Wall Street Banks Are Battling for Japan's Top Young Talent

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4 days ago

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Japan's hottest banking talent is in high demand as Wall Street goes all out to woo new hires, with fancy dinners, strong-arm tactics and higher salaries.
On today's Big Take Asia Podcast, Bloomberg's Lisa Du talks to host K. Oanh Ha about why firms are resorting to extreme measures and the problems they face in hiring top talent.
K. Oanh Ha: Last year, a recent graduate from one of Japan's top universities was weighing job offers from a few international banks. One offer was from a Wall Street firm, which he decided to pass on.
Lisa Du: He had turned down the offer on the phone. But then they called him and asked him to come in for a meeting. So he showed up, and was greeted in a room by three managing directors.
Ha: Bloomberg's Lisa Du covers finance and investing out of Tokyo. She says the young man's story caught her eye – in part – because of what happened next. The managing directors kept him inside the room and gave their young candidate the hard sell.
Du: They basically spent two hours trying to convince him to change his mind and take that offer and at one point, you know, telling him, don't take this company lightly. Just don't mess with us, you should take this offer. And just like really giving him a lot of pressure to take this job.
Ha: The man told Lisa that when the directors finally let him go, he was exhausted and a little traumatized…and even more confident that he made the right choice by not taking the job. It sounds like a crazy story. But Lisa says these hardball recruitment tactics aren't unusual in Japan right now.
Du: We did hear several instances where young candidates were either forced to stay in a room for hours, or were just heavily courted by being taken to really fancy restaurants and private rooms.
Ha: That's because right now, Japan has one of the world's tightest labor markets. In many ways it's the opposite of what's happening in the rest of the financial world: Bankers from Hong Kong to London have been hit by pay cuts and layoffs as the global economy contracts. But in Japan, there's a hiring boom. Du: So I think several factors are coming together at the same time to create this perfect storm. The Japanese market is interesting again because inflation is back. Money is very easy to borrow. There's a weak yen, leading now to a surge in trading for Japanese government bonds, Japanese stocks and also a burst in foreign investment. And this is coming after years of, you know, Japan kind of playing second fiddle in Asia to China. And so these banks haven't really looked at Japan for many years and are now realizing they need to build up the business. So now, international banks, Wall Street banks included, are all kind of racing in Japan to take advantage of the market renaissance that's happening.
Ha: This is the Big Take Asia from Bloomberg News. I'm Oanh Ha.
Every week, we take you inside some of the world's biggest and most powerful economies, and the markets, tycoons and businesses that drive this ever-shifting region.
Today on the show – Wall Street's talent war in Japan, and why a pivot there could be a bumpy road ahead.
Ha: Bloomberg's Lisa Du started taking note of the intense competition for finance talent in Japan last year. There are a couple of drivers – inflation, corporate reforms and low borrowing costs have made Japan a more lucrative environment for investors. Then there's the slew of mega deals also putting Japan in the spotlight.
Du: Right now, Toyota Industries is about to be taken private for about $33 billion. The operator of 7-Eleven, Seven & i Holdings is facing a bid from a Canadian firm to buy it for about $52 billion. And from Bloomberg data that we crunched, actually I think the value of announced deals in the past 12 months is up about 70% in Japan.
Ha: Even before this renewed interest in Japan, its labor market was already challenging for employers.
Du: There's been a chronic and acute labor shortage in Japan for many, many years. And this is due to the aging demographics. And at the same time, they have this younger workforce that's more mobile, more vibrant, has different ideas about what they want from their jobs and may not be as attracted to a job in finance as they were in the past.
Ha: Banks and money managers looking to hire face an even smaller talent pool. Japan's unemployment rate sits at just 2.5% – roughly half of the US level. And by the numbers, that means for every applicant, there are often multiple jobs available. Lisa says it's not uncommon for rising stars to receive five or six offers.
Ha: Lisa, how many jobs are waiting to be filled now in Japan's banking sector? I mean, how big of a problem are we talking about?
Du: It's hard to get exact data on this, but, um, most banks and financial executives that we're speaking to, you know, have always mentioned they need to add headcount, that this is something that's on top of their mind all the time. So Citigroup had told us that they were expanding their investment banking team by about 15%. JP Morgan Chase was saying they needed to add to their capital raising and financing teams. Carlyle Group, the big private equity firm, they just raised a giant Japan buyout fund, and they said they need to hire 10 more investment professionals to deploy that money.
Ha: So even if the scale isn't like, thousands and thousands of jobs, it sounds like these are pretty critical jobs for these international firms?
Du: Yes. And I think timing is very key. I think they really want these job candidates now to take advantage of the moment because there is this demand.
Ha: And what are these banks doing to attract talent?
Du: I mean this is, you know, banks, Wall Street we're talking about. So of course money.
Du: One investment banking partner we've spoken to said they had raised the offers they made for investment banking by about 10% every year in the last three years. You know, we had heard that younger associate analyst level bankers in Japan will make about $140,000 per year. And that will compare to New York where these associate level bankers will make about $200,000 a year. Japan historically has had slightly lower pay in the financial sector than most other places in the world. So these are quite big pay bumps for these young bankers in Japan.
Ha: Besides showering candidates with cash, banks are adopting other more creative ways to woo talent.
Du: One thing we heard they were doing was holding these parties where they invite people that left the firm to kind of come and network again to try to get them to come back. Some are being more serious about setting up an alumni network, so that they then have basically a contact list of people they can reach out to if they wanna hire them back. And they're wining and dining them as well to try to get them to come on.
Ha: And it's not just young graduates that banks are finding difficult to recruit. Lisa says the shortage for finance staff is across the board.
Du: There is also a great need for mid-level to senior bankers. One interesting phenomenon we've also been tracking is obviously the Japanese government bond market has come back to life because Japan has exited negative rates. And so some brokerages are trying to lure back workers who have retired because these guys know what a world with interest rates was like. Traders who were in their 20s and 30s have never experienced a market with interest rates. And so it's like being an old timer is now kind of a benefit.
Ha: After the break, why is it so hard to hire bankers in Japan?
Ha: Besides having a limited talent pool, Japan presents unique challenges for global firms looking to expand. The language barrier is at the top of the list. Unlike in Hong Kong or Shanghai, traders and bankers can't get by with just English.
Ha: Lisa, how important is it to be able to speak Japanese in these jobs?
Du: I think it's very important and quite job specific. You know, like Japanese government bond traders, that's a very domestic job that requires like specialization. I think that one you really would need Japanese. Ideally, I think what a lot of investment banking jobs or investment firms, like private equity would like is someone who is just bilingual and able to seamlessly move between kind of Japanese culture and more of international western culture so that then they can work across teams globally. And that is the ideal, the perfect candidate, someone who can just really do both.
Ha: So you're saying for the bankers listening in New York or London, there's no need for them to hop on a plane and try to land one of these jobs?
Du: I think that might be hard. I think they would prefer that you, you know, have some understanding of Japanese and Japanese culture and Japanese business practices.
Ha: At the beginning of the story you mentioned how this one young graduate turned down a Wall Street firm after they tried to pressure him to join them. And I wonder for these young candidates, do big Wall Street names have cachet? Does working for Goldman Sachs or an international firm carry a lot of weight with them?
Du: Well, he turned down a Wall Street firm for another international one that was European. So I think, uh, you know, these big ones do have cachet, but it probably isn't worth as much as they are in the US. It would be just as good to work for a trading house like Mitsubishi or Sumitomo compared to working at Goldman Sachs.
Japan is home to some of the biggest banks in the world, the mega banks and large brokerages like Nomura and Daiwa , which have international operations. So, you know, if you are a young grad in Japan, it would be equally attractive to go work for these firms, and also make a lot of good money and have a very international experience.
Ha: On top of that, Wall Street firms are also up against a culture that prizes loyalty. Workers in Japan often stay at the same company for their entire career and poaching employees from rival firms is frowned upon.
Du: One aspect is Japanese workers historically tend to be very loyal to where they're working. And, back in the days, like your parents probably stayed in the same company for life. That was very common. Your company took care of you. And when you retire, they also took care of you. And some of that mindset is still there, but it's slowly changing.
Ha: Lisa says what's changing is how young people think about work and their careers in general. And that means working for big finance corporations might not be as attractive as it once was.
Du: We saw this really in the mindsets of younger workers we spoke to. They want better work-life balance. They want to do work that they think is more meaningful and more impactful. And sometimes the salary doesn't even sway them. Actually, one former investment banker I spoke to who opted to go into venture capital said he didn't need that much money. He found being able to help build up businesses way more rewarding.
Ha: Lisa – what do you think this story tells us about Japan?
Du: I think what's interesting about this story is that I think it captures a moment in time and we're telling it through financial firms, but it could probably apply to other industries as well, where Japan is having a kind of financial renaissance. It's become very interesting again for global investors, for global banks. And as they rush back in to try to take advantage of this, they're running up against a problem that has always been there and is actually getting much worse. I'm not sure if we can make any big hypothesis about the future from this tale, but I think, kind of, painting this picture of what it's like in Japan right now is quite interesting.
Ha: And how long do you think this intense competition for talent will last?
Du: I think that will go on for as long as the Japanese markets are sexy. I think it all ties back to the attractiveness of the Japanese market. And this is a question that investors, financiers all ask all the time. Is this moment for real? Is Japan like, really back, for the long run? And all the factors I described before about easy borrowing, weak yen, driving all this activity. As long as that continues, this will also go on.
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