data services.

Find latest market share data in our report on Japan’s telecom industry.

Month-to-month net subscription growth/decline for Japan's mobile phone operators during the period when mobile number portability (MNP) was introduced
Month-to-month net subscription growth/decline for Japan’s mobile phone operators during the period when mobile number portability (MNP) was introduced

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First half FY2008 results: SoftBank and KDDI profits increase, DoCoMo’s trends is downward

In the last few days NTT, NTT-DoCoMo, KDDI and SoftBank announced their first half financial results. SoftBank and KDDI are the winners both for market share and for profits, while DoCoMo‘s results and market shares are sinking, and pulling the NTT-Group down at this time. Extrapolation indicates that DoCoMo‘s net profits may fall into the red about one year from now, drastic action is taken soon.

Net after-tax income of Japan's top three mobile operators NTT-docomo, KDDI and SoftBank. Currently docomo's net profits follows a downward trend, and risks to drop into the red, unless docomo takes drastic measures.
Net after-tax income of Japan’s top three mobile operators NTT-docomo, KDDI and SoftBank. Currently docomo’s net profits follows a downward trend, and risks to drop into the red, unless docomo takes drastic measures.

The thin lines show linear interpolations of quarterly net profit data. Our extrapolation seems to indicate that DoCoMo‘s net profit might fall into the red towards then end of calender year 2008 unless drastic action is taken. If current trends continue, SoftBank‘s net profits might exceed DoCoMo‘s mid-2008. We expect DoCoMo to take dramatic action before this happens.

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