regional bank

Progress in Japan: Hyakugo Bank Stops Shooting Itself in the Foot

Norbert Gehrke

23 Jan 2026 — 7 min read

In an inspired move, Hyakugo Bank is bringing its personnel system into the 21st century. After the first quarter of said century has already passed, Hyakugo Bank has discovered a fundamental commitment to the people who are the bank's foundation, reshaping how they are supported, developed, and rewarded for the future.

If you have followed us for a while, you have certainly come across our commentary regarding the perceived "labor shortage" in Japan. The "Logistics Crisis of 2024" and the "Digital Cliff 2025", for example. In a recent post, someone described the labor shortage as "during roadworks, there are only four people standing around doing nothing, instead of previously seven." While there are real shortages, especially at the low- and high-end of the skill spectrum, the underlying problem to be solved is a low level of productivity (and mis-allocation of resources, as many would argue).

So why is Hyakugo Bank making such a big change, and why now? What does it mean for the people who work there? To understand the story, we first need to look at the challenges the bank was facing with its old system. None of these will surprise you, and the description of the challenges could have easily been written ten to fifteen years ago.

1. The Challenge: An HR System from a Different Era

The previous personnel system was over 20 years old and was struggling to keep up with the modern world. As time went on, it became clear that the old way of doing things was no longer the best way to support employees or drive the bank forward. The key challenges that prompted the change were:

An Aging System in a Changing World: In the two decades since the system was created, society has transformed. How people work, what they value in a career, and the structure of the economy have all evolved, making the old rules feel outdated and misaligned with today's realities.
A Shifting Workforce: Due to a broader trend of an aging population, the bank's own staff is getting older. This created a need to better support experienced senior employees and unlock their valuable knowledge, while also empowering talented younger employees to grow without being held back by outdated rules.
The Need to Be More Competitive: The bank recognized that to serve its community and customers better, its employees needed the best possible support. The old system didn't fully encourage the high levels of professionalism and productivity required to meet the increasingly complex needs of the modern financial world.

These cracks in the foundation of their 20-year-old system demanded a new blueprint for the future.

2. The Goal: A Fairer, More Motivating Workplace

At the heart of this entire revision is a simple, powerful philosophy: the idea that "those who make an effort are duly rewarded, regardless of gender or age." The bank has formally positioned its people as "human capital"—its most valuable resource and the key to its long-term growth.

This philosophy is designed to cultivate a specific kind of company culture. The ultimate vision is to become:

"a professional group that continues to take on challenges."

And to build:

"an organization where each individual can maximize their abilities and work with vitality."

To achieve this ambitious goal, the bank couldn't just change a few rules. It needed a comprehensive solution that addressed the core problems of the old system.

3. The Solution: Four Key Areas of Change

The bank redesigned its entire personnel system by focusing on four main themes. Each theme is a piece of the puzzle, working together to make the new vision a reality for every employee.

3.1. Making Pay and Rewards Fairer

Based on the core belief that "those who make an effort are duly rewarded," the bank overhauled its compensation system to fix unfairness and create a clearer link between contribution and reward. The three most important changes are:

More Pay for More Responsibility: The new system increases the portion of salary tied directly to the duties of a role (job-based pay). This means an employee's compensation will more closely match the level of responsibility they hold.
Better Bonuses for Better Performance: Bonuses will be more closely tied to an individual's actual performance and contributions, rewarding those who achieve outstanding results.
Closing the Gap: The bank is reducing the wage difference between employees who can be relocated (Type I) and those who cannot (Type II). To make things fairer, it will also provide special allowances for employees who do move for work.

While the latter is pretty Japan-specific, if the former two seem revolutionary to you, you have been in Japan too long!

3.2. Supporting Every Generation of Workers

The new system is built to help both experienced senior employees and rising new talent thrive. To do this, the bank made significant changes to its retirement and promotion policies.

First, the retirement age was extended to give senior employees more opportunities to contribute their expertise.

Employee Group	Old Retirement Age	New Retirement Age
Regular Employees	60	65
Re-employed Senior Staff	65	70

At the same time, the new system makes it easier for talented younger employees to be promoted faster by removing rules about minimum years of service, allowing them to advance based on skill and merit rather than just time spent at the company.

As an additional key change, the salary level of employees aged 60 or older who are eligible for the job-based system is expected to be roughly the same as that of active employees. Previously, the retirement age for managers was 55, meaning that salary levels fell to 60% of that of active employees, and to 30-40% for those aged 60 or older. By allowing middle-aged and older employees to receive high salaries, the company also aims to increase the number of mid-career hires per year, which is currently in the single digits, to more than a dozen.

The arrangement of dropping the salary of "older" workers is pretty common in Japan, and it leads to many employees in their early 50s founding "side businesses", essentially a second job that they hope will make up for the decreasein salary in the future. Alternatively, international companies, which do not use these practices, are getting swamped with resumes from people in that age range who become late-career job changers.

3.3. Helping You Build Your Own Career

The new system is designed to give employees more control over their own professional journeys and encourage them to try new things. The bank introduced several new programs to support this goal:

Career Path System: This is a new framework designed to help employees clearly see and plan their potential career futures within the bank.
Expert System (EX System): For employees who want to become true specialists, this new track allows them to build deep expertise in a specific field.
Expanded Internal Job Postings: The bank increased the number of internal job openings, giving motivated employees more opportunities to apply for different roles that interest them and take on new challenges.
Incentives for New Skills: The incentive program for acquiring official qualifications and certifications was expanded, directly rewarding employees who invest in their own professional development.

3.4. Creating More Flexible Ways to Work

Recognizing that the traditional 9-to-5 model doesn't work for everyone, the bank is modernizing how and where its people work. The two main changes are:

Flextime: The introduction of a flextime system gives employees more control over their daily work schedules, which helps reduce long hours and improve work-life balance.
New Staff Course: The bank created a new career track for administrative staff. This includes converting contract employees to permanent status, which provides greater job security and stability.

These practical changes are all built on a new, guiding philosophy—a foundational "rulebook" that defines the bank's core beliefs about its people.

4. The Foundation: A New "People Policy"

For the first time ever, Hyakugo Bank created a formal "HR Policy." This document isn't just a set of rules; it was designed to serve as the bedrock for all HR-related systems, initiatives, and decisions, ensuring that every choice is guided by a clear and consistent philosophy.

The policy's "Mission of HR" is built on three core pillars:

Gathering Diverse Talent: To create a workplace where diverse individuals recognize each other’s unique perspectives and can fully demonstrate their abilities.
Investing in People: To actively help employees learn and grow, viewing people not as a cost but as "the source of value creation"—the bank's most important capital.
Giving Back: To support employee well-being and job satisfaction, which leads to improved corporate value and, in turn, allows the bank to contribute to the development of the entire region.

This policy provides the moral and strategic compass for all the other changes.

5. Conclusion: A "Future Challenge"

Hyakugo Bank's HR revision is positioned as a strategic investment in its people, described by the bank as a:

"future challenge."

By creating a fairer and more flexible system, the bank aims to build a strong, adaptable organization where every employee feels motivated, is treated equitably, and has the opportunity to grow into a "challenging professional." This bold transformation is designed to build a resilient and adaptive organization, ensuring that both its people and its community can thrive together for many years to come.

As a cynic, we would say that Hyakugo Bank is simply stopping to shoot itself in the foot. There are many such practices in Japan that when removed - despite claims to them being essential to "the Japanese way" - could set off a productivity revolution. The big change is that some companies have started taking action.