Japan FinTech Observer #15

Welcome to the fifteenth edition of the Japan FinTech Observer. Do you remember the government's five-year startup plan? One element of the plan was to enable more interchange with the outside world, for both entrepreneurs and academics. For the former, J-StarX has been established as an entrepreneur development and overseas dispatch program sponsored by the Ministry of Economy, Trade and Industry. It held its first public session yesterday, a kick-off event to send students to this year's Slush conference in Finland.

Here is what we are going to cover:

• Venture Capital & Private Equity: robotics startup Telexistence raises USD 170m in a Series B round; Japanese startups are snubbing the Tokyo exchange for Nasdaq IPOs; Bain & Company acquire the APAC arm of venture builder Rainmaking; D Capital is looking to raise a JPY 30bn fund for SME acquisitions; Web3 market developer Scalably raises a JPY 175m seed round; the Japanese startup ecosystem creates its own health insurance association
• Banking: Shizuoka Financial Group tops The Banker's list of Japan's top banks; Japan's top lenders are in a fresh drive to win US investment banking deals; Mizuho is tapping its alumni network for recruitment
• Insurance: Tokio Marine deploys the S?nr Global market intelligence & collaboration platform
• Payments: Seven Bank is partnering with Kakao Pay to enable cash withdrawals at its ATMs; Circle is evaluating the issuance of stablecoins in Japan
• Capital Markets & Investment Management: the Government Pension Investment Fund is on a three-year winning streak; Sumitomo Mitsui Trust Bank has taken an equity stake in PrivateBANK; Rakuten will list its securities business to raise funds; moomoo is applying to open an online trading platform; all major online brokers experienced record trading volumes during June; Japan is the largest ETF market in Asia
• Digital Assets: for the first time in Japan, a joint money trust has been tokenized and security tokens are sold by a bank, through a partnership between Securitize, Sony Bank and Mitsui Sumitomo Trust Bank
• The Last Word: A Wall of Deposits

Venture Capital & Private Equity

• The biggest funding round last week took place in robotics: Tokyo-based Telexistence raised USD 170 million (JPY 23bn) in a Series B round from SoftBank, Airbus Ventures, Monoful Partners, KDDI Open Innovation Fund, a fund set up by Foxconn and CTBC Financial Holdings, and Globis Capital Partners
• The Nikkei sees Japanese startups snubbing the Tokyo exchange for Nasdaq IPOs ; using Tokyo-based Syla, a crowdfunding platform for real estate investments, which listed on the Nasdaq in March as an example, the company's current market capitalization would have placed it around 80th out of the roughly 530 companies listed on the Tokyo Stock Exchange's Growth market
• Bain & Company announced that it intends to acquire the Asia Pacific arm of global venture-building and start-up development studio, Rainmaking , to help companies across the region better innovate, launch, and scale new businesses; the acquisition is expected to close at the end of July 2023
• D Capital plans to raise a JPY 30bn fund backed by KDDI and SMBC as lead investor, and participation from IT company SCSK, data science startup JDSC, Aozora Bank and Shinsei Bank; the fund aims to acquire small and medium-sized enterprises and support their digital transformation
• Scalably, an international community formation and management company in the global Web3 market and developer of the “Ecomedia?” marketing solution, has raised of JPY 175m as a seed round ; the total amount of funds raised since its founding in May 2021 is approximately JPY 200m
• The startup ecosystem has organized to create its own "VC Startup Health Insurance Association ", with the support of 27 venture capital firms, and applications of more than 330 startups these VCs have invested in; the objective is to provide coverage more tailored to the industry's needs....and cheaper, of course

Banking

• The Banker has published its annual ranking of the world's top banks ; all of Japan’s 82 banks in the Top 1000 recorded a decline in Tier 1 capital, with the exception of digital-only Rakuten Bank, which managed a 3.82% increase
• Japan's top lenders are in a fresh drive to win US investment banking deals , Reuters reports; Japanese banks have been considered generous lenders to U.S. clients but unlike their American rivals they had previously shied away from demanding capital markets or M&A deals in exchange
• Mizuho is the latest company to discover that alumni are a potential talent pool not to be ignored; its alumni website, created in 2020, has crossed 1,000 members, and the bank has established alumni recruitment quotas, according to Nikkin Online

• After Citi had decided the prior week to use Pismo as its next generation platforms for corporate demand deposit accounts, Visa swooped in to acquire the Brazilian company at a unicorn valuation; we had an opportunity to talk about the journey with Pismo's International CEO Vishal Dalal in the latest eXponential Finance podcast

Insurance

• Tokio Marine introduced the S?nr market intelligence platform in June 2023 to support operations related to collaboration with external companies; the system allows the group to share information, including the status of search and scouting for potential future business partners; as open innovation is accelerated, the platform fosters efficiency, streamlining the search process for startup companies

Payments

• Seven Bank has partnered with South Korea’s Kakao Pay to allow cash withdrawals at its ATMs for users that have the KakaoTalk or Kakao Pay app installed; the service is supported by Global Loyalty Networks (GLN), an overseas payment platform subsidiary of Korea’s Hana Bank
• In a recent interview with?CoinDesk Japan, Circle Co-Founder and CEO, Jeremy Allaire indicated that his company is evaluating the issuance of a stablecoin in Japan , stating that "“Japan has a long history of cross-border trade, foreign currency transactions, and global commerce.?If stablecoins become more widely used for such purposes, we believe that Japan will become an extremely large market“

Capital Markets & Investment Management

• The?Government Pension Investment Fund (GPIF)?extended its winning streak to three years , realizing a 1.5% return during fiscal 2022, or JPY 2,954bn
• Sumitomo Mitsui Trust Bank has taken an equity stake of less than 5% in PrivateBANK , which operates a multi-family office business for ultra-high net worth individuals (HNI) in Japan
• Japanese e-commerce giant Rakuten Group says its securities subsidiary has applied to be listed on the Tokyo Stock Exchange in the company's latest move to bolster its overall financial health and offset losses from its struggling mobile phone business
• Moomoo, a fully-owned subsidiary of Nasdaq-listed Futu Holdings, which operates the “Futubull” trading platform out of its headquarters in Shenzhen and Hong Kong, has been ranked among the top financial tools in a Nikkei survey; currently only providing financial information, once launched, it will become the fourth market entrant in online brokerage this year
• All major online brokerage firms reached record trading volumes in June, generally up 20-25% over the previous month; SBI Securities, the largest firm and the only one not to disclose monthly figures, declared that it achieved daily average trading volume of JPY 1trn for the first time in its history

• The global market for Exchange Traded Funds (ETFs) is dominated by the US, with close to 70% of the global Assets under Management (AUM) as of May 2023, according to?J.P. Morgan’s 2023 Global ETF Handbook; the Asia/Pacific market makes up 12% of the global AUM, with Japan the largest market ; the report also shows that mutual funds, rather than ETFs, are the preferred investment vehicle for Japanese investors
• The JSDA has enforced the newly enacted self-regulatory "Rules Concerning Trading of Unlisted Securities in Proprietary Trading Systems"; in June 2022, the FSA's Financial Council Market System Working Group's announced that PTS would be used to facilitate the supply of growth funds to startups and unlisted companies through secondary trading of unlisted stocks; the new regulations will be enacted in response to this proposal, according to NRI

Digital Assets

• Securitize announced a business alliance with Sony Bank and Sumitomo Mitsui Trust Bank to support a public offering and issuance of security tokens of a joint money trust backed by loan receivables on its security token platform. This is the first time in Japan that a joint money trust is tokenized and security tokens are sold by a bank
• Sega co-Chief Operating Officer Shuji Utsumi told?Bloomberg?in an interview that the company is no longer interested in making blockchain-based projects for its?Sonic The Hedgehog?and?Yakuza?franchises; putting a stop to its NFT nonsense?would help avoid any more “devaluing” of its content and brand , according to the interview
• Slash FinTech announced a new service, Slash Vaults , introducing new concepts and utilities into NFTs, which have been mainly used to showcase digital ownership; with Slash Vaults, NFT owners can now deposit, withdraw, timelock, and invest various Fungible Tokens (FTs) using their NFT as a key; the assets deposited in the Slash Vaults can be utilized for payment using Slash Vaults Pay

Papers of Interest

• The IMD has published the Japan chapter of its annual Global Competitiveness report , which we had previously reported on
• AMT have published a report on the enactment of the GX Promotion Act and its impact on corporate decarbonization
• MHM have contributed the Japan chapter to Norton Fulbright's APAC M&A guide
• StartupBlink and JETRO have published a Fukuoka Startup Ecosystem Report
• Morgan Lewis have published a guide to Japanese Corporate Venture Capital Investments

The Last Word - A Wall of Deposits

The Nikkei reported a 50% year-on-year increase in deposits at SBI Shinsei Bank, with the average for domestic banks standing at a mere 4.2%. Although interest rates on deposits are still low, with negative real rates due to inflation, it has become less attractive to hoard cash at home, and there is evidence of a slow migration of the "tansu?yokin" (the money is kept in a chest rather than under the mattress in Japan) back into the financial system.

On the flip side, there is severe competition in the residential mortgage market to deploy balance sheet, with the mega banks closely matching the offerings of online competitors for floating rate loans. Also, in the face of rising real estate prices, some lenders have moved to offering 50-year mortgages instead of the customary 30/35-year term in order to reduce the burden on the borrower.

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.