Japan traditionally hires large numbers of new graduates each spring, assigning them to departments and roles after they join. Salaries typically increase based on seniority rather than job performance, with employees often remaining with one company until retirement. This model, characterized by 'shinsotsu ikkan shukatsu' (mass hiring of new graduates), seniority-based pay, and lifetime employment, is now facing significant changes. Companies are shifting from hiring people first to defining job needs and selecting candidates based on market-driven compensation. Employees are also beginning to seek positions that align with their skills rather than following a linear career path dictated by the organization.
The changes are evident in corporate hiring practices. The traditional single entry point for new hires is now being divided by specific fields and skills. According to the Nihon Keizai Shimbun (Nikkei) on August 24, major Japanese banks, including Mitsubishi UFJ Bank, Mitsui Sumitomo Bank, and Mizuho Financial Group, plan to hire a total of 2,180 new employees for 2027, a 4.8% decrease from this spring. However, this does not mean a uniform reduction in hiring. While overall new hires are down, the three major banks are actively recruiting in specialized areas such as IT, global operations, and asset management. The number of experienced hires planned for 2026 is 1,300, up 2.7% from last year. One of the banks acknowledged that the use of AI has impacted the reduction in new hires, indicating that efficiency improvements may lead to further decreases in hiring. While AI may displace some entry-level jobs, the demand for individuals who can work with AI is increasing.
To attract the necessary talent, companies must offer salaries that reflect market value. In high-demand fields like AI and cybersecurity, competition for talent with foreign firms makes it difficult to attract candidates using traditional seniority-based pay scales. For instance, an employee earning 8 million yen (approximately $69,540) at a Japanese company could see their salary exceed 20 million yen after moving to a foreign firm within a year. Mitsubishi UFJ Bank has implemented an 'Ex (Expert) System' since 2024, allowing them to offer salaries equivalent to branch managers or department heads to mid-career professionals in system development, financial markets, and cybersecurity. SOMPO Holdings, which oversees Sompo Japan, has adopted a model where the holding company hires specialized talent in AI, cybersecurity, and legal fields and assigns them to various group companies, enabling them to offer salaries exceeding 10 million yen to young professionals in their early 30s. This marks a shift from the traditional pay structure based on years of service and rank to one that reflects the market value of skills.
Fujitsu has completely overhauled its hiring approach to align with market value. Starting in 2025, the company will eliminate mass hiring of new graduates and switch to a continuous hiring model that does not differentiate between new and experienced hires. For specialized roles in AI, data science, and cybersecurity, Fujitsu will implement a different compensation structure. An internal committee will evaluate candidates based on rarity and contribution, categorizing them into four grades: S, A, B, and C. Grade A employees will receive an additional 300,000 yen per month, while Grade B employees will receive an extra 150,000 yen. The top grade, S, can have salaries set individually between 25 million and 35 million yen. Currently, there are no employees in this category. Compensation is increasingly determined by the market value of skills rather than years of service or tenure.
However, these changes have not yet permeated all Japanese companies. A survey conducted by Keidanren (Japan Business Federation) from September to November last year found that only 26% of the 337 companies surveyed had adopted or were considering adopting a job-based pay system. Even if seniority-based companies attempt to offer higher salaries, they often face obstacles due to existing employment rules and pay regulations.
Changes are also occurring in how employees are assigned within companies. Konica Minolta introduced a 'Skill Sharing System' last month. Departments post 'job listings' for necessary tasks and skills, allowing employees from other departments to apply. Selected employees can work up to 20 hours a month, for a maximum of three months, outside their regular duties and receive up to 100,000 yen in addition to their existing salary. This initiative is not merely about providing extra income; it aims to actively utilize skills that may be underused within the company. For a company that has traditionally filled gaps with temporary or outsourced labor, this approach offers benefits in terms of cost and confidentiality. It adds a pathway for employees to choose alternative roles that utilize their skills, rather than being assigned to predetermined tasks in designated departments.
Similar changes are also emerging in the bureaucratic sector. According to the Nikkei on August 25, there has been a notable exodus of mid-level personnel in their 30s and 40s who have traditionally held key positions, while the number of private sector professionals seeking to enter the civil service has significantly increased. In 2025, 2,360 candidates applied for the national civil service 'experienced hire' program, a 74.7% increase from the previous year. Even in Japan's most conservative organization, the civil service, signs are emerging that the culture of entering as a new hire and working within a single department to reach senior positions is changing.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.