Yamaguchi Financial Boosts Pay to Attract Top Market Talent

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Yamaguchi Financial Group Inc., a regional lender situated at the western tip of Japan’s largest island, is contemplating offering new hires specialized in securities market expertise compensation comparable to that at the country’s major banks. This move comes as competition for financial professionals, particularly bond traders, intensifies with the Bank of Japan adjusting interest rates, thereby heightening trading volatility and creating more opportunities in the sector.

The salaries for bond and foreign exchange trader and sales positions at Japan’s largest banks reach upwards of ¥13 million ($80,500) according to recruitment websites such as doda and Kotora. “We don’t want compensation to be an obstacle” in the recruitment process, stated Keisuke Mukunashi, Yamaguchi Financial’s CEO, in a recent interview. “We’re ready to pay” competitive wages akin to those of Japan’s leading banks, he confirmed.

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Yamaguchi Financial is among several local banks eyeing revenue through securities investment, as dwindling and aging populations reduce business opportunities within their regions. However, the scarcity of seasoned market professionals at these local banks increases the risk of investment mishaps.

According to Rikako Onishi, president of the Tokyo-based recruitment firm Kotora Co., regional banks have been actively hiring more mid-career staff for their market segments. “Given the recent substantial movements in currency and rate markets, many banks have suffered market business losses and need to overhaul their asset-liability management operations,” Onishi said, noting that the absence of interest rates over the past two decades has left a limited pool of experienced individuals in this domain.

Japan’s financial regulator echoed similar sentiments in a report last year, emphasizing the necessity for regional banks to bolster their numbers of experienced personnel capable of navigating rising interest rates. Market-related staff comprised a mere 2% of employees at the banks surveyed by the Financial Services Agency, underscoring a critical gap.

The banking sector in Japan has witnessed significant investment setbacks this year, including Aozora Bank Ltd.’s first loss in 15 years due to failed foreign bond investments and bad US office property loans. The Norinchukin Bank also stunned global markets with its announcement to offload $63 billion of low-yielding US and European government bonds that had turned unprofitable.

Yamaguchi Financial itself reported a ¥13 billion net loss in the fiscal year ending March 2022 after rising interest rates in the US and Europe compelled a sell-off of its foreign bonds and mutual funds. Consequently, it established a risk management committee including external experts. The value of its securities holdings bounced back to about ¥2 trillion as of the end of March, after plunging to around ¥1.34 trillion two years earlier. The bank foresees a record-high consolidated net income of ¥33 billion for the fiscal year that began April 1, buoyed by robust lending revenues and improved investment income from securities.

Securing talent is a nationwide challenge for Japanese financial institutions, with additional hurdles for regional lenders needing to attract professionals to locations outside major urban centers. Yamaguchi Financial is based in Shimonoseki, a coastal city known for its seafood, including the infamous poison-containing pufferfish, located about 800 kilometers (roughly 500 miles) from Tokyo.

The smaller scale of regional lenders relative to Tokyo’s big banks means employees often cover multiple markets, unlike their counterparts at larger firms who can specialize. Yamaguchi Financial employs about 3,800 people, only around 3% of the workforce at Mitsubishi UFJ Financial Group Inc., Japan’s largest bank.

The lender has recently hired two mid-career professionals from Japanese banks for its Tokyo-based market division. It plans to take on 85 mid-career workers in various areas, including markets, this fiscal year, in addition to the 152 new graduates hired in April, aligning with traditional Japanese recruiting practices.

“In the future, we would like to bring the ratio of mid-career and new graduate hires to an even level,” Mukunashi noted. The bank will outline the timeline for reaching this goal in its next mid-term plan, starting in April.