ECONOMIC SPOTLIGHT - TELECOM IS KEY JAPAN MINISTRY Japan's little-known Ministry of Posts and Telecommunications (MPT) has emerged as an international force to be reckoned with, political analysts said. MPT, thrust into the spotlight by trade rows with the U.S. And Britain, is in a position of strength due to its control of a lucrative industry and its ties with important politicians, they said. "The ministry is standing athwart the regulatory control of a key industrial sector, telecommunications and information," said one diplomatic source. "They are a potent political force," the diplomatic source said. But MPT is finding domestic political prowess does not always help when it comes to trade friction diplomacy, analysts said. "The ministry was a minor ministry and its people were not so internationalized," said Waseda University professor Mitsuru Uchida. "Suddenly they're standing at the centre of the world community and in that sense, they're at a loss (as to) how to face the situation." Most recently the ministry has been embroiled in a row with London over efforts by Britain's Cable and Wireless Plc to keep a major stake in one of two consortia trying to compete in Japan's lucrative overseas telephone business. The ministry has favoured the merger of the two rival groups, arguing the market cannot support more than one competitor to Kokusai Denshin Denwa Co Ltd, which now monopolizes the business. It has also opposed a major management role in the planned merger for any non-Japanese overseas telecommunications firm on the grounds that no such international precedent exists. The ministry's stance has outraged both London, which has threatened to retaliate, and Washington, which says the merger plan is evidence of Japan's failure to honour pledges to open its telecommunications market. Washington is also angry over other ministry moves which it says have limited access for U.S. Firms to Japan's car telephone and satellite communications market. Much of MPT's new prominence stems from the growth of the sector it regulates. "What has been happening is an important shift in the economy which makes the ministry a very important place," said James Abegglen, head of the consulting firm Asia Advisory Service Inc. A decision to open the telecommunications industry to competition under a new set of laws passed in 1985 has boosted rather than lessened MPT's authority, analysts said. "With the legal framework eased, they became the de facto legal framework," said Bache Securities (Japan) analyst Darrell Whitten. Close links with the powerful political faction of the ruling Liberal Democratic Party (LDP) nurtured by former Prime Minister Kakuei Tanaka are another key to MPT's influence, the analysts said. "Other factions ignored MPT (in the 1970s), but the Tanaka faction was forward looking and ... Recognized the importance of MPT," Uchida said. Many former bureaucrats became members of the influential political group, he added. The ministry also has power in the financial sector due to the more than 100,000 billion yen worth of deposits in the Postal Savings System, analysts said. MPT has helped block Finance Ministry plans to deregulate interest rates on small deposits, a key element in financial liberalisation, since the change would remove the Postal Savings System's ability to offer slightly higher rates than banks, they said. Diplomatic sources, frustrated with what they see as MPT's obstructionist and protectionist posture, have characterized the ministry as feudal. Critics charge MPT with protecting its own turf, limiting competition and sheltering the former monopolies under its wing. Providing consumers with the best service at the lowest price takes a back seat to such considerations, they said. But many of the ministry's actions are not unlike those of its bureaucratic counterparts in much of the Western world including Britain, several analysts said. "The United States is really the odd man out," Abegglen said. "For a government to take the view that it wants to keep order in utilities markets is not an unusual and/or unreasonable view," he said.