Employment Systems of Financial Institutions in Japan Variations by Country, Products and Individual Strategy

Abstract

This Paper investigates the factors and backgrounds that influence employment systems in financial institutions in Japan. The author focuses on three major factors that are giving rise to varieties and changes in the employment systems. First, country factor indicates that the employment practices of multinational financial institutions are influenced by the best practices adopted by the parent company as well as the relevant institutions in the host country. Secondly, the product factor indicates that the employment practices are influenced by the products handled by each company and required skill formation to deliver such products and services. Lastly, the individual strategy factor indicates the differences in employment practices that can be attributed to corporate strategy selected by each company. The author conducted semi-structured interviews with 17 major financial institutions that include companies of Japanese and foreign origin, in three different sectors, namely, banks, securities companies and life insurance companies, to analyze these different factors.

The results indicate that many important employment practices are determined by country factor, such as hiring and downsizing practices, role of HR department, retirement age, etc., which means that these practices are affected by the origin of the company. Product category or business sector also has strong influence on corporate employment practices, particularly in the domain of skill formation and rewards such as job rotation, ratio of performance related pay, number of job grades, etc. Individual strategy also causes some differences albeit to a somewhat lesser degree.

Such findings lead to the conclusion that the growth of multinational companies in Japan are contributing to the increased diversities in employment systems in Japanese financial institutions, whereas differences in products and business sector also contribute to the existence and/or growth of varieties in employment practices, which could be amplified by the recent financial deregulations.