The Postal Services Agency has begun negotiating with its labor union to trim the 140,000-strong workforce at post offices and rebuild its loss-making operations, according to the chief of the agency.

"It's desirable that postal operations break even when a public postal services corporation is established in 2003. We have to take very extensive steps for that," Seijiro Adachi, director general of the agency, told a news conference Tuesday.

"We are hoping to sort out (the degree of workforce reduction and other details) with the union in the fall of this year," he said.

The agency, created Jan. 6 in line with the sweeping realignment of government ministries and agencies, is scheduled to become a public corporation in two years.

While it will still be a state-run entity, the new corporation to take over the three postal businesses -- mail delivery, savings and insurance -- is to be financially independent.

Although Adachi declined to give a target for the workforce reduction, agency sources said a cut of between 10,000 and 20,000 workers over five years is being considered.

The mail delivery service fell into the red in fiscal 1998, when competition with the private sector led to a decline in parcel deliveries.

It is expected to post losses of more than 30 billion yen in fiscal 2001, its fourth consecutive year in the red.

"Inefficiency remains (in the mail delivery service) due to slow progress in the redistribution of management resources under the principle of operating uniformly nationwide," Adachi said.

The agency also plans to reduce the 28 postal savings administrative centers nationwide to 11 when the independent public corporation is set up.

The idea to create the new public corporation was the result of a compromise among members of the ruling Liberal Democratic Party, in which some wanted the postal services privatized and others strongly opposed the plan.