Japan FinTech Observer #94

Welcome to the ninety-fourth edition of the Japan FinTech Observer.

We apologize for the tardiness of this week's newsletter. Let's just say the editorial team has been...decimated. Not by alien invaders (though with this cough, I wouldn't rule it out), but by a microscopic menace with a penchant for tissues and daytime television: the flu.

Apparently, sharing is caring, and our team took that to heart by sharing a single, potent strain of influenza. Picture a petri dish, but instead of agar, it's filled with lukewarm coffee and discarded drafts. That's our office right now.

So, why the delay? Well, typing with oven mitts on (to avoid germ spread, naturally) is challenging. Also, most of our newsletter this week was accidentally written in feverish gibberish about sentient houseplants and the merits of chicken soup IV drips. It was…poetic, in a delirious kind of way. Sadly, not fit for public consumption.

We're slowly emerging from our blanket cocoons, smelling vaguely of menthol and regret. We promise to return to our regularly scheduled programming next week, assuming we haven’t mutated into something that requires Hazmat suits to approach. Until then, please wash your hands (for the love of all that is holy, wash your hands!) and pray for our sinuses.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: SBI Holdings is poised to acquire a controlling stake of around 70% in German FinTech Solaris for approximately €100 million; MUFG Innovation Partners participates in Endowus' Series C extension; Cross Capital has invested in “Airbus Ventures Fund IV”; Pacific Meta has made an investment in Sonzai Labs
• Banking: UBS targets Japan's regional banks with senior sales hires; Saison OMNI rebrands to Aumnee (definitely a more inspired move than the recently disclosed new Jaguar brand)
• Payments: Central Bank Digital Currencies from a Japanese legal perspective
• Capital Markets: Interest rates, interest rates, M&A on the rise, and bond market due diligence
• Asset Management: PayPay Asset Management will cease operations in September 2025; Apollo Global Management plans to expand in Japan; Blue Owl Capital appoints Head of Japan Private Wealth
• Digital Assets: Capital Group becomes Metaplanet’s third-largest shareholder; Binance Japan is adding three new cryptocurrencies for an industry-leading total of 59
• The Last Word: Real Wages keep falling

Venture Capital & Private Markets

• SBI Holdings is poised to acquire a controlling stake of around 70% in German FinTech Solaris for approximately €100 million, as part of a larger €150 million fundraising round; this deal, expected to close this month, significantly reduces Solaris's valuation from its $1.6 billion peak in 2021, largely wiping out existing shareholders, which also includes SBI's previous stake from a €96 million funding round in March 2022
• MUFG Innovation Partners participates in Endowus' Series C extension: Endowus has increased its total funding to over US$110 million; the digital wealth advisory platform raised an additional US$17.5 million following from their US$35 million raise in August 2023 to take the total for this round to US$52.5M
• Cross Capital has invested in “Airbus Ventures Fund IV,” managed by Airbus Ventures, through its Fund of Funds, Cross Capital I Limited Partnership (CC1); this collaboration establishes a strategic partnerships aimed at fostering innovation and mutual growth; Cross Capital is dedicated to “unlocking Japan’s potential through the power of cross-border innovation": it operates a Japan-focused open innovation infrastructure leveraging a fund-of-funds structure
• Pacific Meta has made an investment in Sonzai Labs, a company dedicated to developing Web3 games with the goal of driving the mass adoption of Web3; Sonzai Labs is focused on developing mini-app games on Telegram, a platform that aligns perfectly with Pacific Meta's vision of fostering innovative and scalable solutions for the Web3 ecosystem

New Funds

• Tokyu Fudosan Holdings announced the joint establishment of a JPY 50 billion corporate venture capital fund, “TSVF2 Investment Limited Partnership”, with SBI Investment as the General Partner; this fund aims to strengthen the value chain through partner collaboration, address social issues, and enhance corporate value by leveraging regional resources to create added value; the predecessor fund, established in 2017 with a total of JPY 50 billion, has invested in 37 startups; Tokyu Fudosan continues to actively engage in external partnerships
• Z Venture Capital has launched a new fund, ZVC Fund II Investment Limited Partnership (ZVC Fund II), with a total size of 30 billion yen; the fund has officially commenced operations on January 1, 2025; ZVC is a subsidiary of LY Corporation; continuing the approach of its predecessor, the new fund will invest across all stages, from early seed rounds to late-stage growth, with a focus on key markets supported by its hubs in Japan, South Korea, and the United States
• Open innovation specialist Creww has formed Creww Capital, a new subsidiary focused on Corporate Venture Capital (CVC) support and fund management; the new subsidiary will invest in startups both domestically and internationally, supporting their growth and co-managing and creating funds linked to regional open innovation initiatives; leveraging its extensive network and expertise, Creww aims to strengthen startup ecosystems across Asia and beyond, establishing a comprehensive new framework for investment and support

Digital Agency Annual Report

The Digital Agency has published its annual report to share the current state of digitalization in Japan and the agency's achievements over the past year (September 2023 - August 2024), using data-driven insights. The report aims to inform the public and stakeholders about the progress and direction of the agency's initiatives:

• Digital Transformation for Everyone: A core theme is ensuring that digitalization benefits all citizens, regardless of their circumstances. This involves making digital services accessible, user-friendly, and tailored to individual needs.
• Growth Strategy through Digitalization: The Digital Agency aims to boost the nation's productivity and competitiveness through digitalization. This includes digitizing quasi-public sectors (healthcare, education, disaster prevention, childcare), revitalizing local economies, and fostering digital talent.
• Secure and Robust Digital Infrastructure: Establishing a safe, reliable, and resilient digital infrastructure is a priority. This includes strengthening cybersecurity and optimizing government and local systems.
• The "Three Pillars" of Focus: The Agency organizes its efforts around three main areas, which are used to guide project prioritization and resource allocation, ensuring alignment with the Agency's overall objectives: (I) Providing User-Friendly Services: Focused on improving the experience for citizens, businesses, and government employees; (II) Promoting Growth Strategies: Focused on leveraging digitalization for economic and social development; and (III) Ensuring Secure Infrastructure: Focused on building a robust and safe digital foundation for the country

Banking

• UBS Targets Japan’s Regional Banks With Senior Sales Hires: UBS Group AG hired three salesmen in Japan to boost its business selling high-yielding structured investments and other tailored derivative products to local financial firms, as activity heats up in this area; former HSBC banker Shuhei Sanada joined the Swiss lender’s Tokyo brokerage arm on January 1 to lead sales for regional financial firms; Eiichiro Yoshida from Nissay Asset Management and Hiroaki Sato from Barclays also started at UBS Securities Japan on the same day
• Saison OMNI rebrands to Aumnee, marking a bold new chapter in its journey as part of the Credit Saison family; Aumnee is a technology company which enables capital to be deployed into the lending ecosystem by transforming the way lenders (Banks) and originators (Non-Bank Financial Companies) interact through a unified platform; through its proprietary co-lending solution, Aumnee enlarges opportunities by digitizing and streamlining the discovery to loan management processes, thereby removing the traditional barriers to enable lending at greater scale and ease; currently, Aumnee operates in India and Indonesia

Payments

• Waseda University released the fifth episode of its English language podcast series “Rigorous Research, Real Impact”, covering “Central Bank Digital Currencies from a Japanese Legal Perspective”, with Professor Takashi Kubota sharing insights on Central Bank Digital Currencies (CBDCs), focusing on the legal implications and challenges for Japan; Professor Kubota, a legal expert with experience at the Bank of Japan and various international institutions, offers a detailed perspective on the current state and future of digital currencies, drawing on his extensive research and practical knowledge

Capital Markets

• Interest Rates (I) - reflecting the move towards higher interest rates in the US, where the 10 Year Treasury Note has added close to 60 basis points since December ("higher for longer"), the 10 Year JGB yield has reached its highest level in 13 years; for an out-of-consensus view, this puts the yield more than halfway to the "natural ceiling" of around 1.5% Asymmetric Advisors have been stating since mid-2024 as the foundation of a possible inversion of the 2y to 10y yield curve by the end of the first quarter 2025
• Interest Rates (II) - the Bank of Japan's "Regional Economic Report" summarizes the reports from all regional research divisions, mainly at the Bank's branches in Japan, and is based on data and other information gathered for the meeting of general managers of the Bank's branches held last week; all nine regions reported that their respective economies had been recovering moderately, picking up, or picking up moderately, although some weakness had been seen in part; this data is one of the key inputs to the Bank of Japan's Monetary Policy Meeting next week
• Japan’s dealmakers are expecting a busier 2025 after more than $230 billion in mergers and acquisitions last year, underpinned by companies’ changing attitudes around business expansion; in 2024, the value of mergers and acquisition deals that involved a Japanese company rose 44%, according to data compiled by Bloomberg; that is the fastest growth since 2018 and compares with 38% rise in M&A activity across the Asia-Pacific region
• The Asian Development Bank has published a brief detailing how the due diligence process works, explaining how it underpins bond markets, and sets out how it helps both issuers and investors identify risks that could affect their decision making; drawing on a 2020 Supreme Court decision from Japan, it looks at the role of underwriters and shows how effective due diligence can play a role in encouraging issuers and investors to participate in nascent bond markets

Asset Management

• As initially announced in October 2024, PayPay Asset Management will cease operations in September 2025; the entity is a a joint venture between LINE Yahoo and a subsidiary of Mizuho Financial Group; LINE Yahoo's inability to tolerate ongoing losses was the primary driver of this decision; the abrupt closure of an asset management firm, a business inherently focused on long-term investment, is highly unusual and has sparked criticism from investors concerned about the company's fiduciary responsibilities
• Apollo Global Management plans to expand in Japan and add staff to its Asia wealth business, its regional top executive said, as global investment firms pump more resources into the region to capitalize on a surge in deals and assets; Japan will be Apollo's fastest-growing office in Asia for the next two years, with a setup covering private equity, institutional sales, wealth and credit, and capital allocation to the country is also likely to rise
• Blue Owl Capital, a leading alternative asset manager, announced the hiring of Yoichi Nakamura as a Managing Director and Head of Japan Private Wealth; Nakamura will be based in Blue Owl's Tokyo office, reporting to Johann Santer, Managing Director and Head of APAC Private Wealth; the appointment of Nakamura adds a veteran senior leader with deep relationships across Japanese securities companies and brings an executive with a track-record of scaling the private wealth businesses of global asset managers in Japan; Nakamura's hiring reinforces Blue Owl's commitment to serving the largest securities companies and wealth managers in Japan

Digital Assets

• Capital Group, one of the world’s largest investment firms with over $2.3 trillion in AUM, has become a 5% shareholder of Metaplanet; already a major investor in MicroStrategy as its second-largest shareholder, Capital Group is now Metaplanet’s third-largest shareholder
• Binance Japan will begin handling three new cryptocurrencies for spot trading, namely PEPE, SEI, and IOTX; of these, SEI will be listed for the first time in Japan; this brings the total number of cryptocurrencies handled by Binance Japan to 59; in addition, JPY trading pairs will be added for APT, SUI and XLM

The Last Word: Real wages keep falling

While the 2024 spring wage negotiations delivered the biggest pay hike in 33 years, the effect has been slowly evaporating, leaving the average Japanese with negative real wages for the fourth month running in November 2024, based on data published on January 9.

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