Earlier this year, a Tokyo-based compliance officer was ready to call it quits. A job at an asset manager entering the country had fallen through after two months of painful negotiation.
Within two weeks, however, he was swamped with offers from a hedge fund, a cryptocurrency outfit and another investment firm offering base salaries of close to ¥30mn ($204,000). He was 69 years old.
The compliance officer’s experience underlines both the frenzy of interest Tokyo is attracting from global financial institutions, which could finally transform it into one of the world’s pre-eminent financial capitals — and the stumbling blocks that remain.
Japan has done a lot to ease the pain of getting a licence to raise funds or open an investment shop, from making forms available in English and generous subsidies to cover costs. But it still takes months from start to finish, say people familiar with the process — and that is even if you have the patience and skill to navigate the system.
“I think he almost talked himself out of that job, when he explained the licensing process and they realised how long it might take,” said Vid Gunapala of recruiter Michael Page.
“There are probably only around 20 or 30 international compliance officers in the city and they keep moving around. I have four clients currently asking me to find one if they are available,” said one senior lawyer in the industry in Tokyo.
The draw is simple. Huge volumes of once stagnant Japanese capital, spurred by rising inflation and government policy, stand ready for deployment. And international investors — from sovereign wealth funds to pension pot managers in the US — would like to take advantage.
According to people in the industry, the two busiest flights for New York bankers right now are to Abu Dhabi and Tokyo. As one high-level dealmaker put it: “That’s where the money is.”
But with available fund managers and compliance officers thin on the ground, it is like, as one investor put it, “squeezing so much capital through a pinhole”.
“You can blame it on tax or on language but . . . it is still just very hard to get the right staff in Japan,” said a fund manager who examined setting up in Tokyo before choosing to invest in Japan from Singapore.
For decades, Japan’s capital market was tightly regulated and built around bank lending, cross-shareholdings and cosy relationships. That brought stability but also engendered complacency in managers who were unused to listening to shareholders. Companies are listed for status rather than to raise capital. That is now changing.
A decade ago, the country went all-in on a campaign to promote Tokyo as Asia’s foremost financial hub, sending emissaries to Hong Kong and Singapore to lure money away from China’s shadow. The economy ministry, financial regulator and stock exchange are all backing an unprecedented wave of domestic dealmaking. Japanese companies, as buyers and sellers, have been directly involved in many of the world’s biggest M&A deals of 2025.
Then two years ago, Japan declared itself an “asset management nation”, convinced that asset management was crucial to improving corporate performance and getting capital flowing to the right places.
“We want to see an asset manager break into the top 20 companies. We have banks, insurers, but no asset managers,” said a senior official at the country’s markets regulator, the Financial Services Agency.
Geopolitics is also primed for Tokyo to take advantage. Hong Kong’s success is increasingly as a financial outpost serving mainland China rather than the west. Across the Pacific, investors are trying to get capital out of President Donald Trump’s America.
“I was expecting it would take a long time for Tokyo’s transformation to take place, but I think there is a change — like it or not — in the global financial environment, triggered by Trump 2.0,” said Hiroshi Nakaso, a former deputy governor of the Bank of Japan and one of the drivers of Japan’s push.
Things are moving on the ground. Although many investors in Japan are still based abroad, there are hundreds of domestic and international firms now in Tokyo, from Steve Cohen’s Point72 Asset Management, which is doubling its office space, and Chinese investment firm Hillhouse, which is doubling staff.
But there is still a long way to go. Private equity bankers and lawyers put Japan 20 years or more behind the US market. Hiromi Yamaji, one of the country’s foremost corporate governance advocates and the chief executive of the Tokyo Stock Exchange, estimates that the country’s reforms are just 15 per cent or 20 per cent complete.
“I would like to put shine back on Tokyo’s appeal as a hub for international finance but there are still some challenges that remain,” acknowledged Tokyo’s Governor Yuriko Koike.
Growth in the investment industry remains too slow, say asset managers and recruitment professionals, who blame tax and language barriers.
The number of people in asset management has increased by almost 65 per cent since 2012, according to the Japan Investment Advisers Association, to close to 25,000. Banking employment has declined over roughly the same period.
The figures for young people are concerning, however. The number of people between the ages of 20 and 34 going into finance and insurance has fallen from 610,000 in 2002, when comparative records began, to a low of 380,000 last year, according to figures from the Ministry of Internal Affairs and Communications.
“Tokyo still faces challenges in establishing itself as a global fund management hub . . . there’s a persistent mismatch between the demand for asset management talent and the available supply,” said Yuki Soga, founder of investment advisory Penrose Japan.
Michael Page’s Gunapala said: “Some clients are still holding out for a unicorn, a Japanese person who speaks English, who has the right skillset, but it’s a limited resource and the universe is shrinking.”
The problem is partly due to too few foreign finance workers. As of October last year there were 12,872 in the country, according to figures from the Ministry of Health, Labour and Welfare. That is 0.6 per cent of all foreign workers in Japan and compares with 6,961 in 2008 and 10,152 in 2018.
Those already working in Japan — foreign or otherwise — can also be hard to poach away.
“I do think there are enough qualified people. But whether there’s a functioning market for that kind of talent — that’s another matter . . . We need more foreign companies to come into Japan and hire these people — because that’s how a real market for this kind of talent will start to develop,” said Yutaka Ito, the commissioner of Japan’s FSA.
Yoshiki Kumazawa, of recruiter Morgan McKinley in Japan, said: “Asset management is growing and gradually people are hunting for staff, but it’s very domestic, almost all Japanese, so it’s very difficult. If someone’s base pay is ¥10mn, the offer from the global asset management firm trying to approach a Japanese guy probably has to be at least 1.5 times higher.”
The war for talent does not stop with traditional asset managers. The competition at private equity groups and hedge funds is even more extreme.
Buyout groups trying to enter Japan are stymied by an inability to poach experienced managers, and if you want to hire a Japanese government bond trader, companies are paying between $20mn and $35mn to lure talent.
The government is trying to accelerate things itself with initiatives that allow compliance to be outsourced and develop emerging managers — although they have yet to deliver meaningful results.
At the same time, the biggest insurers and asset managers are answering the government’s call in other ways, with a spate of deals abroad and strategic partnerships at home that improve reach and skill without relying on hiring more people in Japan.
“In . . . any industry where you want to upgrade fast, I feel that bringing in high-end international partners, and allowing them to ride on the back of a domestic partner that has the full infrastructure, is far more effective than encouraging them to set up from scratch,” said Stefanie Drews, president and chief executive of Amova Asset Management, formerly Nikko Asset Management. Amova has inked a partnership with France’s Tikehau Capital.
But for all that effort, industry insiders say that if Tokyo wants to become a true international financial centre, it will simply need more people to come.
“You have to be on the ground to understand Japanese companies,” said Hideki Kinuhata, the founder of SILQ, a hedge fund based in the city. “To do fundamental investing in Japan, it helps to breathe the air.”
It remains unlikely that Tokyo will cut its taxes — on income, inheritance and beyond — to levels that rival other Asian hubs, limiting the number of internationally mobile financiers likely to relocate.
“It’s a big headache. When the compensation becomes more than . . . ¥40mn, suddenly the tax rate jumps actually and . . . people start saying ‘May I go to Singapore or may I go to Hong Kong’,” said Masahiro Kihara, chief executive of Mizuho, one of Japan’s biggest banks.
That leaves a long road ahead before Japan can produce enough domestic talent to support the industry.
“They need to make this industry attractive from a much earlier point, and that is a very long game they have not thought through,” said a senior figure in asset management in Japan.
A senior hedge fund manager with a growing presence in the city said: “It takes eight to 10 years to train a fully fledged portfolio manager so we have to start that now for the ecosystem to come. It’s true that Japan is back but you can’t just create the people to execute on that opportunity all at once.”
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