A difficult path lies ahead the Japan Post group companies' 10-year privatization process, which started Oct. 1. They have to make profits to survive but not at the expense of services. This is especially critical for the postal service, which has earned the people's trust over the past 130 years through the quality of its operations.

Under the privatization scheme, Japan Post Corp. serves as a holding company for four units: Yucho Bank, Kampo Insurance, a mail delivery firm and an over-the-counter services firm (the last firm operating post offices). Yucho Bank has assets of ¥188 trillion, nearly twice the assets held by the Bank of Tokyo-Mitsubishi UFJ, the nation's leading bank. Kampo Insurance has assets of more than ¥110 trillion, more than double the assets held by Nippon Life Insurance Co., the nation's leading insurance firm.

But Yucho Bank has no experience in management of assets, except buying government bonds. As an initial step, it hopes to sell housing loans provided by local banks at post offices. But many local banks are reluctant to go into business with Yucho Bank. Kampo Insurance hopes to sell diversified types of insurance including health insurance. But competition from existing insurance firms is tough. Existing financial companies are also complaining that the massive assets of Yucho Bank and Kampo Insurance pose a threat to them.