The United States should continue to press the Japanese government to make the giant Kampo postal life insurance program compete on a level playing field with private insurers.[@@]

American Council of Life Insurers President Frank Keating delivered that message here Wednesday at a hearing of the House Ways and Means Committee.

Japanese Prime Minister Junichiro Koizumi recently suffered a major setback in the Japanese parliament in connection with his efforts to privatize Kampo and other postal service businesses.

Koizumi’s party won a decisive victory in a general election held earlier this month, and Koizumi has talked about his plans to continue to push for postal privatization.

U.S. life insurers entered the Japanese market about 30 years ago and now account for 15% of the Japanese life market, but Kampo still controls 40% of the market, Keating said at the House hearing.

“Year after year, through successive U.S. administrations, [the U.S. trade representative] has urged Japan to ‘level the playing field’ so as to counteract Kampo’s looming presence,” Keating said.

Kampo is so big because it pays no taxes, contributes nothing to policyholder protection funds, and receives full, unique government guarantees for all of its products, Keating said.

Japan’s continuation of Kampo’s special privileges “calls into question Japan’s commitment” to the General Agreement on Trade in Services agreement, Keating said.

Partial efforts to privatize Kampo could make things worse if they free Kampo from traditional restraints on its product offerings while failing to subject it to the same rules that apply to private insurers, Keating said.

Wendy Cutler, an assistant U.S. trade representative, testified that keeping Kampo from expanding its product line without facing the same regulatory regime as private insurers already is high on the Bush administration’s list of concerns.

“The administration is urging Japan to take this opportunity to make the policy choices that are necessary to finally achieve a level playing field,” Cutler said.