Japan FinTech Observer #106

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

What a week, eh? According to our friends at Goldman Sachs, the TOPIX’s 11.8% decline over the six trading days from Friday, March 28, to Friday, April 4, 2025, is the 35th largest decline since 1968, placing it in the 99.8th percentile. Since 2000, it was the 21st largest decline. Happy to be alive!

We feel for all the economists (nah, not really) whose job obliged them to publish assumptions and projections prior to April 2, only to see every single "worst case" scenario being thrown out of the window. Better get used to it, this chaos is intentional. Every deal struck or "retaliation" implemented will tilt the scales one way or another. And do not mention military action against Iran.

For now, taking a survey of our most favorite analysts, here is the current approximate fallout from last week:

• Japan GDP forecast for CY2024 & CY2025 down by around 0.2% and 0.3%, respectively
• With markets at the end of last week pricing in four Fed rate cuts, forecasts for the USD/JPY rate drop by about 10 yen 12 months out
• This also contributes to reduced TOPIX earnings revisions, with EPS growth going from low double-digits to flat, or even slightly negative for this fiscal year; FY2026 revised down a percentage point or two
• TOPIX potential is seen quite limited through this quarter, at 2,450 to 2,550, but with potential for a 10% recovery over the nine months thereafter, i.e. 2,700 to 2,800

Here is what we are going to cover this week:

• Venture Capital & Private Markets: The Cool Japan Fund has decided to invest up to 6 billion JPY in "Japan Activation Capital II"; Sumitomo Mitsui Trust Bank has made an impact equity investment in the "Japan Hydrogen Fund"; Gojo & Company has entered into an agreement to acquire an additional 16.6% stake in JSC Credo Bank; Mitsubishi will acquire a 6.5% stake in Filipino e-wallet giant GCash
• Insurance: Sumitomo Mitsui Card, Sony Life, and Next Solution (Nexsol) have formed a business alliance; Yamada Small Amount and Short-Term Insurance has implemented the Finatext's SaaS digital insurance system "Inspire"
• Banking: Sumitomo Mitsui Banking Corporation and Fujitsu announced a partnership to explore the creation of a data analytics business
• Payments: PayPay accounts for 1 in 5 cashless payments in Japan; South Korea’s 7-Eleven stores will accept payments in the country’s CBDC; Sony Electronics Singapore and Crypto.com have enabled the acceptance of Circle's USDC; Sumitomo Mitsui Trust Bank will reorganize its subsidiaries engaged in the credit card business; Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, TIS, Ava Labs, and Fireblocks partner on stablecoins; Digital Garage has integrated three group companies to better support digitalization alongside payments
• Capital Markets: SMBC has intermediated more than 1m of SBI Securities' financial product accounts; SmartPlus has updated the functions of its securities business platform "BaaS (Brokerage as a Service)" to offer bond trading; MUFG to issue publicly offered unsecured Green Bond in Japan; the TSE's proposed initiatives to enhance the Growth Market are being discussed
• Asset Management: Sumitomo Mitsui Trust Group, Sumitomo Mitsui Trust Bank, Daiwa Securities Group, and Daiwa Institute of Research have entered into a business alliance
• Digital Assets: Korean blockchain company DSRV is planning to enter the Japanese market; BOOSTRY has published its "Japan Security Token Market Report" for FY2024
• The Last Word: Japan as No. 22

Venture Capital & Private Markets

• The Cool Japan Fund has decided to invest up to 6 billion JPY in Japan Activation Capital II, a fund that invests in publicly listed Japanese companies that are committed to long-term, sustainable growth and corporate value creation; the Fund was established and is operated by Japan Activation Capital; historically, CJF has primarily supported startups and non-listed companies; however, recognizing the potential for publicly listed Japanese firms to achieve further growth by tapping into overseas demand, CJF has chosen to invest in the Fund
• Sumitomo Mitsui Trust Bank has made an impact equity investment in the "Japan Hydrogen Fund", a fund established by the Japan Hydrogen Association in cooperation with Advantage Partners that specializes in investments in hydrogen-related areas; in September 2024, Sumitomo Mitsui Banking Corporation (SMBC) executed an investment agreement with the Japan Hydrogen Fund as one of the major LP investors, and Sumitomo Mitsui DS Asset Management (SMDAM) participates in the fund as a service provider
• Gojo & Company has entered into an agreement to acquire an additional 16.6% stake in JSC Credo Bank from Triodos Microfinance Fund and Triodos Fair Share Fund; this follows Gojo’s initial acquisition of 16.8% stake in December, bringing its total ownership in Credo to 33.4%; Credo is the fifth-largest commercial bank in Georgia; with its wide regional outreach through 96 service centers, it offers fully-fledged and innovative banking services to over 490,000 customers
• Filippino conglomerate Ayala and Mitsubishi have executed an investment agreement for the Japanese multinational’s acquisition of a 6.5% stake in e-wallet giant GCash, according to a stock exchange filing; Mitsubishi will subscribe to 18.03 million common and redeemable preferred shares of AC Ventures Holding, which holds a 13% stake in Globe Fintech Innovations (Mynt), the parent of GCash, for at least PHP 18.4 billion; Ayala and Mitsubishi will each own a 50-percent ownership stake in ACV after the transaction

New Funds

• Morgan Stanley is raising about 100 billion yen for a Japan-focused real estate fund, highlighting investor interest in property as the world’s fourth-largest economy emerges from years of deflation and standstill prices; the Morgan Stanley-managed fund is due to close in June and expected to raise at least 100 billion yen based on current investor commitments; the final size of the fund could change by the closing; investment will centre on offices and multi-family residential buildings in major cities, as well as logistics and hotels
• Sumitomo Mitsui Trust Investment has formed the Circular Economy/Nature Positive No. 1 Investment Limited Partnership jointly with SBI Shinsei Corporate Investment, and commenced investment activities; Sumitomo Mitsui Trust Bank has made an LP investment in the Fund, which will seek to raise LP investments from parties sympathetic to this initiative toward a target total operating amount of approximately 10 billion yen
• Granite Asia, a leading multi-asset investment platform focused on technology, and  Integral Corporation, Japan’s leading publicly listed private equity firm specializing in buyouts, announced the formation of Granite-Integral, a joint venture designed to invest in high-growth companies with a strong Japan nexus, empowering technology scale-ups expanding into Japan and Japanese companies seeking international growth opportunities; Granite-Integral launches with an initial committed capital of USD 100 million, contributed equally by both partners
• Forseas has established and completed the first close of a new fund, "Shinryo Fund", which will primarily invest in and support seed-stage startups with funding from investors centered in Okinawa Prefecture; Forseas will actively develop investments in startups driving new growth industries in Okinawa; the existence of a venture capital fund aggregating capital from local businesses is expected to create a positive cycle where profits and knowledge accompanying the development of startups born and growing in Okinawa Prefecture are returned to the prefectural economy and human resource development

Insurance

• Sumitomo Mitsui Card, Sony Life, and Next Solution (Nexsol) have formed a business alliance for collaboration in the insurance sales business through insurance agencies; Sumitomo Mitsui Card and Sony Life will acquire part of the shares of Nexsol, a multi-carrier insurance agency currently owned by Money Forward, and establish Nexsol as a jointly managed entity by the three companies; the ownership ratios will be: Sumitomo Mitsui Card 70%, Sony Life 20%, and Money Forward 10%
• Yamada Small Amount and Short-Term Insurance has implemented the Finatext's SaaS digital insurance system "Inspire" and launched the "Digital Device Expense Compensation Insurance", which covers repair costs of digital devices including smartphones, for up to 5 devices at a monthly fee of 890 yen, with maximum annual coverage of 300,000 yen; applications and insurance claims can be completed entirely online
• Robert Pick, the CIO of Tokio Marine North America and Deputy Group CIO for Tokio Marine Group worldwide, joined the "Leading Change" podcast with Ema Roloff to discuss the realities of implementing Agile methodologies in organizations, particularly those that are not tech-centric; he critiques the unrealistic expectations set by analysts and consultants, emphasizing that Agile is not a one-size-fits-all solution and often requires significant culture change

Banking

• Sumitomo Mitsui Banking Corporation and Fujitsu announced a partnership to explore the creation of a data analytics business, designed to empower customers with enhanced decision-making and operational efficiency; the partnership comes after a joint project team formed by the two companies in 2024 conducted a survey of customer needs and discovered that various industries, including manufacturing, wholesale, and retail, want to move away from decision-making based on individual experience and promote data-driven operations to improve efficiency, and enhance management decision-making

Payments

• PayPay accounts for 1 in 5 cashless payments in Japan: the number of "PayPay" payments in 2024 has exceeded 7.46 billion, accounting for approximately 1 in 5 of the total 38.8 billion cashless payments in Japan; the total number of QR code payments increased by 23% year-on-year to over 11.5 billion, with "PayPay" maintaining approximately two-thirds of the market share since 2020, growing to become Japan's No. 1 QR code payment service
• South Korea’s 7-Eleven stores will accept payments in the country’s central bank digital currency until June, as the retailer participates in the test phase of its CBDC project; the convenience store chain will reportedly provide a 10% discount on all products paid for with CBDC during the test period; according to Moon Dae-woo, head of 7-Eleven’s digital innovation division, the company is making an effort to incorporate digital technology advancements in its operations
• Sony Electronics Singapore and Crypto.com have enabled the acceptance of Circle's USDC, a U.S. dollar-pegged stablecoin, exclusively on the Sony Store Online in a move to make direct crypto payment accessible to SES’ consumers; Crypto.com users will now benefit from an optimised checkout experience via Sony Store Online through Crypto.com Pay; starting with USDC, SES has plans to expand to other cryptocurrencies, empowering consumers to make purchases directly with their crypto balances on Sony Store Online
• Sumitomo Mitsui Trust Bank will reorganize its subsidiaries engaged in the credit card business, Sumitomo Mitsui Trust Card and Sumitomo Mitsui Trust Club, with the merger of both companies scheduled for October 1, 2025; Trust Club issues cards such as the Diners Club Card, which has many high-income members, while Trust Card issues the Sumitomo Mitsui Trust VISA Card; Trust Card was established in 2012 following the merger of Sumitomo Trust Bank, Chuo Mitsui Trust Bank, and Chuo Mitsui Asset Trust Bank; Trust Club was established in 2015 when Sumitomo Mitsui Trust Bank acquired all shares of Citi Cards Japan from Citi for just over 40 billion yen, and changed its name to Sumitomo Mitsui Trust Club
• Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, TIS, Ava Labs, and Fireblocks have signed a basic agreement concerning joint exploration of stablecoin utilization with a view toward future commercialization, aiming to conceptualize use cases with a view toward ongoing business implementation, rather than limiting their application to proof-of-concept experiments; furthermore, as there is also a need for stablecoins as a settlement method for RWA (Real World Assets), which represent traditional financial assets such as government and corporate bonds, as well as real-world assets such as real estate in the form of tokens, the companies will collaborate to promote the widespread adoption of token businesses both domestically and internationally
• Digital Garage has integrated three group companies - Naviplus (main business: marketing support for EC businesses), DG Commerce (main business: EC site development), and Scudet (main business: fraud detection and prevention solutions) - and launched a new company, DG Business Technology, to provide comprehensive digital business support; going forward, Digital Garage aims to achieve overall group growth through a dual structure alongside DG Financial Technology, while contributing to the business growth of a wider range of commerce operators

Capital Markets

• The total number of SBI Securities financial product accounts intermediated through Sumitomo Mitsui Card and Sumitomo Mitsui Banking Corporation has exceeded 1 million, and the monthly investment amount for "Sumitomo Mitsui Card Regular Investment" has exceeded 85 billion yen.
• SmartPlus, part of the Finatext Group that realizes embedded finance through the provision of next-generation financial infrastructure, has updated the functions of its securities business platform "BaaS (Brokerage as a Service)" and is now offering bond trading services; as the first phase, Amber Asset Management and CS Asset will offer U.S. dollar-denominated bonds (public and corporate bonds) selected by SmartPlus
• MUFG to issue publicly offered unsecured Green Bond in Japan: Mitsubishi UFJ Financial Group has decided to issue the “Mitsubishi UFJ Financial Group, Inc. 14th series unsecured bond with callable clauses (no collateral provision restrictions or other financial covenants)”, the proceeds of which are to fund the construction of the new MUFG Headquarters Building
• At the next meeting of the Tokyo Stock Exchange's Council of Experts on April 22, 2025, the discussion will focus on the TSE's proposed initiatives to enhance the Growth Market and promote sustained high growth of listed startups; the TSE aims to cultivate companies that can attract institutional investors, contribute to the revitalization of the Japanese economy through M&A and new ventures, and ultimately become drivers of future economic growth; the proposals focus on a package of measures spanning the pre-IPO and post-listing stages, including encouraging "high-growth-oriented management," revising listing maintenance criteria, and facilitating smoother IPOs focused on long-term growth; a key proposal is the tightening of the market capitalization requirement for continued listing after five years
• The Sustainability Standards Board of Japan（SSBJ）has published the “Schedule of Differences between ISSB Standards and SSBJ Standards”; the contents of this document has been confirmed by the Financial Accounting Standards Foundation（FASF）, the mother organization of the SSBJ, and the IFRS Foundation, the mother organization of the International Sustainability Standards Board (ISSB)
• "Current State and Challenges of Impact Investing in Japan" has been published by the GSG Japan Impact National Partner

Asset Management

• Sumitomo Mitsui Trust Group, Sumitomo Mitsui Trust Bank, Daiwa Securities Group, and Daiwa Institute of Research have entered into a business alliance agreement in the field of asset management and asset administration; both groups will bring together their expertise to first establish a "data sharing platform" to facilitate the smooth exchange of information and data between asset management companies and trust banks; leveraging this platform, the partners aim to establish a Single-NAV calculation solution while reducing system costs and improving operational efficiency across the asset management industry through the provision of IT solutions centered around middle and back-office operations directed at asset management companies

Digital Assets

• Korean blockchain company DSRV is planning to enter the Japanese market, recognizing its growth potential; DSRV is considering expanding its stablecoin and validator businesses in line with the Japanese government's commitment to fostering stablecoins and institutional changes; aiming for a KOSDAQ listing in the first half of next year, DSRV targets 30 billion won in revenue this year through revenue diversification
• According to BOOSTRY's Japan Security Token Market Report for FY2024, Japan's security token market continued to expand, although the total amount of public security token offerings (STO) was limited to approximately 47% compared to the previous fiscal year, largely influenced by widespread caution surrounding discussions on revisions to trust taxation; the cumulative issuance amount of public STOs increased, surpassing JPY 160 billion
• Japan’s Tokenization Landscape: Key Takeaways and the Role of Canton Network

The Last Word: Japan as No. 22

The 37th edition of Z/Yen’s Global Financial Centres Index (GFCI) has been published, and Tokyo gave up two ranks, settling at No. 22. The point differentials among the Top 20 has narrowed further, and Tokyo's distance to fifth-place San Francisco has actually narrowed by four points over the past six months.

The only change in the Top Ten is Seoul swapping places with Frankfurt, moving into tenth place. The Asian order remains Hong Kong, Singapore, Shanghai, Shenzhen, Seoul (that's five Asian cities in the Top Ten!), Beijing, Tokyo, Busan.

If you are too young to understand the pun this section's title attempted, check out "Japan As Number One: Lessons for America".

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