※Translated with Notion AI. (Plus version)
The reason why many foreign exchange strategists active in Japanese and foreign financial institutions are from the Bank of Japan has long been shrouded in mystery. The Bank of Japan is responsible for monetary policy and works to stabilize the economy through adjustments in interest rates and money supply. On the other hand, the Ministry of Finance is mainly in charge of exchange rate policy and fiscal policy. Given this, one would expect graduates from the Ministry of Finance’s International Bureau to dominate as foreign exchange experts, but in reality, very few foreign exchange strategists from the Ministry of Finance move into the private sector.
To unravel this mystery, we asked an executive headhunter from a foreign firm. His answer was surprising.
Career Choices of Ministry of Finance Elites
The Ministry of Finance attracts a concentration of talented individuals who have passed the National Public Service Comprehensive Employment Examination. In Japan’s bureaucratic system, top scorers tend to prioritize entering the Ministry of Finance. In contrast, ministries such as the Environment Ministry and the Ministry of Agriculture, Forestry and Fisheries are less popular and struggle to attract elites.
The reason why elites from the Ministry of Finance’s International Bureau do not venture into private financial institutions is that their career paths and specializations differ from those of Bank of Japan alumni. They tend to pursue careers in the following areas:
Government and International Organizations: Many graduates from the Ministry of Finance’s International Bureau work at international organizations such as the International Monetary Fund (IMF) and the World Bank, utilizing their expertise in international economics and financial policy.
Think Tanks and Research Institutions: They conduct analyses on economic policies and international economics, playing a role in influencing the economy through policy recommendations.
Academia: They continue research in international economics as professors or researchers at universities and research institutions, nurturing the next generation of experts.
Consulting Industry: With their extensive knowledge of international economics and financial policy, they provide policy analysis and market research to clients at economic consulting and strategy consulting firms.
International Divisions of Corporations: Some companies recruit them for international operations or strategy divisions, leveraging their policy understanding and international networks.
To be frank, in the Ministry’s exchange rate division, career officials typically rotate every two years, and non-career officials lack the skill set to excel in foreign firms (they are essentially clerical workers).
In contrast, Bank of Japan alumni possess specialized knowledge focused on monetary policy and market operations, and their direct experience and skills in private financial institutions are valued. For Japanese companies and clients, the title of being from the Bank of Japan is very attractive. As headhunters, we always target talent from the Bank of Japan, graduates from private universities, with overseas work experience.
Differences Between the Bank of Japan and the Ministry of Finance
While Ministry of Finance elites are offered many opportunities for secondment to international organizations, the reality is that there are fewer such opportunities for Bank of Japan alumni. Also, to advance within the Bank of Japan, graduation from national universities like the University of Tokyo or Kyoto University is required, and graduates from private universities tend to move to private financial institutions early in their careers.
In contrast, Ministry of Finance elites show less of this tendency, and because the Ministry of Finance has stronger influence in policy-making, there are also differences in elite consciousness.
It’s interesting to note that while Japanese bureaucrats are referred to as “bureaucrats,” elites from the Bank of Japan are rarely called as such. We think this might stem from Japan’s history and feudal aspects.
It’s generally said that research-oriented people tend to join the Bank of Japan, while power-oriented people tend to join the Ministry of Finance.
Comparison with the United States
In the United States, monetary policy is handled by the Federal Reserve Board (FRB), while the Treasury Department is responsible for fiscal policy and international currency management. In careers as foreign exchange strategists, while many come from the FRB, there are also those from the Treasury Department.
The reason why there are many FRB alumni in the U.S. is, similar to Japan, because their deep knowledge of market analysis and monetary policy is valued.
Furthermore, U.S. foreign exchange strategists have diverse backgrounds, with people from private financial institutions and academic institutions, in addition to the FRB and Treasury Department, playing active roles.
In reality, in the U.S., there are many professionals with at least graduate degrees, and many Ph.D. holders are also active. They are headhunted with high salaries for diverse workplaces such as large funds, venture companies, international organizations, and consulting firms. We wish Japan would become like this too, but due to cultural differences, we are not blessed with such opportunities.
The reality is that in Japan’s financial market, authoritarianism is stronger than actual ability, and it’s not uncommon for Bank of Japan alumni who are not from the University of Tokyo to be active as economists or foreign exchange strategists.
We can’t help but question whether financial literacy can truly improve with this hiring stance, despite the fact that there are capable foreign exchange strategists and economists hidden in Japan.
It’s clear that one cannot read the market solely based on previous job or educational background. It’s important to focus on the published reports.
