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Editorial: Japan Post Holdings must revamp irresponsible corporate culture

Japan Post Holdings Co. is set to sell off the mainstay business of its Australian logistics affiliate Toll Holdings Ltd. The Japanese postal giant took over the Australian company in 2015 for 620 billion yen (about $5.7 billion) in a bid to gain a foothold overseas, but two years later found itself saddled with losses of 400 billion yen (approx. $3.7 billion) after the subsidiary's earnings deteriorated.

    Japan Post Holdings now reportedly intends to dispose of Toll Holdings' domestic distribution business in Australia, and is expected to post an additional loss of 67.4 billion yen (some $624 million).

    Japan Post Holdings cites the economic downturn in Australia and the coronavirus pandemic as the reasons for the sellout. However, there was little point in owning a domestic business in Australia in the first place. It was nothing but haphazard for the postal company to move ahead with the buyout without fully scrutinizing the Australian firm's business.

    Then Japan Post Holdings President Taizo Nishimuro and other executives spearheaded the acquisition, finalizing the deal without ample discussion at board meetings.

    The firm may have made the misjudgment due to its ambition and desperation to drive up its share prices by presenting a scenario of overseas expansion ahead of the listing of its stock -- a milestone in Japan's postal privatization initiative.

    Japan Post Holdings initially failed to send enough staff to Toll Holdings, leaving the latter's management entirely up to local offices. Being a patched-together entity with a history of repeated mergers, Toll Holdings has many overlapping services. Japan Post Holdings' successive managers bear a heavy responsibility for failing to promote streamlining of the affiliate.

    Nevertheless, the postal firm has shown no intention of clarifying why the buyout resulted in failure and who is accountable.

    If Japan Post Holdings' financial foundation deteriorates, it could put a strain on postal services, which are of a highly public nature. The Japanese government, the primary shareholder of Japan Post Holdings, plans to sell off its shares in the firm and divert funds toward reconstruction efforts in areas devastated by the March 2011 Great East Japan Earthquake and tsunami. If the postal company's corporate value declines, it could affect the general public.

    Japan Post Holdings is poised to maintain its strategy of fostering international logistics business as a primary source of revenue. Amid waning domestic demand, overseas business expansion may provide one way to move forward.

    The postal company, however, has yet to work out a specific strategy for overseas deployment, even though six years have passed since its acquisition of Toll Holdings. It makes one wonder if the firm can vie squarely with logistics giants in the United States and Europe under such tardy management.

    The Japan Post Group also incurred enormous deficits in 2010 stemming from massive delivery delays after taking over Nippon Express's delivery service. The postal group's business forecast was not realistic enough to successfully manage the acquired service, just as was seen in the Toll Holdings case.

    Further failures from Japan Post Holdings cannot be permitted. The company must revamp its corporate culture by drawing lessons from its experience of having wasted colossal amounts of investment capital.

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