Japan's Aiful to Close Outlets, Cut Jobs

Japan's Aiful said it would halve the number of outlets and cut more than 10% of its workforce, the latest consumer lender to embark on a major restructuring amid mounting legal costs and tighter regulations on interest rates.

Aiful, Japan's fourth-largest consumer lending company by market value, said in a news release on Saturday that the restructuring would generate cost cuts of 40 billion yen (US$330 million) on an unconsolidated basis. That compares with group sales of about 550 billion yen in the past business year ended in March.

Japan's consumer loan firms have faced a flood of demands to repay interest charges deemed illegal by courts. The charges were levied on loans with rates set at between 20% and 29%, a grey zone between two conflicting lending laws.

Japan's parliament last month approved a bill to eliminate this grey zone and cut the maximum interest rate that can be charged on loans to 15-20%. That change is expected to lead to a sharp drop in the industry's revenues.

In light of the tough business environment, Aiful said that it would cut the number of its outlets to 1,193 from 2,713 while eliminating 400 full-time jobs through early retirement and cutting the number of part-time workers by 900.

As a group, Aiful currently has some 7,000 full-time workers and 4,000 part-time and temporary workers. The company said up to 600 additional workers may quit due to outlet closures, which would bring the number of job cuts to 1,900.

Aiful estimated a special loss of 5.3 billion yen for retirement allowances, but forecast employee cost savings of 7.6 billion yen from the next business year starting in April. It said it was still assessing the overall earnings impact from the restructuring plan.

Japan's top four money lenders -- Acom, Takefuji, Promise and Aiful -- posted a combined 765 billion yen loss for the first half, reflecting the tough operating environment.

Among other restructurings, Acom has announced plans to cut 17% of its workforce, Citigroup said it would close most of its consumer finance branches in Japan, and Shinsei Bank announced an early retirement scheme for 750 workers at consumer finance unit Aplus.