You’ve Got Mail, But It’s Going to Cost You!
Neither snow, nor rain, nor heat, nor gloom of night will prevent the cost of postage in Japan from rising for the first time in more than 30 years.
What’s new: On December 13, 2023, Japan's equivalent of the postmaster general, Tetsuya Senda (千田哲也), formally requested an early increase in postal rates, including those for first-class mail, which accounts for the majority of the letters sent, to address projected revenue shortfalls amid a long-term trend of steadily declining mail volume. While the central government must now consider the financial argument for the proposed increases, it is likely that the proposal will be approved, resulting in across-the-board increases for stamps and other postage.
Why it matters: Japan has held the cost of postage for most types of sealed letters flat since 1994. Now, along with more than 25,000 other items that have experienced inflationary pressure and price increases over the past 12 months, Japanese consumers will have to allocate more of their living expenses to higher postage rates. Businesses will also suffer.
Context: The Japan Postal Service offers much more than mail delivery. It also offers banking services (such as savings accounts) and life insurance. The postal system in Japan is comprehensive, encompassing domestic and international mail services as well as various financial services through Japan Post Bank and Japan Post Insurance. These two companies, both subsidiaries of Japan Post Holdings, are major players in the financial sector. Japan Post Bank is one of the largest banks in Japan by assets, and Japan Post Insurance is a major provider of life and non-life insurance. The privatization of Japan Post in 2007 was aimed at increasing efficiency and competitiveness in the financial services sector while maintaining the essential role of the postal network in delivering mail.
By the numbers: The reason for the expected price increase is quite simple. The Postal Service needs to cover its ever-increasing costs to at least break even.
Rationale: Japan Post's operating loss was -21.1 billion yen (about -$150 million) in fiscal year 2022, the first operating deficit since privatization in 2007. Financial performance is not expected to improve in fiscal 2023. In fact, the operating loss is projected to widen to -91.9 billion yen (-$652 million). If postal rates are not raised, the deficit will continue to grow, exceeding 300 billion yen ($2.1 billion) in fiscal 2027 and worsening to 343.9 billion yen ($2.4 billion) in fiscal 2028. Therefore, the current business model is no longer sustainable.
Proposed Increases: The price for standard size sealed letters weighing 25 grams or less is expected to rise to 110 yen ($0.78) from the current price of 84 yen ($0.59), an increase of 26 yen (+31.0%). Excluding the consumption tax, this is the first price increase since 1994. The cost of stamps for letters weighing more than 25 grams but less than 50 grams is expected to rise to 110 yen ($0.78) from the current price of 44 yen ($0.59), an increase of 16 yen (+14.5%). Japan Post is expected to raise the price of second-class postal items (postcards) from the current 63 yen ($0.45) to 85 yen ($0.60), an increase of 22 yen (+34.9%). Excluding the consumption tax hike, this is the first price increase for postcards in seven years, since 2017. While details have not yet been announced, a possible postage increase for the popular Letter Pack1 is also being considered.
The big picture: Japan Post is a victim of shifts in demand and is still being held hostage by an inefficient operating structure. Something has got to give.
Shift in Demand toward the Internet: The Ministry of Internal Affairs and Communications cited "the spread of the Internet and social networking sites, the increasing use of the internet for various invoices and other documents, moves by companies to reduce communication and sales promotion costs, and a decline in personal communication" as the main reasons for the decline in the number of mailings in its December 18, 2023 report.
Reduction of Postal Volume: The number of pieces of mail has continued to decline since its peak in fiscal 2001, when Japan Post processed more than 26.2 billion pieces of mail. By fiscal 2022, the volume had already dropped 45% to only 14.4 billion pieces of mail. The latest projections indicate that the volume will decline to only 11.5 billion pieces by fiscal year 2028.
System in Need of Structural Reform: Although Japan Post has been promoting operational efficiency, including eliminating Saturday delivery of regular mail, the company faces structural issues that make it difficult to improve profitability, such as the fact that personnel expenses accounted for 2/3 of operating expenses in fiscal 2022. There are, moreover, more than 24,000 post offices in Japan. That's about one post office for every 5,200 people in a country about the size of California2. Many of these post offices are located in rural areas. Especially considering that Japan's population has begun to decline from a peak of 128.1 million in 2008 and is expected to fall to about 87 million by 2070, this relatively inefficient distribution model is, essentially, unsustainable now and will certainly need to be addressed in the future.
“While mail volume continues to decline, labor and fuel costs have risen significantly, and the Postal Service will have a very difficult time making ends meet. To continue service, we have no choice but to ask for an early rate increase. We will continue to improve the efficiency and productivity of our operations, including using technology to create an extremely streamlined pickup and delivery system, and we will make every effort to expand our services.” - Hiroya Masuda (増田寛也), president of Japan Post
What’s next: Public comments have been invited until January 22, 2024. After receiving feedback, a report will be submitted to the Ministry of Internal Affairs and Communications. After further discussion on the matter, a ministerial order will be issued, Japan Post will announce the new rates, and the price increase is expected to be implemented in the fall of 2024.
However, this is not likely to be the end of the story. Going forward, upward revisions of postal rates are expected to become routine.
"It may be difficult to gain the public's understanding for repeated price increases, but since 1994, when the price of standard sealed envelopes was last raised in Japan, other developed countries have raised prices frequently, including 17 times in the United States and 20 times in the United Kingdom.”
Hiroya Masuda, President of Japan Post
That just might be enough to trigger someone in Japan into going postal!
Links to Japanese Sources: https://toyokeizai.net/articles/-/723344 and https://www.nhk.or.jp/shutoken/newsup/20231218c.html
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Letter Pack is for one A4-size package weighing up to 4 kg, including correspondence. It can be sent anywhere in Japan at a flat rate.
By comparison, the U.S. has about 31,000 post offices for a population of 331 million - or one post office for every 10,677 people.
Thanks for this story, Mark. As a former mail artist and zine maker who used to send out letters and postcards and other stuff practically every day, it is very sad news.
To make matters worse, posting something has increasingly become a hassle. More bureaucracy, more forms to fill out. If I want to send printed matter abroad, now I'm supposed to enter my data online first. It's like they are trying to discourage people from using the postal service.
Seems to me that the PO's days of delivering letters/documents/information are numbered. Hasn't that service been obsolescent since the internet was made available to civilians? A long, slow death. Packages/parcels are handled well already by the logistics sector. From the customer's point of view, privatization was probably a mistake - and probably from the private shareholders' point of view also. They invested in a sunset corporation?
IIRC, in 2023, I went into a post office once only. It was like walking into the 1970s; but of course the counter staff were both charming and obliging.