Financing the Recovery

Financing the recovery

On March 11, 2011, a magnitude 9 earthquake rocked Japan, causing extensive damage to the north-eastern part of the country. It was the most powerful earthquake in Japan’s history, damaging hundreds of thousands of buildings and causing considerable loss of life. Four years later, the devastating effects of the deadly force are still felt in the hearts and minds of Japan’s citizens. In one of many actions to finance ongoing recovery efforts, Japan is selling a well-known state asset.

In a move expected to take place later this year, Japan is preparing to sell shares of Japan Post Holdings Co. in three separate initial public offerings. In addition to Japan Post, the holdings company also includes Japan Post Bank Co and Japan Post Insurance Co. The first IPO round is expected to provide more than $8 billion in funding, but that could change based on investor evaluation of earnings growth potential of the company.

In addition to struggling with reduced earnings due to decreased demand for its letter delivery operations and low interest earnings on its financial products, the company will face restrictions on its flexibility. The soon-to-be publicly owned company must obtain approval from government regulators before venturing into any new businesses. The requirement could extend the time it takes to pursue new endeavors if it receives permission to do so.

If the sale of Japan Post Holdings proves as fruitful as the government anticipates, it could provide a needed infusion of cash to support continued earthquake recovery efforts in the country.

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