Japan Reality Check #6: Elite on the Move

Young elite bureaucrats are quitting at unprecedented rates - a leading indicator for greater risk taking and the impatient ambitions of next generation Japan

At a recent presentation to a large audience of Japanese retail investors, I was asked the following: “Jesper, I know you’re optimistic, but can you actually demonstrate that something fundamental is changing in Japan?”

Here is my answer: Japan’s rigid labor market is beginning to free-up, with the younger generation now on the move, abandoning safe and prestigious careers in the elite bureaucracy for something new, more challenging and risky in the private sector.

The numbers speak for themselves: elite bureaucrats who resign while still in their twenties have shot-up more than three-fold since 2014/15; and those quitting while in their thirties have more than doubled. For some of the cohort years taken in over the past decade, the quit-rate is now up to almost one-in-five.

Make no mistake: these are historically unprecedented quit-rates from Japan’s best & brightest. And, in my view, when the next generation elite begin to move, something very fundamental is changing.

Unfortunately it is, to my knowledge, not possible to ascertain where the quitters go due to personal privacy protection rules. However, anecdotal evidence suggests that a fair number do not move on to large prestigious companies but actually join start-ups.

To be sure, being a bureaucrat is no longer quite as prestigious as it used to be. Political interference in senior-position promotion schedules has grown and, more importantly, the general public high respect once granted to bureaucrats has been on the decline. It has definitely become less “cool” to become a bureaucrat: the number of university students taking the national public service exam has more than halved over the past decade (to approximately 25,000 now).

Be this as it may. What matters here is that amongst Japan’s best & brightest who did join the bureaucracy, the number who call it quits early on in their career has been surging. They are taking risks and ambitiously seek better opportunities in the private sector.

All said: Japan’s young elite is now on the move. That’s real fundamental change like we have never seen before; and yes, when the liquidity and the metabolism of a nations most important factor of production — labor — is on the rise, I get even more optimistic.

Thank you for reading. As always, comments welcome. Thank you & many cheers ;-j

For a more detailed analysis of Japan’s changing labor market dynamics please see an earlier post Demographic Sweetspot