Japan FinTech Observer #102

Welcome to the one hundred second edition of the Japan FinTech Observer.

A big thank you to everyone who made it to Tokyo for the core of Japan Fintech Week 2025, and especially those who joined us for our meetup on Monday, the most international participation we have ever had!

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Akari Hosho has raised 80 million from Incubate Fund, Kyoto Capital Partners, Saison Ventures, and Bengo4.com; Episode Six has secured a strategic investment from Japan Airlines; MUFG makes follow-on investment in InsuranceDekho; Mitsui Sumitomo Insurance invests in cyber InsurTech Coalition; MPower Partners have established the "WPower Fund," Japan's first fund 100% dedicated to supporting startups founded by women; Incubate Fund has formed a new "IFLP Fund 3"
• Insurance: hokan expands footprint with first direct sales implementation; justlnCaseTechnologies has begun providing the SaaS insurance system "joinsure" to Orient Corporation; Smartpay is launching embedded insurance products
• Banking: SBI Shinsei Bank has concluded an agreement regarding the specific method of repaying public funds; Seven & I Holdings will exit its ownership of Seven Bank by selling down its ownership stake to below 40%; San ju San Bankwill implement the nCino Mortgage Solution for its housing loan operations
• Payments: "elepay Bill Payment" improves operational efficiency and CX with new functions; Digital Wallet Corporation has struck a co-operation agreement to improve the financial infrastructure of remittances and help strengthen financial inclusion in Canada
• Capital Markets: SSBJ issues inaugural sustainability disclosure standards to be applied in Japan
• Asset Management: The Financial Services Agency has released an updated version of its "Guidebook for Registration of Investment Management Business and Other Financial Instrument Businesses"
• Digital Assets: SBI VC Trade is the first to have completed registration as an "Electronic Payment Instruments Business Operator", enabling it to handle Circle's stablecoin "USDC" in Japan; Hitachi has begun a proof-of-concept experiment aimed at improving the effectiveness and standardization of anti-money laundering practices for digital asset trading including cryptocurrency, stablecoins, and NFTs; Digital Asset Markets has formed a strategic partnership with Intertrade and Fireblocks to support the creation of Web3 infrastructure for Japanese companies; KDDI has decided to participate as a node validator in the Bifrost Network
• The Last Word: Huge USD sell-off as Europe acts

Venture Capital & Private Markets

• Top 10 FinTech deals in Asia Pacific during the second half of 2024, according to KPMG's "Pulse of FinTech" report, including: No. 1 - Mynt, operator of GCash, includes MUFG as investor; No. 3 - DMI Finance, funding round by MUFG as well; No. 5 - Gojo & Company, Japan's next unicorn; No. 9 - NTT DATA acquires GHL Systems Berhad
• Akari Hosho, which provides lifetime support and identity guarantee services for the elderly in compliance with national guidelines together with a group of trusted professionals such as lawyers, judicial scriveners, and care managers, has raised 80 million yen in funds through a third-party allotment of new shares, with underwriters including Incubate Fund, Kyoto Capital Partners, Saison Ventures, and Bengo4.com
• Episode Six, a global provider of ledger and cards infrastructure, has secured a strategic investment from Japan Airlines, a longstanding customer of E6 since 2017; this investment allows JAL to contribute to E6’s ongoing success while advancing its financial services initiatives, including JAL Pay, the core payments feature integrated into JAL’s ecosystem, and expanding new offerings to serve JAL’s approximately 30 million customers
• MUFG makes follow-on investment in InsuranceDekho: InsuranceDekho raised USD 70m in its latest funding round, co-led by Beams Fintech Fund alongside Mitsubishi UFJ Financial Group (MUFG) and insurer BNP Paribas Cardif, which participated through its InsurTech fund managed by European investment firm Eurazeo; this latest funding round comes about a year and a half after InsuranceDekho raised $60 million in its Series B round, which was led by Venture Catalysts’ growth capital vehicle Beams Fintech Fund, Mitsubishi UFG Financial Group, BNP Paribas Cardif, and the Yogesh Mahansaria Family Office in October 2023
• Mitsui Sumitomo Insurance invests in cyber InsurTech Coalition: Mitsui Sumitomo Insurance, a subsidiary of MS&AD Insurance Group Holdings, has invested an undisclosed amount in Coalition, a U.S.-based cyber InsurTech company and a leading provider of cyber insurance with advanced cyber risk assessment technologies; MSI and Coalition have collaborated since 2022 and developed a service, the "MS&AD Cyber Risk Finder", for automatically detecting cybersecurity vulnerabilities; through this investment, MSI aims to strengthen its strategic partnership with Coalition and expand its global cyber insurance business with preventive measures and optimal protections

• Consumer deals help fuel Japan’s PE boom; the consumer sector represented more than a third of total PE deal value in Japan last year as PE dealmaking in the country hit a record high; $22.5 billion was invested across 253 deals, with B2C investment accounting for 38% of deal value, according to PitchBook data

New funds

• MPower Partners have established the "WPower Fund," Japan's first fund 100% dedicated to supporting startups founded by women and those offering services and products that contribute to women's advancement, with the Tokyo Metropolitan Government, MUFG Bank, Mitsubishi Estate, and Shionogi & Co. as Limited Partners and a fund size of up to JPY 8bn (USD 54m); this fund aims to nurture women entrepreneurs from Japan who can succeed globally, support startups that promote women's advancement, revitalize innovation in Japan, and contribute to creating an attractive nation
• Incubate Fund has formed a new "IFLP Fund 3"; the "IFLP Fund 1," established in 2018 with 6.9 billion yen, had invested as an LP in 17 funds as of the end of December 2024, executing investments in over 300 startup companies through these funds; multiple companies have already achieved IPOs, while other companies continue to grow steadily; additionally, the "IFLP Fund 2," established in 2021 with 10 billion yen, has already completed the incorporation of 16 funds and is advancing investments in over 100 diverse startups; similar to "IFLP Fund 1," investments in startup companies are expected to exceed 300

Office opening/expansion

• Fin Capital, a global asset manager specializing in B2B FinTech, will establish a formal presence in Asia, opening an office in Tokyo as its Asia headquarters; Tokyo was selected based on Fin Capital’s strong relationships with Japanese institutions, and the country’s robust and globally respected financial services ecosystem; additionally, in recent years, Japan has seen a significant increase in corporate adoption of Fintech, and a rapid expansion of the innovation and startup ecosystem; Fin has observed momentum in its own portfolio companies, such as Circle, Unqork, Figure, Articul8, Talos, and others partnering with Japanese companies or entering the market
• Hillhouse Investment looking to invest up to $2 billion annually in Japan; Hillhouse was founded by China-born dealmaker Zhang Lei in 2005; it is known for its hedge fund and private equity investment and has also moved into real estate and private credit; Hillhouse has been investing in Japan since 2009; it has hired 10 people in the country and aims to roughly double that by the end of 2025; the firm will relocate to dedicated office space in Tokyo's Marunouchi business district from shared office space by mid-year

Insurance

• hokan expands footprint with first direct sales implementation; hokan has completed an MVP implementation of its SaaS "hokan®︎" at the Consulting Sales Headquarters of ORIX Life Insurance; following the MVP, the system will be used at all branches from April 2025 onwards; "hokan®︎" has been mainly used by insurance agencies up until now, but this is the first time it has been used by an insurance company's direct sales channel; this has further strengthened its characteristics as a vertical SaaS equipped with the most advanced operational know-how in the industry
• justlnCaseTechnologies has begun providing the SaaS insurance system "joinsure" to Orient Corporation (Orico) for its Cancer Insurance, a new service exclusively for e-Orico members; the Orico Cancer Insurance includes medical, cancer, and nursing care insurance coverage underwritten by Tokio Marine & Nichido Fire Insurance, offering robust protection against a variety of risks; Orico selected “joinsure” based on justlnCaseTechnologies’ proven insurance marketing expertise and the sophisticated capabilities of the SaaS Insurance system
• Smartpay, provider of the "Smartpay" Buy Now Pay Later service, is launching embedded insurance products in the Japanese market, following one year of partnership with Chubb Insurance Japan, the Japanese subsidiary of Chubb Group, a world leader in insurance; Smartpay and Chubb Japan plan to provide their first embedded insurance product in BNPL in partnership with Fútbol Opción, a soccer cultural exchange program provider operated by Actif LLC, in summer 2025

FSA AI Discussion Paper

The Financial Services Agency has published an AI Discussion Paper to provide strong support for the sound use of AI and to contribute to constructive dialogue with business operators in the future.

This Discussion Paper provides an initial overview of the current state and challenges of AI utilization in financial institutions, examining a broad range of related issues.

As this analysis is preliminary, technological advancements and evolving business landscapes may significantly alter the identified challenges.

The FSA intends to use these viewpoints as a foundation for ongoing dialogue with stakeholders and to evolve and refine specific future policies.

Banking

• S&P Global has published its "Asia-Pacific Banking: Country Snapshots", including the above one-pager for Japan
• SBI Shinsei Bank has concluded this agreement regarding the specific method of repaying public funds, which it aimed to agree upon by the end of June 2025, based on the "Contract on Handling of Public Funds" concluded on May 12, 2023, with the Deposit Insurance Corporation of Japan, the Resolution and Collection Corporation, and SBI Holdings
• Seven & i Holdings announces plan to unlock shareholder value through leadership changes and transformational capital and business initiatives; "In addition [...], the Company continues to make progress on previously announced business transformation initiatives. The Group will exit its ownership of Seven Bank by selling down its ownership stake to below 40% and will deconsolidate from the Group’s balance sheet. Throughout this process, the Company will continue to assess additional alternatives for its shares in Seven Bank that may unlock value for shareholders at a more accelerated pace."
• San ju San Bank, a regional Japanese bank based in Yokkaichi City, will implement the nCino Mortgage Solution for its housing loan (mortgage) operations; San ju San Bank will replace manual tasks with digital, paperless processes, thus helping to reduce the workload of bank employees and create opportunities for more efficient workflows; with the time saved, the Bank aims to significantly enhance its internal processes, allowing employees to focus on delivering convenient, customer-centric and relationship-based experiences
• The Okinawa Institute of Science and Technology (OIST) and Mizuho Bank have signed a memorandum of understanding for collaboration to advance the development of a startup ecosystem; OIST was established by the Government of Japan in 2011 to foster a world-class research hub and create an intellectual cluster that drives technology transfer and industrial innovation in Okinawa

Payments

• How Japan is Opening Payments for Cross-Border Business: Q&A with Masayasu Heishi, Nium Japan Country Manager; Nium recently became one of the first global fintechs to secure a Type 1 Funds Transfer Service Provider (FTSP) license from the FSA, representing a major step forward in helping businesses to move funds quickly, securely, and reliably in and out of the country
• "elepay Bill Payment" improves operational efficiency and CX with new functions; "elepay bill payment" is a service that allows users to create invoices on the "elepay" management screen or through API integration; until now, payment methods such as bank transfers and credit cards have been mainstream in Business-to-Consumer (B2C) businesses; "elepay" is a cashless specialized service that allows users to choose their payment method from up to 20 cashless brands, including PayPay and credit cards, by reading the QR code printed on the invoice
• Digital Wallet Group (DWG), an international IT and FinTech company and operator of subsidiary Digital Wallet Corporation’s (DWC) Smiles Mobile Remittance, Japan's most popular mobile money transfer service, has entered into a strategic partnership with Payment Source, an award-winning Canadian payment gateway provider with more than 20 years of experience, to enhance the loading experience for Smiles Canada users; this collaboration will not only provide a more seamless way for customers to load their Smiles accounts, but it will also significantly improve the financial infrastructure of remittances and help strengthen financial inclusion in Canada

Capital Markets

• SSBJ issues inaugural sustainability disclosure standards to be applied in Japan; the Sustainability Standards Board of Japan (SSBJ) was established in July 2022 to develop sustainability disclosure standards to be applied in Japan and to contribute to the development of international sustainability disclosure standards, following the establishment of the International Sustainability Standards Board (ISSB); SSBJ Standards were developed under the assumption that SSBJ Standards would eventually be required, under the Japanese securities laws and regulations, to be applied by entities listed on the Prime Market of the Tokyo Stock Exchange
• Nomura has published its quarterly "Outlook for corporate earnings"; for FY25, Nomura's analysts forecast sales growth of 2.4% y-y, operating profit growth of 9.5%, recurring profit growth of 3.9%, and after-tax profit growth of 3.0%

Asset Management

• The Financial Services Agency has released an updated version of its "Guidebook for Registration of Investment Management Business and Other Financial Instrument Businesses"; in an easily understandable way, using flowcharts and illustrations, this Guidebook explains the types of registration to be required for each of the major business schemes related to asset management business, while provides an overview of the procedure for registration screening and explanations on the requirements for registration

People Moves in 2025

• Kenta Sakakibara has taken the reigns of Circle Japan
• Shohei Yamada has moved to Seattle to head SBI Holdings USA
• Partisia has appointed Miyoji Kakinuki as Japan Country Head
• Oko Okamoto has joined Worldpay as Japan Country Manager
• Jim Maricondo is now heading Kaleido in Japan

Digital Assets

• SBI VC Trade, a consolidated subsidiary of SBI Holdings that operates a cryptocurrency exchange business has completed registration as an "Electronic Payment Instruments Business Operator" (Registration Number Kanto Regional Financial Bureau No. 00001), which will enable SBI VC Trade to be the first to handle the stablecoin "USDC" in Japan
• Hitachi, together with NTT Digital, OPTAGE, Crypto Garage, JPYC, Chainalysis Japan, Digital Platformer, NEC, Nomura, bitbank, finoject, Hokkoku Bank, and Laser Digital Japan, has begun a proof-of-concept experiment from February to April 2025 aimed at improving the effectiveness and standardization of anti-money laundering practices for digital asset trading including cryptocurrency, stablecoins, and NFTs
• One month after launching in Ishikawa, Hokkoku Bank has launched the digital local currency service "Tochitsuka", jointly provided with Digital Platformer, to start offering "Nomi Tochipo," a point issued primarily by Nomi City, Ishikawa Prefecture; "Nomi Tochipo" is the third Tochipo following "Suzu Tochipo" and "Ishikawa Tochipo," and can be used at more than 100 Tochitsuka affiliated stores in Nomi City
• Digital Asset Markets has formed a strategic partnership with Intertrade, a software house for financial institutions and a shareholder of DAM, and Fireblocks, a digital asset infrastructure provider, to support the creation of Web3 infrastructure for Japanese companies
• Hakuhodo DY Media Partners has signed a Memorandum of Understanding with SC Ventures to explore business initiatives aimed at expanding and accelerating the overseas growth of Japanese IPs, including anime and manga, through FinTech and tokenization
• KDDI has decided to participate as a node validator in the Bifrost Network; through this partnership, KDDI will contribute to strengthening security on the Bifrost network and support its penetration into the Japanese market; KDDI has re-affirmed this partnership by listing Bifrost as one of its key Web3 initiatives during FIN/SUM this week

The Last Word: Huge USD sell-off as Europe acts

At the time of writing, the JPY has appreciated to around 147.5 to the US Dollar, driven by JGB 10-year rates that have settled at around 1.55%, the highest in 18 years, while UST bond yields are down sharply with investors growing increasingly concerned over the damage of Trump trade policy uncertainties and the continued restrictiveness of monetary policy.

In its "FX Weekly", MUFG marks the US dollar plunge during the past week as significant and potentially a meaningful signal.

"The US dollar this week has had a move that happens very rarely – a drop of between 3.5%-4.0% is the largest decline for the dollar since November 2022 when lower than expected inflation data triggered a 4.1% drop. Previous to that the dollar fell 4.3% during the covid turmoil in March 2020. In 2022 it was significant in signalling a further 5% drop over the following two months. In 2020 markets were more volatile but still also signalled a more sustained turn with the dollar extending 5% further lower but over a 4-month period and by 9% by the end of 2020. Looking back beyond those two more recent big weekly declines for the US dollar you have to go back to the Global Financial Crisis and the turmoil in 2009 to see the scale of declines we have had this week. So from a historic perspective this week’s move is now very significant."

With regard to JPY flows, the analysts note:

"The weekly flow data from the MoF this week covering last week revealed a notable pick-up in foreign bond and equity purchases. Strong demand for Japan fixed income by foreign investors was also evident although selling of Japan equities continued. Appetite for speculative selling of the yen remains far less than previously underlining we believe the changing market dynamics."

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