contrast, postal services include the shipment of letters and parcels both domestically and internationally.

Competition and regulation interact in this regard when express delivery services are at a competitive disadvantage when postal companies use Universal Service Obligation ("USO") requirements to anti-competitively cross subsidize their unregulated services (such as express delivery) using revenue provided by their monopoly services. Because of the dominant position of Japan Post, the JFTC must ensure that Japan Post does not abuse this position and engage in anticompetitive conduct. Furthermore in view on the impending privatization of Japan Post, the JFTC retains an important advocacy role in the regulatory shape of the privatization.

### a. Arguments in Favor of Postal Privatization

Perhaps the most important argument in favor of postal privatization is often lost when the issue is discussed. While the argument that the postal company will become more efficient, with resulting benefits for investors is often raised, the impact on consumers of privatization is often ignored. This is a pity as the benefits to consumers are the most valuable benefits for society as a whole provided that the privatization is accompanied by competition as well as liberalization.

The benefits of privatization are that public sector monopolistic entities tend not to be as efficient as private entities. It is to be hoped that privatization will lead to more efficiencies, because managers will be able to keep costs down and quality up. Managers will be able to maximize worker output and minimize waste. These are things that are not easily done in a public sector context. But these greater efficiencies do not just arise because of the fact of privatization. They arise because of the restraints that competition imposes on managers to perform and also get the most out of their workforce. Postal prices have generally risen in countries where the postal service is a government owned monopoly. This is in contrast to other sectors where prices in communications and transportation have fallen. There is evidence in the US that this number translates into a significant cost imposed on consumers – as much as 4bn - 12bn per year. $ ^{64} $ Studies of the US postal system also demonstrate that not only have prices gone up, but quality of service has declined. Between 1967 and 1987, mail delivery became 15 percent slower. $ ^{65} $

In the US, there have been a number of postal reorganizations that have not led to beneficial changes. The reasons that these reorganizations have all failed is because none of them have actually unleashed the forces of competition, and led to the kinds of systemic internal changes that we have referred to above. It is the absence of the competitive impulse that meant increasing costs simply translated to increasing prices. The lack of competition also creates a risk-averse mentality at all levels of the workforce, leading to much less innovation. The rewards of innovative activity do not flow to the business that is not facing the white heat of competition. One source of problems for USPS has been the manner of regulation; in particular, the fact that the USPS must seek approval from the Postal Rate Commission for any innovative activity.

In Japan, the current plan to privatize Japan Post has the strong support of Prime Minister Junichiro Koizumi, who has promoted the idea of postal reform since 1979 when he served as a