Photo/Illutration Hironori Kamezawa, left, and Kanetsugu Mike (The Asahi Shimbun)

Mitsubishi UFJ Financial Group Inc. on Friday said it was replacing its CEO with its digital chief after one year, a rare move that illustrates the deepening urgency at Japan’s biggest bank about the rise of fintech.

The elevation of Deputy President Hironori Kamezawa to the top spot marks a radical break from tradition for MUFG. The 58-year-old will become the first chief executive to have not previously headed the group’s core unit, MUFG Bank.

Outgoing CEO Kanetsugu Mike will become the group’s deputy chairman and will remain as head of MUFG Bank. The changes will take effect in April.

Kamezawa’s promotion, which was widely speculated in local media, shows how Japan’s megabanks are looking to keep pace with more nimble fintech start-ups and the sweeping technological changes that are altering global finance.

“The business environment surrounding the financial industry has changed a lot with the entry of other types of firms into the sector,” Kamezawa told a news conference.

“Some investors have been quite harsh, pointing out, for example, our low share price. I’d like to pour my strength into outlining how we are going to achieve future growth with our next mid-term plan,” he said.

With $2.8 trillion in assets, MUFG is one of the world’s biggest banks. It also owns 24% of Wall Street lender Morgan Stanley.

But despite its massive heft--MUFG is roughly the size of the British economy--it suffers from the common ailments of Japanese banks: years of ultra-low interest rates and a shrinking economy and population at home.

MUFG's total return, the measure of share performance that includes dividends, was 11.7% over the last five years, well below the benchmark Nikkei index, which returned 55% when dividends were included.

Its return on equity is 5.4%, well short of global rivals such as JPMorgan Chase which had a return on equity of 14.9%.

TOUGH NUT TO CRACK

“With the rising customers’ needs of fintech, it is essential for banks to promote the strategy of digitalization,” said Ryoji Yoshizawa, a senior director at S&P Global Ratings.

“This personnel change reflects their sense of urgency over this and so should not be a surprise.”

But digital has so far proved a tough nut to crack for Japanese banks, whose apps and on-line banking services are often clunky and hard to navigate.

What is clear, though, is that Japan’s big banks themselves recognize the need for change, pointing to digitalization as a way to cut costs and boost profits.

In its current mid-term business plan through fiscal 2020, MUFG set 11 priorities, including digitalization, as key areas for structural reform.