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Finance

Japan's megabanks to cut 2018 hiring class by 25%

Specter of protracted earnings slump prompts restraint

Japan's three megabanks are planning to hire fewer graduates next year.

TOKYO -- Just over 3,300 new college graduates are expected to start working at Japan's three megabanks next April, a roughly 25% decline from the current fiscal year, as financial institutions rethink their hiring priorities in a difficult business environment largely precipitated by negative interest rates.

The total will likely decrease for the second straight year to its lowest in six years. The Bank of Tokyo-Mitsubishi UFJ, the flagship unit of Mitsubishi UFJ Financial Group, is planning to hire 1,050 new graduates -- 13% fewer than this year. Mizuho Financial Group has not come up with a specific number but is likely planning a reduction of 20% or so. Sumitomo Mitsui Banking, the main banking arm of Sumitomo Mitsui Financial Group, is expected to make a roughly 40% cut. The three together will likely be employing just half as many new graduates as they did in 2007, before the global financial crisis.

Sumitomo Mitsui Trust Bank is planning a 10% cutback in hiring to 400. The only bank among Japan's five largest planning an increase is Resona Holdings, which seeks to hire 16% more new graduates next year for a total of 710. But this is largely to help offset the 34% drop recorded this year.

The main reason for the hiring downturn is sluggish earnings. The five banks suffered slumps in combined group net profit in the April-December period for the first time in seven years, due to declines in lending in Asia as well as bond trading. A major recovery seems unlikely, given the Bank of Japan's negative-interest-rate policy.

"We increased the number of hires in fiscal 2015 and fiscal 2016 because of a weak yen and hopes for economic recovery," said a bank representative.

Labor costs at Japan's banks came to roughly 3 trillion yen ($27 billion) in fiscal 2015, according to the Japanese Bankers Association. While the figure had decreased from the previous fiscal year, it still accounted for over 40% of total costs.

But banks are working to make better use of financial technology. "There is a lot of room to save on labor," said the head of one megabank regarding the tradition of hiring large numbers of new graduates each year to staff branches across Japan. More women are returning to work after having children than before, which has also reduced the need for new hires.

(Nikkei)

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