High-paying recruitment for traders over 50 years old! Japanese financial institutions urgently seek "experience in trading during market prosperity and interest rate cycles"

The Nikkei Index continues to hit a 34-year high, and the Japanese bond market is also becoming active. The Bank of Japan is on the verge of ending its 30-year loose monetary policy, bringing a second spring to senior traders nearing retirement.

According to media reports on Wednesday, securities firms in Tokyo are actively recruiting senior traders who were active during the Showa era, offering significantly higher base salaries and substantial bonuses.

Yoshiki Kumazawa, the recruitment director at Morgan McKinley, a recruitment consulting firm, said that a vice president-level yen exchange trader can receive an annual salary offer of up to 30 million yen (approximately $205,000), which is about 5 million yen higher than the traditional upper limit for employees at that level.

Kumazawa said, "We are starting to see salary offers jump to a new level. The competition for human resources has become intense again, which is something we haven't seen for a while."

It is widely expected in the market that the Bank of Japan will end its negative interest rate policy in the coming months. Over the past 30 years, the Bank of Japan has kept short-term interest rates close to zero. Young traders do not have enough experience to deal with market volatility caused by interest rate hikes. Therefore, traders in their 50s or older who have experienced market booms and have trading experience during interest rate hike cycles have become highly sought after by major financial institutions.

Rare Interest Rate Hike by the Central Bank, Traders in Their 50s or Older are in High Demand

"I am approaching the retirement age recognized by the financial industry," said Tadashi Masumoto, an interest rate swap broker and former CEO of Deliwanbang (Japan) Co., Ltd.

A few years ago, Masumoto planned to slow down his work pace to welcome the birth of his fourth child. However, he unexpectedly received a series of job invitations recently and is currently serving as the Managing Director of BGC Group, a NASDAQ-listed brokerage firm, responsible for a new Japanese team focusing on yen interest rate swap business.

Masumoto, 54, said, "For someone my age, receiving a job invitation or being sought after for work is really exciting."

It is widely expected in the market that the Bank of Japan will end its negative interest rate policy in the coming months. Over the past 30 years, the Bank of Japan has kept short-term interest rates close to zero, and few traders have enough experience to deal with market volatility caused by interest rate hikes.

Therefore, in the face of the prospect of rising interest rates, experienced senior traders like Masumoto have become extremely valuable.

A recent survey by the Bank of Japan showed that Japan lacks suitable bond traders to cope with future market volatility. Even those who have worked for decades hardly remember the situation during an interest rate hike cycle.

Masayuki Koguchi, the Executive Chief Fund Manager at Mitsubishi UFJ Asset Management, is a senior professional with 25 years of asset management experience. He said that he has never experienced a benchmark interest rate at the relatively moderate level of 1% to 2%, so he appreciates the few colleagues in the office who have been in the industry longer than him. "We have some veterans who have been in the market since the 1980s," Koguchi said, "and we are sharing and discussing the market trends of that era."

After forty years, the Japanese interest rate market is revitalized

Looking back in history, the last time the Japanese interest rate market was this lively was 40 years ago.

In the 1980s, billion-dollar bond transactions were not uncommon, and yields often fluctuated dramatically. In 1990, the 10-year government bond yield soared to 8.69%.

This all changed in the late 1990s when the Bank of Japan lowered interest rates to zero in an attempt to revive the stagnant Japanese economy. In 2016, the central bank further implemented the Yield Curve Control (YCC) policy, allowing it to purchase a large amount of government bonds and keep interest rates at low levels.

As a result, the Bank of Japan became the dominant player in the Japanese bond market, holding 53.9% of the national ¥70 trillion ($700 billion) government bonds as of the end of September last year. The 10-year government bond yield is currently hovering around 0.60%, and as the benchmark for government bonds, there are even days when there is no trading.

However, starting from 2023, the Japanese bond market has become active again. From January to November last year, the average monthly trading volume of Japanese bonds surged 41% compared to the same period two years ago, reaching ¥29 trillion ($290 billion). During the same period, the trading volume of listed stocks on the Tokyo Stock Price Index increased by 25% to ¥69 trillion ($690 billion), and forex margin trading soared 94% to ¥978 trillion ($9.78 trillion).

Under the leadership of Warren Buffett, international investors are returning to the Japanese market. Additionally, as the Bank of Japan reduces its bond purchases, investors are expected to once again become a key force in the Japanese government bond market.

"The vibrant Japanese interest rate market seems to be regaining its vitality," said Ville Vaataja, a former JPMorgan trader who set up a macro fund for the Japanese interest rate market last year. "We believe that in the coming years, or even decades, the actual volatility in Japan will structurally rise to higher levels."

Over the past few decades, $4 trillion has left Japan in search of higher returns overseas. Some analysts predict that as the Bank of Japan tightens its policies, some of the funds will flow back to Japan.

Barclays Japan stated that they have received more orders related to yen interest rates from domestic and foreign clients, with many overseas institutional clients betting that local rates will rise.

However, not everyone is excited about the Bank of Japan's future rate hikes.

Mari Iwashita, Chief Market Economist at Daiwa Securities, said that although rising prices may prompt the Bank of Japan to lift its negative interest rate policy in April, the central bank is unlikely to raise rates above zero quickly.

She said, "As a response to the cancellation of the negative interest rate policy, the 10-year government bond yield may temporarily rise, but it is unlikely to stay above 1% in the long term."