Japan FinTech Observer #90

Welcome to the ninetieth edition of the Japan FinTech Observer.

Nippon Life owned this week, like hardly any other Japanese company has owned the headlines in recent memory. The deal to acquire 20% of Corebridge, the AIG spinout, announced seven months ago, closed this week (< USD 4bn). Nippon Life will also acquire all the shares of Resolution Life it does not currently own (> USD 8bn), and has invested USD 550m in convertible bonds and preferred securities issued by TCW, potentially moving its ownership from the high-20s to the high-30s percent over the next three years.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Japan broke its record for total VC deal value in Q3 with $2.2 billion invested across 363 pacts; Ant Capital Partners secured an initial commitment of 169 billion yen from domestic institutional investors for its new fund; UntroD Capital Japan has established the Crossover Impact Fund with 4 billion yen; Nihon M&A Center has established “ASEAN to Global Capital” to support SME's Asia expansion; xID has completed a JPY 600m funding round to scale its MyNumber card-based services
• Insurance: Nippon Life rules
• Banking: Japan’s megabanks are awash in cash and eager to invest
• Payments: JPYC provided a progress update and an assessment of the Japanese stablecoin landscape; JR East plans to evolve Suica from a simple "travel device" to a "lifestyle device" - over the next ten years
• Capital Markets: Optiver is expanding its derivatives presence in Japan; the Tokyo Stock Exchange examines future measures to strengthen the Growth Market
• Digital Assets: Coincheck Group listed on the Nasdaq; Startale Cloud Services (SCS) has launched the Hypersonic Builder Alliance (HBA), a collective of top-tier technology providers dedicated to Sonieum; AsiaNext has launched its cross-exchange collateralisation and margining platform
• The Last Word: Data Center Density

Venture Capital & Private Markets

• Japan broke its record for total VC deal value in Q3 with $2.2 billion invested across 363 pacts; deal count reached its highest quarterly figure in just over two years, according to PitchBook; the increase in deal value was largely due to a handful of outsized rounds, including AI startup Sakana AI’s $200 million Series A and HR management specialist SmartHR’s $140 million Series E; at the current funding pace, the country’s annual total is expected to stand at around $5.5 billion—a 7.8% increase from 2023; deal count is projected to land just above last year’s figure, at 1,294
• Ant Capital Partners (ACP) has established a fully-owned subsidiary, Ant Solution Partners (ASP), by spinning off the main operations of their Solution Investment Group (SI Group) into a separate company; additionally, ASP established the Ant Solution 6 Investment Limited Liability Partnership (AS6) as its general partner, securing an initial commitment of 169 billion yen from domestic institutional investors; the final committed amount for AS6 is expected to reach 250 billion yen
• UntroD Capital Japan has established the Crossover Impact Fund and has completed its first closing of 4 billion yen; the fund aims to create a positive impact on society in addition to investment returns through impact-oriented crossover investments that transcend the boundaries between listed and unlisted companies
• Nihon M&A Center has established “ASEAN to Global Capital”, a subsidiary fund management company aimed at supporting Japanese companies’ expansion into the ASEAN region; the fund aims to facilitate cross-border M&A transactions, with the first partnership kicked off in Malaysia with CK MAC Global, a trading company specializing in Computer Numerical Control (CNC) machineries and providing after-sales services, which has a presence in Malaysia and Singapore
• xID has completed a JPY 600m funding round; xID is a GovTech startup that supports local governments and companies in solving problems and creating new businesses using My Number Cards and digital IDs; this funding will be used to further expand its digital postal service, “SmartPOST,” which solves the challenges of municipal mailing operations, and accelerate its expansion into the private sector, in particular into financial services

Insurance (aka the Nippon Life section)

• Resolution Life announced that Nippon Life has agreed to acquire 100% of the company; Resolution Life is a global life insurance group focusing on the acquisition and ongoing management of portfolios of life insurance policies; Nippon Life will consolidate its ownership interest by paying $8.2 billion to acquire the remaining shares from Resolution Life’s investment limited partnership, valuing Resolution Life at $10.6 billion, with shareholders also retaining final dividends before completion
• Nippon Life's deal to acquire a 20% equity interest in Corebridge, an AIG spinout, closed this past week, with an acquisition amount of around USD 3.84bn, funded by cash on hand
• Nissay invests USD 550m in convertible note and preferred security issued by TCW; moreover, Nippon Life intends to commit up to $3.25 billion to TCW private credit strategies to expand TCW’s business and to strengthen Nippon Life’s investment capabilities by utilizing TCW’s investment know-how
• Melon announced that it has provided Melon's mindfulness program to Nippon Life; Melon is a company that provides emotion management training to resolve mental and emotional issues within organizations; internally, Nippon Life is working on health management under the banner of "Improving Well-being and Extending Healthy Life Expectancy for Nissay Employees" and is also focusing on supporting health management through initiatives like the "Nissay Health Promotion Consulting Service Wellness-Star☆"

Banking

• Japan’s megabanks are awash in cash and eager to invest: Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group are enjoying record earnings; selling off cross-shareholdings is bringing in even more money; even as they reward shareholders with buybacks and higher dividends, they are determined to fund overseas expansion
• The Bank of England examined "Forbearance lending as a crisis management tool: evidence from Japan"; the authors examine the effects of Japan’s small and medium-sized enterprise (SME) Financing Facilitation Act, which encouraged banks to offer loan forbearance to troubled SMEs; they develop a framework to quantify the aggregate impact of the policy using a difference-in-differences approach combined with back‑of‑the‑envelope counterfactual exercises

Payments

• JPYC hosted a webinar (in Japanese), covering JPYC’s mission in issuing stablecoins, a company overview, the stablecoin landscape in Japan, JPYC’s features and use cases, its development kit, future plans, and a Q&A session
• JR East will progressively upgrade Suica's functionality over the next 10 years, transforming it into a digital platform as part of its mid-to-long-term business growth strategy, "Beyond the Border"; Suica will evolve from a simple "travel device" to a "lifestyle device", seamlessly integrated into various aspects of its customers' lives, extending beyond transportation and payments
• It is now possible to read "PayPay" payment QR codes using the standard camera function on smartphones; with this update, you can now easily use PayPay by going straight to the payment screen without having to search for the PayPay app from your home screen, eliminating the hassle of making payments

Capital Markets

• One of the effects of the Bank of Japan's normalization of the policy rate (reminder: there is a Monetary Policy Meeting this week, and the expectations for another quarter point rise are essentially split between this meeting and the January MPM) and the curtailing of JGB purchases is that in the medium-term, there will actually be again a functioning fixed income market in Japan; so financial institutions are slowly scaling up those trading operations after the desks had been decimated during NIRP/ZIRP
• Optiver is expanding its derivatives empire in Japan, where it aims to boost a single-stock options market that has so far been virtually non-existent; the speed trader, which has been dealing index contracts in the nation since 2008, in September started providing liquidity on options of 12 Japanese companies and exchange-traded funds; the Dutch firm aims to grow that number to 30 by June, according to its head of international sales in Japan
• To improve the effectiveness of the market restructuring, the Tokyo Stock Exchange (TSE) established the “Council of Experts Concerning the Follow-up of Market Restructuring” that will continuously follow up on progress of measures and investors’ evaluation; the council will discuss additional measures regarding listed companies’ efforts to increase corporate value, handling of the grandfathered rules, and supply of capital to venture businesses, etc.; at the nineteenth council meeting on December 10, 2024, future measures to strengthen the Growth Market were presented by the TSE Listing Department for discussion
• The Financial Markets Department of the Bank of Japan has published the latest edition of the Tokyo Money Market Survey, which has been conducted since 2008; in August 2024, the 15th survey in the series was carried out, covering data as of the end of July 2024
• Nomura has published its Individual Investor Survey for December 2024

Digital Assets

• As we reported four weeks ago, Coincheck Group listed on the Nasdaq through a De-SPAC transaction
• Startale Cloud Services (SCS) has launched the Hypersonic Builder Alliance (HBA), a collective of top-tier technology providers, all dedicated to equipping developers with both financial and technical resources on Soneium, a leading Ethereum Layer 2 solution developed by Sony Block Solutions Labs; by joining forces, these partners aim to lower the barriers to entry and foster rapid innovation, making it easier than ever for developers to bring their ideas to life in the web3 space
• AsiaNext has launched its cross-exchange collateralisation and margining platform, the AsiaNext orchestration layer (AXOL); this solution, combined with the recent inaugural listing of a USD-denominated money market fund, is set to revolutionise the experience for their trading Members by seamlessly integrating its three trading venues and offering; AsiaNext is , a joint venture between SIX Digital Exchange and SBI Digital Asset Holdings
• SBI VC Trade will launch an NFT and signed shikishi board presentation campaign in collaboration with Asobi System and Social Marketing; SBI VC Trade is a consolidated subsidiary of SBI Holdings that operates a cryptocurrency exchange business; FRUITS ZIPPER is an idol group born from the “KAWAII LAB.” project, which aims to transmit Japanese idol culture to the world, managed by Asobi System.

The Last Word: Data Center Density

From Apollo's 2025 Economic Outlook: "There is no AI boom in other developed countries. As shown in [the exhibit above], there are more data centers in the US than in all other major countries combined."

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