Japan FinTech Observer #11

Welcome to the eleventh edition of the Japan FinTech Observer. This past week, Tokyo FinTech became six years old, so while we are a little better behaved, we are still far from growing up. We hope you enjoyed the ride so far as much as we did.

Here is what we are going to cover:

• Startups: GIG-A wins Takeoff Tokyo pitch contest; Bloomo obtains Type I Financial Instruments Business Operator (FIBO) license; SusLab listed among Tokyo's cutting edge machine-learning companies
• Venture Capital & Private Equity: Kilde raises seed round; MS&AD Ventures?participates in?Bitcoin?life insurer Meanwhile's USD 19m fund raise; Global Brain invests in life insurance startup Life5 for Sony Financial Ventures; Japan Post Insurance, KKR and General Atlantic enter into strategic partnership
• Banking: Revolut partners with Minna Bank for free account top-ups, and competitive FX transactions; Seven Bank introduces AI-assisted chatbot for higher conversion rates on card loans
• Payments: Generative AI renders QR codes; new Suica and Pasmo cards issuance restricted due to "chip shortage"; survey shows that people in their 20s have positive attitude towards receiving their salary straight into digital wallets
• Capital Markets & Investment Management: the Tokyo Stock Exchange will launch its Carbon Credit Market in October; as will a joint venture between SBI Holdings and startup Asuene; Mrs Watanabe set new retail FX records in 2022, a Bank of Japan research papers shows
• Digital Assets: OKX will deploy Komainu's digital asset custody solution; two Russian nationals charged with laundering Bitcoin from the MtGox heist; Japan FSA publishes Travel Rule summary; visual data asset management service launched for creators
• The Last Word: Nikkei Highs & BOJ Watch

Startups

• It's a wrap! Congratulations to Antti Sonninen and the whole Takeoff Tokyo team for pulling off an impressive first edition of what hope will become an annual fixture in the Tokyo event calendar; a big round of applause for GIG-A and Raul Allikivi on winning the JPY 1m prize of the startup contest; our Tokyo FinTech Association favorites did quite well, with Woodstock also reaching the final four
• ブルーモ証券 Bloomo Securities (Bloomo), a startup developing an asset building app focusing on US stocks/ETFs that had?raised a JPY 800m seed round in April?this year, announced that it has completed the registration as a Type 1 Financial Instruments Business Operator (FIBO); although Bloomo is similar in their offering to above-mentioned Woodstock, the latter chose the path of a Financial Instruments Intermediary license
• Innovation Tech News lists ESG data analytics firm Sustainable Lab Inc. (ESG data bank “TERRAST”) among Tokyo's cutting edge machine-learning companies

Venture Capital & Private Equity

• Singapore-based digital private debt platform Kilde , a Tokyo FinTech presenter alumni, has raised a USD 1.1m seed round, an indication of the continued strong interest in private credit markets
• MS&AD Ventures ?participates in?Bitcoin?life insurer? Meanwhile 's USD 19m fund raise; Sam Altman, CEO of?OpenAI, the company behind?ChatGPT, and Lachy Groom, one of the original employees at payments giant?Stripe, co-led the first round of seed funding;?Gradient Ventures, a?Google-backed?venture capital?fund, led a second round
• Global Brain Corporation, through the fund it runs for?Sony?Financial Ventures, participates in life insurance startup?Life5 (formerly Getlife)?USD 10.7m fundraising
• Japan Post Insurance, KKR , and Global Atlantic Financial Group have announced their entrance into a strategic partnership; Japan Post Insurance will additionally make a material investment in a reinsurance co-investment vehicle sponsored by Global Atlantic; the partnership enables Japan Post Insurance to access KKR and Global Atlantic’s platforms to enhance its growth and diversify its business portfolio into overseas markets

Banking

• Revolut has signed a Memorandum of Understanding (MOU) to form a bank partnership with Minna Bank (part of Fukuoka Financial Group Inc ) to provide free account top-ups and low-cost direct debit services for Revolut customers; in turn, customers of Minna Bank will benefit from Revolut’s attractive remittance and foreign currency exchange services
• Seven Bank has introduced Capex's "PickUp", a conversion improvement service using dialogue AI, in its card loan service; previously, SBI Securities had deployed the service as well

Payments

• Beautifully Generative AI-rendered QR codes circulated widely on social media this past week; expect variations of these to come to your payments experience soon
• Meanwhile, sales of Suica and Pasmo cards have been restricted from June 8, 2023, due to alleged chip shortages; strangely, this shortage affects only unregistered cards, and even those will still be available around the cities of Aomori, Morioka and Akita in Northern Japan, where Suica services became available as recently as May 27
• Recruitment firm Gakujo Co Ltd has run a survey among Tweens to gauge their sentiment with regards to salary payments directly to digital wallets (e.g., PayPay Corporation has filed such application); more than half the respondents were aware of the regulatory changes, and about one third are leaning towards adoption; also, many see this as an opportunity to receive their salary in multiple installments

Capital Markets & Investment Management

• The Tokyo Stock Exchange announced its plans to open its Carbon Credit Market and begin trading (initially for J-Credits) around October 2023; it will start accepting applications for registration as market participant from July onwards; this implementation steps follows the "demonstration experiment" that took place towards the end of the prior fiscal year
• In a parallel move, Japanese financial conglomerate SBI Holdings Inc. and climate tech startup?Asuene & Asuzero?have entered a joint venture to set up a carbon exchange in?Japan?that will also open around October
• Mrs Watanabe broke retail FX trading records in 2022: in a Bank of Japan research paper?published in Japanese on Friday, the authors analyze Japan’s retail FX trading ecosystem in 2022, a record-setting year for the proverbial Mrs Watanabe

Digital Assets

• OKX , the world’s second largest cryptocurrency exchange by trading volume, and regulated digital asset custody service provider? Komainu ?(a joint venture between Japan’s Nomura , blockchain experts Ledger , and digital asset investment manager CoinShares ) announced that OKX has joined the collateral management platform Komainu Connect, enabling institutional customers to conduct secure 24/7 trading of segregated assets under custody through the OKX platform
• The long tail of MtGox: two Russians nationals are charged in the Southern District of New York with conspiring to launder approximately 647,000 Bitcoins from the 2011 hack of MtGox?

• With the travel rule in effect for crypto-assets and stablecoins in Japan since June 1, 2023, the Financial Services Agency, Japan (JFSA, 金融庁) has published a three-page summary of the obligations
• Visual Voice, which has a network of over 100,000 creators around the world through the International Short Film Festival, the Short Shorts Film Festival & Asia (SSFF & ASIA), Amazon Web Services (AWS) Japan, 德勤 Tohmatsu Consulting, and Consensys have launched “LIFE LOG BOX”, a digital asset management service that aims to help creators maximize the value of their content

The Last Word - Nikkei Highs and the BOJ

Schroders , in their monthly Equity Lens chartbook, compared local currency and USD returns for major regions as of the end of May 2023, and Europe ex UK came out on top in USD terms. Foreign flows continue to be going into large caps, with the Nikkei 225 and the Topic Core 30 outperforming the Topix by 3.5% and 2.3% during May, respectively, according to Goldman Sachs. The Nikkei now is on a nine-week win-streak, while the Topix broke its run three weeks ago, and has now strung together two consecutive weeks of gains.

Amir Anvarzadeh at ASYMMETRIC ADVISORS observes: "Interestingly, Japanese institutional investors have been cutting their home equity exposure into the market rally as they generally tend to when overseas interest in Japan stocks rise. However, from their perspective, the external picture does not look great for equities in general and given that they naturally have ample domestic equity exposure, they have become forced net sellers of domestic stocks.?Besides the secular market rerating of Japan which looks likely to continue for now, we really don’t see too much to cheer about, especially as second half corporate earnings recovery assumptions are starting to look suspect."

On Bank of Japan watch, the Asian Development Bank (ADB) sees its "unconventional monetary easing [bringing] global recognition as a bold, innovative practitioner", and Nomura Asset Management views it unlikely that the Bank will "ditch negative rates for another year", Reuters reported.

If you would like to see more of our content, please head over to the?Tokyo FinTech YouTube Channel?or check out the?eXponential Finance Podcast.

Have an awesome week ahead!