U.S. life insurers are watching and waiting as Japanese leaders sort out the effects of a move by Japan’s Parliament to reject a proposal to privatize the country’s mammoth postal system.[@@]

The system includes Kampo, a life insurance business with $1 trillion in assets, as well as a savings business, a retail post office network and a basic mail delivery system.

Japan’s Upper House voted 125-108 to reject the postal privatization plan earlier today, with the help of 30 votes from members of Japanese Prime Minister Junichiro Koizumi’s Liberal Democratic Party, and the Lower House passed the measure by an unusually slim 233-228 vote in July.

Because the measure received only 1 vote more than needed for passage in the Lower House and a number of Liberal Democratic Party members of parliament defected, many Japanese observes greeted the results as a setback for Koizumi’s government, according to press reports.

Japanese unions have opposed the privatization proposal, arguing that rural residents might be left out of the new postal and financial services order.

But Koizumi has spent years working on the postal privatization plans. Before the Upper House voted, he said he would dissolve the current Parliament if lawmakers rejected the proposal.

Koizumi has responded to the defeat of the postal privatization plans in the Upper House by scheduling Lower House general elections for Sept. 11.

Koizumi, the president of the Liberal Democratic Party, is refusing to let LDP lawmakers who rebelled against him by voting against his privatization proposal run as LDP candidates for Lower House seats.

The American Council of Life Insurers, Washington, has issued a statement arguing that Japan is obligated under the General Agreement on Trades and Services to remove special advantages, such as government guarantees, that the Kampo postal life business now enjoys.

“Our consistent theme has been, and remains, that whatever the outcome of privatization efforts, there must be a level playing field established before new or modified postal products are permitted,” ACLI President Frank Keating says in the statement.

Due to an editing error, the original version of this article gave an incorrect description of what happened to the privatization measure in Japan’s Lower House. The measure passed by a 223-228 vote.