As Japanese banks struggle with the macro-economic situation and challenging business environment, the country’s biggest bank Mitsubishi UFJ Financial Group (MUFG) is all set to undergo drastic workforce reduction, to shed about 10,000 jobs, which is about 7 percent of its total workforce.

The largest bank formed after the nation’s banking crisis almost 2 decades ago, has been a suffering a decade of lower interest rates and intensifying competition profit squeeze. Anonymous sources with knowledge of the matter said, MUFG is set to cut majority of its workforce from its main banking unit through natural attrition and less hiring.

As the central bank’s negative-rate policy erodes margins and a shrinking population curtails credit demand, this move by the country’s largest financial institution is a classic example of the challenges faced by banks in Japan in the current uncertain economy, Straits Times reports.

Further MUFG is seeking to transform itself by closing branches and boosting technology investment. This drop in headcount could take place over a shorter period than the 10 years as estimated. The bank set up in 2005 from a merger, employs about 147,000 people worldwide.

See: How Should Managers Deliver Bad News of Layoffs to the Workforce?

MUFG announced a “re-imagining” strategy last month, saying it would cut 120 billion yen (S$1.5 billion) of costs over several years through initiatives such as using financial technology to add digital banking channels and streamline back-office functions.

“As structural problems such as the decline in lending margins and the shrinking and ageing population emerge, we need to bring in new technologies as seen with fintech,” Mr Hirano said on Thursday in his capacity as chairman of the Japanese Bankers Association.

The bank is also seeking at boosting profits by 180 billion yen through shifting thousands of corporate accounts to its banking unit from its trust banking arm in an effort to unify loan oversight.

MUFG’s main lending unit had 766 branches in Japan and 75 abroad as of March 2015, according to its website. The bank’s annual net income per full-time employee has fallen in each of the past four fiscal years, according to data compiled by Bloomberg.

Also read: Japan’s Fujitsu to Trim Workforce, 1,800 Jobs Slashed in UK

Feature image credit: novostimira.net