Japan Post: A huge business changing fast

Japan Post is enormous. However it is also very complex with operations that stretch beyond its postal activities into banking, insurance and even hotels and hospitals. Consequently it is meaningless to relate this organisation’s sales to the logistics market.

The organisation is owned by the Japanese state although there has been an attempt by the many politicians to privatise the institution. The first step in doing this was to create a holding company Japan Post Holdings in 2006. This includes the banking, insurance and other businesses but also Japan Post Company Limited (Japan Post Ltd) in which both the mail and the logistics activities reside.

In 2014 Japan Post Company Limited had a net income of ¥32.9bn (US$280m) on an ordinary income of ¥2,792bn (US$23bn). This represented a fall in net income from 2013 of ¥60bn.

The entity of Japan Post Holdings had a revenue of ¥15 trillion (US$130bn) in 2014, but of course this includes the banking and other operations. It is unclear what implications these financial resources have for the strategic direction of Japan Post Ltd, as it is possible that an acquisition can be funded from the wider Group Holding’s assets and cash. Net assets for the whole Group are ¥13 trillion, so debt to fund any acquisitions may not be a big problem.

Within the Japan Post Ltd organisation, what might be described as ‘Mail’ activities accounted for a revenue ¥1,777,635m ($14.9bn) with a profit of ¥ 9,454 million ($80m). The ‘Post Office’ activities had a revenue of ¥1,183,528m ($9.9bn).

Japan Post does have e-commerce orientated parcel operations, handling around 3m parcels in 2014. There are also logistics operations, largely focussed on air freight and pallet load sized operations. These include an air freight forwarding joint venture with the very large Japanese LSP Sankyu Inc. However overall Japan Post’s logistics operations are modest in size and domestically focussed.

The break-up and part privatisation of the entire Japan Post Holdings is likely to take place in the second half of this year with the insurance and banking businesses being floated on the stock exchange. However the core Japan Post Ltd business appears likely to remain a state owned entity at least in the medium term. The revenues generated by the sale of the banking and other businesses are assumed to be absorbed by the Japanese state however it is unclear if Japan Post Ltd will be able to use part of these resources to invest in its business or fund acquisitions.