We’re not launching a blow-by-blow commentary on the quickening pace of shrinkage in the investment bank and hedge fund industry in Japan – but this is worth an update.
Citigroup, which is grappling with its unwieldy Japanese structure after buying Nikko Cordial, Japan’s third largest brokerage, and associated businesses earlier this year is now turning its sights on its lacklustre Japanese consumer finance business. And from early signs, it could be courting (labour) trouble.
On the investment banking and broking side of Citi’s Japanese business there has been some serious culling of both the Nikko Cordial and Citi parts of the operation, with Citi staff bearing the brunt of the cuts.
Now, as Citi struggles back from more than $45bn in writedowns and credit losses since last summer and undertakes cost cuts around the world, the need to slash heads and costs in Japan has become more urgent.
The issue in Japan, however, is the very strict labour laws. Cutting jobs is very costly and can be time-consuming – as Citi is finding out.
For several years, the US investment bank has been steadily scaling back its Japanese consumer lending business (from 903 consumer lending outlets nationally to just 320 by January 2007) but this week, bit the bullet and offered 1,350 employees of CFJ KK, its Japanese consumer finance unit, early retirement, reports Reuters.
Citi plans to close its remaining 32 consumer outlets over the next 12 months, and gave employees until July 15 to apply for the early retirement valued at two months worth of wages. But CFJ’s union has hardly embraced the offer.
“This is beyond comprehension,” Akihito Kawamura, head of the CFJ union, told Reuters in a telephone interview. “Employees who worked at the company for two years and those who worked for twenty years are both offered the same package.”
Ominously, for Citi, Kawamura added that the union is likely to demand Citi increase the offer to two years worth of wages.
Related links
Hollowing out, Tokyo-style (1)
Hollowing out, KBC Japan-style (2)