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Japan FinTech Observer #104

Norbert Gehrke

Norbert Gehrke

— 13 min read
Japan FinTech Observer #104
Cutting through the noise in Japanese Finance & FinTech

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

Happy second birthday to us! What started as a personal effort to keep our fingers on the pulse of the Finance & FinTech ecosystem is now being shared with more than 15,000 subscribers (12,500 on LinkedIn alone). We cannot thank you enough for spending time with us.

While we remain skeptics with regards to the overall pace of change, and the hype in the startup ecosystem, a position that we find altogether healthier and more nuanced than being perma-bulls or perma-bears, there are some notable shifts in the overall market structure over the past two years that cannot be ignored.

First, Governor Ueda and his team took the helm of the Bank of Japan in April 2023, and - with the exception of some market turbulence late last summer - has been guiding the normalization of monetary policy in a way that could have hardly been more successful so far (see our coverage of last week's MPM below). It is an excellent start, and they will need to keep it up another 10 years or more: the Bank's JGB holdings will only have marginally decreased by the end of the forecast period, March 2027, and a plan to scale down the significant ETF holdings has not yet been formulated.

Second, the Tokyo Stock Exchange published the "Action to Implement Management that is Conscious of Cost of Capital and Stock Price" at the end of March 2023, and at the very least in the Prime segment, we have seen listed companies taking measures to reduce cross-shareholdings, reduce listed subsidiaries, etc. The average Price-to-Book Ratio (PBR), however, stands pretty much where it was before. The TSE will now weed out all those companies that are too small, not committed, and poor in liquidity, and softly guide them towards a delisting. The second stage in improving capital efficiency, through successful investment and productivity gains, will be a little harder. But similar to the Bank of Japan, an excellent start, let's keep going.

Third, the NISA. launched at the beginning of 2024, has surpassed all expectations, and in fact already achieved the AUM goal originally set for 2027. A significant amount of the investments is still flowing into international markets, primarily the US, but domestic buyers have turned a little more positive towards their own market given the two developments quoted above. Again, a very promising start to the long process of converting to an "asset management nation".

That brings us now to what we are going to cover this week:

  • Venture Capital & Private Markets: Bloomo Securities has raised a total of 2 billion yen in a Series A round; Cool Japan Fund-backed Funding Societies secures investment from Gobi Partners; MUFG divested a 2% indirect stake in IndiaMART
  • Insurance: Fortitude Re closed a $4 billion reinsurance transaction with Taiyo Life Insurance; Tokio Marine HCC International backs Artio to launch early stage carbon insurance; misconduct at Japan Post Insurance
  • Banking: MUFG has formulated the MUFG AI Policy; Sumitomo Mitsui Banking Corporation (SMBC) and CHANGE Holdings have signed a partnership agreement for regional revitalization; Fujitsu and FICO have entered into a partnership to expand FICO’s solutions to Japan
  • Payments: Credit card/web3 crossover - Nudge launches "Snap to Earn" Visa card
  • Capital Markets: Iyo Bank supports J-Credit utilization in the agricultural sector
  • Asset Management: Nikko Asset Management Group has appointed a Chief Investment Officer; Polymer Capital Management is launching two Japan-focused funds this year; Japan’s Government Pension Investment Fund (GPIF) has selected Impact Cubed's ESG data and analytics
  • Digital Assets: Metaplanet has acquired an additional 150 BTC; TIS and the Kyoto Table Tennis Club have issued a digital corporate bond; Mitsui Digital Asset Management (MDM), Shinsei Trust & Banking, SBI Shinsei Bank, and BOOSTRY have issued real estate security tokens; Plat'Home and Securitize partner on RWA tokenization initatives; IDA, Progmat, Datachain & TOKI partner on stablecoin-based remittances; RigSec and Vlightup to collaborate on crypto wallet compliance and security; NTT East has selected SettleMint as Blockchain as a Service (BaaS) platform
  • The Last Word: Tariffs

The Bank of Japan's Monetary Policy Meeting

In his press conference, Bank of Japan Governor Ueda began by outlining the key decisions made at the Monetary Policy Meeting:

  • Policy Rate: The BOJ decided to maintain its current monetary policy, guiding the overnight call rate (a key short-term interest rate) to around 0.5% . This decision was made unanimously.
  • Economic Assessment: The BOJ assessed that Japan's economy is "recovering moderately," although "some weakness" is observed in certain areas.
  • Economic Outlook: The BOJ anticipates that the global economy will continue to grow moderately. With the support of accommodative financial conditions, a virtuous cycle of income and spending will gradually strengthen in Japan. This should lead to growth exceeding the country's potential growth rate.
  • Price Developments: The year-on-year change in the Consumer Price Index (CPI), excluding fresh food, is currently in the "lower 3% range." While the impact of pass-through from higher import prices is waning, gradual increases in service prices due to rising wages are expected to continue. The government's energy subsidy reduction is also contributing to the current inflation level.
  • Price Outlook: The BOJ projects that the underlying inflation rate will gradually increase, driven by a tightening labor market (due to labor shortages), improvement in the macroeconomic supply-demand gap, and a continued strengthening of the wage-price spiral. This is expected to contribute to a rise in medium- to long-term inflation expectations. The BOJ anticipates that inflation will be "generally consistent with the price stability target" towards the end of the projection period in the Outlook Report.
  • Risks: The Governor emphasized that uncertainties surrounding the economic and price outlook remain high. Key risk factors include:Global trade policy developments and their impact on global economic and price trends.Trends in resource prices.Corporate wage and price-setting behavior.Developments in financial and foreign exchange markets and their potential impact on the Japanese economy and prices. The Governor noted that exchange rate fluctuations have a greater impact on prices compared to the past, given the recent trend of more proactive wage and price-setting behavior by companies.
  • Future Monetary Policy: The Governor stated that the BOJ will continue to adjust the degree of monetary accommodation (i.e., raise policy interest rates) if the projected economic and price developments materialize, given that real interest rates are currently at "extremely low levels."
  • Commitment to Price Stability: The BOJ remains committed to achieving its 2% price stability target in a sustainable and stable manner. Monetary policy will be conducted appropriately, taking into account economic, price, and financial conditions.

For the key takeaways from the Q&A session, please refer to our summary. Also, the full Monetary Policy Statement is available in this post.

Venture Capital & Private Markets

  • Bloomo Securities has raised a total of 2 billion yen in a Series A round through a third-party allocation of shares to Global Brain, ANRI, Spiral Capital, Portage Ventures, MUFG Innovation Partners, Angle Bridge, Sumitomo Corporation Venture & Innovation, and Scrum Ventures; this brings the company's total funding to approximately 2.85 billion yen; the funds raised will be used to develop new features and products, recruit talent, and promote the service
  • Cool Japan Fund-backed Funding Societies secures investment from Gobi Partners: the largest SME digital finance platform in Southeast Asia has announced a strategic equity investment from Gobi Partners, an Asia-focused venture capital firm; this investment underscores strong investor confidence in Funding Societies' business model, resilience, and commitment to bridging the region's SME credit gap, even amid broader fintech market challenges; also, this investment comes only months after Funding Societies raised US$25 million in equity investment from Cool Japan Fund, and at a time when lenders and investors have become increasingly cautious toward fintech firms following industry challenges
  • Z Venture Capital (ZVC) has signed a business agreement with the Seoul Center for Creative Economy & Innovation to promote mutual entry and investment in Korean and Japanese startups; through this agreement, ZVC will support and help innovative companies in both Korea and Japan to grow together in a wider market; ZVC is striving to create practical results for Korean startups based on the assets of its parent company, LY Corporation, as well as its network and portfolio proven in Japan
  • MUFG said it divested a 2% indirect stake in IndiaMART on account of sale of four of its subsidiaries; MUFG held a 5.13% stake in IndiaMART prior to this sale, which has now reduced to 3.12%; founded in 1999, IndiaMART is a B2B marketplace connecting buyers and sellers across sectors such as consumer electronics, manufacturing, among others

New funds

  • Vertex Ventures Japan (VVJ) has completed the first closing of its inaugural fund, Vertex Ventures Japan Fund I (“VVJFI”), targeting JPY 10bn; this milestone was achieved with the participation of LP investors representing key sectors across industry, government, and academia, with the support of government institutions; VVJ will commence investments to foster Japan’s next generation of global champions; VVJ has strengthened its foundation to enable Japanese startups to access major global markets and accelerate their growth by welcoming Vertex Holdings, a wholly-owned subsidiary of Temasek Holdings, as its anchor investor; VVJFI will focus on investments in high-growth sectors, including deep tech, AI, digital transformation (DX), and the creator economy

Outside of FinTech

Insurance

  • Fortitude Re announced the signing and closing of a $4 billion reinsurance transaction with Taiyo Life Insurance; under the transaction Taiyo Life has reinsured a significant portion of its whole life annuity business to Fortitude Re; Taiyo Life will continue to service and administer the reinsured policies; this transaction marks Fortitude Re’s second reinsurance transaction with Taiyo Life and Fortitude Re’s sixth deal in Japan
  • Tokio Marine HCC International backs Artio to launch early stage carbon insurance: Tokio Marine HCC International (TMHCCI), leading the panel, is joined by Markel and Apollo in providing insurance capacity for Artio, to power its data-driven early-stage carbon credit delivery insurance product; the new, innovative cover will be available to businesses globally with immediate effect
  • Misconduct at Japan Post Insurance: Japan Post Holdings, Japan Post, Japan Post Bank, and Japan Post Insurance confirmed cases in which non-public financial information on customers' savings was used at post offices to invite customers to visit the post office for the purpose of soliciting Japan Post Insurance products without prior consent from the customers; in addition, they conducted an investigation into the use of such information for soliciting Japan Post Insurance products, which revealed that the number of customers who were estimated to have been listed for such insurance solicitation was approximately 1.55 million people
  • MSIG Asia has announced a strategic collaboration between MSIG USA, MSIG Singapore and MSIG Hong Kong to expand the Group’s political risk and trade credit business in Asia; this initiative reinforces MSIG’s commitment to supporting its global customers and strengthening its footprint in key international markets; the partnership leverages the expertise of MSIG USA’s seasoned political risk and trade credit underwriting team alongside the strong local presence and market knowledge of MSIG Singapore and MSIG Hong Kong

Banking

  • MUFG has formulated the MUFG AI Policy, under which MUFG Group will safely and securely utilize AI through measures including implementing AI governance and dialogue with various stakeholders; as a business entity engaged in the utilization of AI, MUFG recognizes the risks associated with the inappropriate use of AI, such as information leaks, the spread of misinformation, and causing misunderstanding; MUFG acknowledges the importance of AI governance in properly managing these risks while maximizing the benefits of AI, and thus has formulated the MUFG AI Policy
  • Sumitomo Mitsui Banking Corporation (SMBC) and CHANGE Holdings have signed a partnership agreement with the aim of promoting initiatives in response to growing corporate interest in solving social issues and contributing to regional revitalization; through this partnership, both companies will strengthen their collaboration to solve regional issues through cooperation between local governments and corporations
  • Fujitsu and FICO have entered into a partnership to expand FICO’s solutions to Japan, with plans to extend into other financial markets; under the partnership, Fujitsu will provide FICO® Platform’s Omni-Channel Engagement Capabilities to Japanese financial institutions from July 2025, while also broadening the solution lineup and exploring opportunities for further regional expansion to support the financial industry’s digital transformation

Payments

  • Credit card/web3 crossover: Nudge launches "Snap to Earn" Visa card: Nudge has partnered with Snap to Earn game "SNPIT" to begin offering the "Official SNPIT Credit Card" through the next-generation "Nudge Card"; "SNPIT" allows users to earn unique NFTs (on Polygon Labs) by taking photos using their smartphone camera; it has attracted attention for its game-like system that allows users to have fun while participating in their daily lives, and has surpassed 240,000 users in Japan as of February; the Visa card has a numberless design for enhanced security, has been environmentally friendly manufactured, and carries a carbon neutral certification (PAS2060)

Capital Markets

  • Iyo Bank supports J-Credit utilization in the agricultural sector: Iyo Bank has collaborated with Green Carbon to support J-Credit utilization in the agricultural sector for Au Nogyo, which has joined the "Rice Cultivation Consortium" operated by Green Carbon, enabling the creation of carbon credits through "extending mid-season drainage in rice cultivation," thereby generating new income beyond agricultural products; this is the first project based on the cooperation agreement signed in December 2024 by Iyo Bank, Green Carbon, Ehime Prefecture, Ehime Bank, and Themix Green
  • The U.S. Commodity Futures Trading Commission’s Market Participants Division issued interpretation concerning financial reporting obligations for nonbank swap dealers subject to regulation by the Financial Services Agency (Japanese nonbank SDs)

Asset Management

Digital Assets

  • Metaplanet has acquired an additional 150 BTC for ~$12.5 million, and now holds 3,200 BTC, putting the company in the top 10 of publicly listed holders of Bitcoin globally
  • TIS and the Kyoto Table Tennis Club have issued digital corporate bonds called "Kaguya Smile Token" through private placement, using TIS's platform "STLINK" which comprehensively supports the issuance and management of security tokens; Kyoto Table Tennis Club operates the T.League women's professional table tennis team Kyoto Kaguya Rise, and the funds raised through this private bond issuance will be used to strengthen the table tennis school business of Kyoto Table Tennis Club; this is the first domestic fundraising case using security tokens for private bond issuance in the T.League, and also the first issuance of digital corporate bonds utilizing "STLINK"
  • Collaboration on public offering and issuance of real estate security tokens: Mitsui Digital Asset Management (MDM), Shinsei Trust & Banking, SBI Shinsei Bank, and BOOSTRY have collaborated on the public offering of security tokens backed by real estate assets, utilizing the consortium-type blockchain platform "ibet for Fin" developed primarily by BOOSTRY, and have now completed the offering and issuance
  • Plat'Home and Securitize partner on RWA tokenization initatives: this partnership will combine Securitize's top-class track record in the financial sector with Plat'Home's tokenization technology in non-financial sectors that utilizes IoT, and is expected to create a new market for tokenizing a wide range of real-world assets; currently, Plat'Home's IoT platform, Web3 technology, and ThingsToken™ technology are being used in the "Distribution Demonstration Project to Create a New Sake Experience Using Vacuum and Web3 Technology" that Plat'Home is promoting; in this demonstration project, Plat'Home has begun demonstrations using Securitize with the aim of issuing and managing rights and incentives within the ecosystem
  • IDA, Progmat, Datachain & TOKI partner on stablecoin-based remittances: the companies have announced a strategic partnership to develop a proof of concept (PoC) to enable stablecoin-based cross-border use cases between Hong Kong and Japan, seeking to provide a viable alternative for initiating, processing, and settling import/export trades between Japan and Hong Kong using blockchain technology
  • RigSec and Vlightup to collaborate on crypto wallet compliance and security: Hong Kong-based RigSec Technology, a leading provider of regulated digital asset wallet solutions, and Tokyo-based Vlightup have begun discussions to collaborate on solving security issues in cryptocurrency wallets; by combining Vlightup's "TRUSTAUTHY" security technology with RigSec's regulation-compliant self-custody wallet solution, the partners aim to develop a highly secure cryptocurrency wallet that users can use with confidence
  • NTT East has selected SettleMint as the Blockchain as a Service (BaaS) platform to support its initiatives in regional public administration and local economic development; this collaboration marks a major step in NTT East’s commitment to leveraging blockchain technology to enhance regional services and strengthen digital transformation efforts
  • Parasol, an end-to-end platform enabling game developers to seamlessly integrate blockchain infrastructure into their games, and recently announced subsidiary of Mysten Labs, has confirmed SEGA-licensed CODE OF JOKER: EVOLUTIONS by Jokers Incorporated is coming to Sui

The Last Word: Tariffs

With Trump's "Liberation Day" on April 2 coming up, the world is waiting anxiously as to the tariffs that will be levied against specific countries and industries.

Among countries with most favored nation status, only Switzerland has a lower average tariff burden than Japan, suggesting a more lenient treatment.

Source: Apollo Global Management

Also - and for me, surprisingly - Japan has the lowest non-tariff barriers.

Source: Apollo Global Management

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