Japanese, U.S. officials begin talks on life products.

Japanese officials began talks in Tokyo in August with the U.S. trade representative over the sale of life insurance products by Japan Post, the country's government-run postal, banking and insurance giant.

The Japanese government is outlining a multiyear plan to privatize Japan Post. U.S. life insurance industry interests, spearheaded by the American Council of Life Insurers, have been watching closely.

The ACLI has asked Japan to prevent Kampo, Japan Post's life insurance segment, from introducing products before the privatization effort is completed. At privatization talks begun earlier this year, Kampo announced the introduction of a product that competes directly with private-sector offerings: A fixed-term whole life policy with a health benefits rider.

Kampo enjoys significant advantages over its competitors. It doesn't pay taxes, and it operates under separate and less-transparent regulations than the private sector. Kampo also pays no policyholder-protection premiums, and all of its policies are guaranteed by the Japanese government.

Kampo, which had been launched as the Postal Life Insurance Service in 1916 to serve rural and poor Japanese, has grown to be the world's largest life insurer and a hugely distorting influence on the Japanese market. According to an ACLI white paper on Kampo published earlier this year, Kampo has about 40% market share in Japan--a number taken from Japan Post's own 2003 annual report.

The ACLI and the U.S. trade representative have been asking Japan to place the new, privatized Kampo operation under the same regulations as those facing its private-sector competitors. ACLI's president and chief executive officer, Frank Keating, repeatedly has called on Japan Post to halt the sale of any new insurance products until a "level playing field" is established.