Tokyo confronts critical talent gap in pursuit of global finance hub status

Earlier this year, a 69-year-old Tokyo-based compliance officer thought his career was over. A role at an asset manager had collapsed after two months of negotiation. But within two weeks, he was flooded with offers from a hedge fund, a cryptocurrency outfit and an investment firm — all dangling salaries near ¥30 million ($204,000).

Accordig to a piece by The Financial Times, his story captures both the allure and the challenges Tokyo faces as it seeks to transform into a global financial capital. Global institutions are rushing in, yet the city still lacks the people needed to make that ambition real.

Japan has eased some hurdles for newcomers — offering English-language forms and subsidies for costs — but licensing still takes months.

“I think he almost talked himself out of that job, when he explained the licensing process and they realised how long it might take,” said Vid Gunapala of recruiter Michael Page.

The shortage is acute.

“There are probably only around 20 or 30 international compliance officers in the city and they keep moving around. I have four clients currently asking me to find one if they are available,” said one senior Tokyo lawyer.

The attraction for foreign investors is clear: Japan’s vast pool of capital is finally moving after years of stagnation, spurred by inflation and government reforms.

As one dealmaker put it: “That’s where the money is.” Yet funneling those funds is proving difficult. “It is like squeezing so much capital through a pinhole,” another investor said.

Structural shifts

For decades, Japan’s capital markets relied on banks, cross-shareholdings and clubby ties. That system brought stability but dulled responsiveness to shareholders. Now, reforms are reshaping the landscape. Tokyo has pushed aggressively to market itself as Asia’s premier hub, with the economy ministry, regulator and stock exchange backing a surge of domestic and cross-border deals.

Two years ago, Japan branded itself an “asset management nation,” aiming to boost corporate performance and channel capital more effectively.

“We want to see an asset manager break into the top 20 companies. We have banks, insurers, but no asset managers,” said a senior Financial Services Agency official.

Geopolitics has also given Tokyo momentum. Hong Kong has become more of a conduit for mainland China, while international investors seek to move funds out of Donald Trump’s America.

"I was expecting it would take a long time for Tokyo’s transformation to take place, but I think there is a change — like it or not — in the global financial environment, triggered by Trump 2.0,” said Hiroshi Nakaso, former deputy governor of the Bank of Japan.

Momentum is building. Point72 Asset Management is doubling its Tokyo office space, while China’s Hillhouse Capital is expanding staff. Yet, Tokyo still lags far behind. Hiromi Yamaji, chief executive of the Tokyo Stock Exchange, reckons reforms are just 15–20% complete.

“I would like to put shine back on Tokyo’s appeal as a hub for international finance but there are still some challenges that remain,” said Governor Yuriko Koike.

War for talent

The real bottleneck is people. Since 2012, the asset management workforce has risen 65% to nearly 25,000, while banking employment has declined. But fewer young Japanese are entering finance: those aged 20–34 in the sector fell from 610,000 in 2002 to 380,000 in 2024.

“Tokyo still faces challenges in establishing itself as a global fund management hub . . . there’s a persistent mismatch between the demand for asset management talent and the available supply,” said Yuki Soga, founder of advisory Penrose Japan.

Foreign talent is scarce too. As of October 2024, only 12,872 foreigners worked in finance in Japan — just 0.6% of all foreign workers.

“Some clients are still holding out for a unicorn, a Japanese person who speaks English, who has the right skillset, but it’s a limited resource and the universe is shrinking,” said Michael Page’s Gunapala.

Poaching is costly. Global firms must offer at least 1.5 times local pay to lure Japanese professionals. In government bond trading, packages of $20 million – $35 million are common.

“I do think there are enough qualified people. But whether there’s a functioning market for that kind of talent — that’s another matter,” said Yutaka Ito, commissioner of Japan’s FSA.

Barriers to growth

Taxes remain a deterrent.

“It’s a big headache. When the compensation becomes more than . . . ¥40mn, suddenly the tax rate jumps actually and . . . people start saying ‘May I go to Singapore or may I go to Hong Kong’,” said Masahiro Kihara, chief executive of Mizuho.

Some companies are sidestepping talent shortages through partnerships. Amova Asset Management, formerly Nikko, has teamed with France’s Tikehau Capital.

“In . . . any industry where you want to upgrade fast, I feel that bringing in high-end international partners, and allowing them to ride on the back of a domestic partner that has the full infrastructure, is far more effective than encouraging them to set up from scratch,” said Stefanie Drews, Amova’s CEO.

Yet insiders warn that Tokyo must still cultivate homegrown expertise.

“It takes eight to 10 years to train a fully fledged portfolio manager so we have to start that now for the ecosystem to come,” said a hedge fund manager in Tokyo.

As Hideki Kinuhata of SILQ put it: “You have to be on the ground to understand Japanese companies. To do fundamental investing in Japan, it helps to breathe the air.”

By Sabina Mammadli