Japan yesterday stepped forward with a plan to privatize its huge postal service system that is by some indicators the largest financial institution on the globe as part of the campaign to reduce the size of the nation’s public sector. Japan’s post office has savings and insurance units that manage about 350 trillion yen ($3.3 trillion) in funds.

The plan that aims to start with privatization only in 2007 has as its goal increase in competition for funds in Japan’s financial sector, as the new institution would have to pay taxes like other private banks and invest according to market principles like other financial institutions.

"It’s a good reform plan, isn’t it?" Mr. Koizumi said to reporters. "I hope people cooperate so we can pass the bill."

The bill envisages the breakup of the post office into four separate arms that would be engaged in mail delivery, banking services, insurance and technical tasks like employees’ payrolls and managing post-office properties. To prevent the opposition in parliament, the Japanese government has included measured that will sugar the pill for the lawmakers, such as provisions for savings and insurance units against hostile takeovers. Even with such protections, the bill may turn out to be too great a change and thus can fail in parliament.

"This is like a lot of reforms in the past -- very gradual and full of delays," said Jason Rogers, a banking analyst at Barclays Capital in Tokyo. "But at the end of the day, it’s reforming the public sector, and that’s positive."