Postal banking in the United States and Japan: A comparative analysis

This paper analyzes the experience of the United States postal savings system, and (in less detail) that of Japan, with a view to assessing the past and potential future role of postal savings in Japan. The immense size of Japan's postal savings system - accounting for one-third of household savings deposits and comprising the largest "bank" in the world - means that the question of their disposition is central to any discussion of the future of Japan's financial system as a whole. This study found that demand for postal savings deposits is explained, in both countries, mainly by two variables: price (interest-differentials) and confidence in private banks. Geographical accessibility in rural areas is of less, and diminishing, importance. It is argued that postal banking should be viewed as an alternative to publicly sponsored deposit insurance, as a means to assure households' access to safe and convenient savings and payment services. This implies that reform discussion should focus on the possibility of restructuring postal savings as a "narrow bank", in such as way as to ensure that services are priced to fully reflect costs and risks incurred.