TOKYO -- Japan Post will set up a joint venture with Australian subsidiary Toll Holdings to meet demand for logistics support in Japan from automakers and major overseas brands.
The new company, expected to be called JP Toll, will add competition to an already fiercely contested corporate logistics market, which is expanding fast as online shopping takes off. The postal service aims to leverage the logistics expertise of the Australian company, whose struggles led to a group net loss in fiscal 2016.
Japan Post and Toll will invest equally in JP Toll, each providing several billion yen (several tens of millions of dollars). Negotiations are proceeding with an eye to appointing Taneki Ono, an executive officer at Japan Post, as president of the venture. JP Toll will have access to Japan Post's nationwide network of branches and delivery depots. With this access and Toll Holdings' expertise, the new company will pitch large-lot contracts for comprehensive logistics coverage in Japan.
The Japan Post group believes the joint venture will complement its postal and home delivery services. Deliveries of letters, postcards and the like are tapering off, but there is growth in its Yu-Pack parcel courier service, which is used by both individual and corporate shippers.
Parent Japan Post Holdings currently relies on Japan Post Bank and Japan Post Insurance for much of its revenue. But the holding company does not expect growth in these two financial subsidiaries amid the current ultralow interest rate environment.
It believes the corporate logistics market has a much higher growth potential. That market was valued at over 2.5 trillion yen in one private survey, and further expansion is expected. Demand is growing for comprehensive service packages that include handling product orders, warehouse management, sorting, packing and more. The ability to cut costs by outsourcing logistics helps fuel that demand, as does the nearly 10% annual growth in online shopping.
According to the Ministry of Land, Infrastructure, Transport and Tourism, the number of parcels delivered in Japan in the year through March grew 5.8% to 4.25 billion -- the third consecutive year of increase.
The Japan Post group bought Toll Holdings for about 630 billion yen in 2015. This was Japan Post's first major overseas acquisition after its privatization. With the Australian company struggling, Japan Post booked an impairment charge of more than 400 billion yen for the year through March 2017, resulting in its first post-privatization net loss.
Japan Post returned to profit the following fiscal year after making changes in Toll's management ranks and cutting payroll.