Koizumi's gamble with snap election looks like paying off

JAPAN: The world's largest pool of capital is being bitterly fought over, writes David McNeill , in Hanbara, Japan

JAPAN: The world's largest pool of capital is being bitterly fought over, writes David McNeill, in Hanbara, Japan

Dressed in the standard salary-man uniform of dark suit and shiny black shoes, Yasuo Tokuoka doesn't look much like the minor aristocrat he is.

The fifth member of his family to hold the title of postmaster in a tradition going back over 100 years, Mr Tokuoka is as respected as a mayor or a parish priest, and runs one of the busiest institutions in town.

Like many others in his profession, he considers what he does to be more of a calling than a job. "I feel a very strong sense of responsibility to the people around here," he says.

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Japanese towns do not get much more one-horse than Hanbara, a dying hamlet of 350 households, a shrine, a noodle restaurant and a couple of struggling businesses 100km (60 miles) west of Tokyo.

Yet somehow this town's post office and 24,700 others are part of one of the biggest political and economic stories of the year, their fate hingeing on Japan's most bitterly-fought election in decades.

Prime minister Junichiro Koizumi called a snap general election for September 11th and expelled 37 members of his Liberal Democratic Party (LDP) after they voted against his plan to privatise Japan Post.

His main opposition, the Democratic Party of Japan (DPJ) says that pensions, the health service and Mr Koizumi's disastrous foreign policy are more important than reform of the postal service, but they appear to be losing the argument. A weekend poll in the Yomiuri newspaper found that 64 per cent of respondents support an LDP victory, against just 26 per cent for the DPJ.

The prime minister has promised to quit if his coalition fails to get "one seat less" than a majority.

For over half a century, as Japan has grown into the world's second-richest economy, post offices like Hanbara's have been accepting deposits big and small from housewives, pensioners and schoolchildren.

Today they sit on the largest single pool of capital in the world - $3 trillion, an amount exceeding Britain's entire GDP. This money is owned by the 85 per cent of Japanese households which have a post-office account, and it has been used throughout the postwar period to build roads, dams and bridges.

But it has also been, in effect, a giant slush fund, ladled out to political backers of the ruling LDP. The post offices provided construction firms and small businesses with non-collateral loans, brokered by men such as Mr Tokuoka, who in return harvested millions of votes for the LDP around the country.

For better or worse, this was one of the bedrocks of Japan's economic miracle, a core element of the country's "welfare capitalism", with roots so deep that the former policy chief of the LDP, Shizuka Kamei, one of the 37 rebels, calls it part of the country's "DNA".

For the reformers, led by Mr Koizumi, that DNA has been deformed by inefficiencies and corruption. One of Mr Koizumi's advisers recently called the vast pool of money a "cancer eating away at Japan's economic vitality".

Mr Koizumi will find few backers for such views in Hanbara. "We are totally opposed to privatisation," says Mr Tokuoka. "It may work elsewhere, but here it will destroy a culture of mutual help built up over years."

Nobody will say it out straight, but there is a feeling here of betrayal, a sense that the prime minister is intent on importing a US-inspired Darwinian capitalism which is somehow alien, un-Japanese.

Inside country post offices like the one in Hanbara time seems to have stood still.

Customers and staff treat each other with an old-world courtesy, bowing exaggeratedly beneath a grim black-and-white portrait of Hisoka Maejima, who founded Japan Post in 1887.

The branches pay virtually zero interest on deposits and the staff have jobs for life. Mr Tokuoka, like 19,000 other postmasters, inherited the job from his father, who inherited it from his.

In return, they perform tasks unthinkable in other parts of the world: hand-delivering pensions to bedridden customers, providing small loans and constantly feeling the pulse of tiny communities like this one.

"What will happen to us if privatisation goes ahead?" asks Mr Tokuoka. "They may close us down if we don't make a profit. That will cause terrible problems to the people around here who cannot travel. I can never accept this plan."