Japan scraps postal privatisation plans Japan's parliament has approved a retreat from plans to privatise the huge banking and insurance arms of the national postal system, formally repudiating a flagship reform pushed through by liberalising former prime minister Junichiro Koizumi. A revised postal system reform law, enacted on Friday after a landslide vote by the upper house of the Diet, scraps a requirement for Japan Post's postal and insurance businesses to be fully privatised by 2017. It also clears the way for the two businesses - among the world's biggest financial institutions - to offer new services even if the state sells only half of its stake in them. The law, passed by the upper house by a vote of 216 to 17, underscores Japan's dramatic turn away from policies pushed by Mr Koizumi, who had made postal privatisation his highest profile policy for a 2005 general election that his Liberal Democratic party won by a landslide. The law will fuel complaints from domestic and overseas banks and insurance companies that the postal businesses have an unfair advantage, and will complicate Japan's efforts to seal market-opening trade pacts with the US, EU and other Asian nations. Critics say that by maintaining even a minority stake in the postal system's financial arms, the government will be able to keep effective management control - undermining their long-term development - while at the same giving them an implicit guarantee that constitutes an unfair advantage over private rivals. Business groups including the American Insurance Association and Insurance Europe, the European insurance federation, this month expressed "deep concern" about the law, which they said called into question Japan's commitment to fair competition. "It will harm the employees, sales agents, contractors, and investors of Japan Post's private sector competitors; reduce consumer choice; distort Japan's economy in a detrimental manner; and reduce opportunities for economic growth," the business groups said. One western diplomat expressed relief that the final version of the law had not raised limits on the payouts that the Japan Post Insurance products could offer. "This is an intermediate outcome," the diplomat said. Japan's ruling Democratic party pledged to rethink privatisation after its 2009 general election victory. Party leaders said their success in dislodging the ruling LDP was helped in part by anger at Mr Koizumi's reforms, which many rural voters believed had put at risk post offices seen as a lifeline for many communities. The DPJ gave the portfolio of minister for Postal Reform to politicians from a small party of LDP rebels who opposed privatisation, and Yoshihiko Noda, the prime minister, has repeatedly stressed the importance of ensuring that post offices offer postal service, banking service, and life insurance services "in a unified manner." However, the LDP also backed the bill passed on Friday alongside Komeito, Japan's second largest opposition group - making its enactment a rare example of cross-party unity in an often deadlocked Diet.