Japan’s top three brokerages are cutting back on graduate hires as household investors continue to shun the stock market, squeezing their retail business.

The total number of planned graduate hires in 2018 by Nomura Holdings Inc., Daiwa Securities Group Inc. and SMBC Nikko Securities Inc. will be the lowest in five years, according to a Bloomberg News survey of hiring plans. The securities firms will add a total of about 1,540 people in their annual intake next April, down from 1,847 this year.

Brokerages are cutting back on their retail businesses, which had accounted for more than half their total profits in the years when stocks surged after Prime Minister Shinzo Abe came to power in late 2012. This initial optimism has faded, and increasing political risks are prompting individual investors to park their cash in bank accounts rather than invest in securities -- even in a negative rate environment.

“The stone-cold mindset on risk products still exists, and expectations for Abenomics are going backward,” said Takashi Ueno, senior economist at NLI Research Institute in Tokyo. “It became difficult for Japanese households to foresee the global economy after huge market swings on big surprises such as Brexit and Donald Trump’s election victory.”

Annual Intake

Japanese companies tend to hire graduates in batches at the start of the financial year in April, with many having already started the process for 2018 as competition for top students is fierce.

Nomura plans to hire about 600 graduates, compared with 652 this month, said Kenji Yamashita, a spokesman at Japan’s biggest brokerage. Daiwa, the second-largest, is looking to bring in 592 people, down from 678, according to spokesman Hiroki Aoyama.

SMBC Nikko will hire 350 after an intake of 517 this year. “In the past several years, we’ve had a high level of hiring, and our sales network has further developed,” the company said in an emailed statement to Bloomberg. Figures for all three companies can change.

While some brokerages are cutting back, Mitsubishi UFJ Morgan Stanley Securities Co. spokesman Hiroaki Konishi said the company had yet to make a decision, while Mizuho Securities Co. spokesman Hiroki Saigusa wouldn’t comment on hiring for 2018.

While brokerages are cutting back, hiring across the board is expected to rise 18 percent next year, according to research by Mynavi Corp., the nation’s biggest recruitment information provider for graduates. The biggest increases will be at trading houses, construction companies and manufacturers, according to the survey of 2,419 companies conducted in February and March.

In May 2013, Daiwa planned to add branches and increase the number of employees in its retail business by 50 percent as the stock market rally boosted household demand. But retail profits have fallen 40 percent from two years earlier. Nomura saw pretax profits from its retail business drop 34 percent in the same period, and in the nine months through Dec. 31 profits slumped 58 percent from a year earlier.

Japanese households held a record 937 trillion yen ($8.4 trillion) in cash and deposits -- 52 percent of total assets -- as of the end of last year. This compares with 288 trillion yen in securities.

Source:
courtesy of BLOOMBERG

by Takahiko Hyuga

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