Japan FinTech Observer #17

Welcome to the seventeenth edition of the Japan FinTech Observer. It is hot in Tokyo. Tourists are back, and tons of visitors to this week's WebX Asia conference add some buzz. Please ping us if you are at the Tokyo International Forum, we will be podcasting right at the venue.

Here is what we are going to cover:

• Venture Capital & Private Equity: Mizuho will launch a venture debt fund worth JPY 10bn; Tractable raised USD 65m in Series E investment led by SoftBank’s Vision Fund 2; SoftBank has divested another 2% stake in PayTM; RenewBuy raised USD 40m from Dai-Ichi Life; Bureau raised an additional USD 4.5m from GMO VenturePartners, GMO Payment Gateway; Laser Digital invested in WebN Group; Vertex Ventures raised USD 80m from Marubeni, Development Bank of Japan and NEC Capital Solutions
• Banking: MUFG and Morgan Stanley announce their "Alliance 2.0"; Goldman Sachs updates its ratings for Japanese mega banks; startup GIG-A appoints FinTech veteran to advisory board
• Insurance: McKinsey's latest report demonstrates the importance of Japan's insurance market
• Payments: the Bank of Japan holds its inaugural "CBDC Forum" with good FinTech & infrastructure participation; PayPay launches offline payments; payment specialist Atlas Technologies acquires Kapronasia
• Capital Markets & Investment Management: Webull launches US options trading in Japan; Man Group and SBI Holdings form an asset management joint venture for alternative investments; LUCA Japan participates in Maybach Foundation event; Nomura expands its international wealth management business to Dubai
• Digital Assets: Seven Bank successfully launches NFT as rewards for donations; JR Kyushu fails with a similar NFT project; Komainu partners with Kiln for Ethereum & Tezos staking; Nomura launches web3 educational app
• The Last Word: Japanese Consumers under Pressure

Please join us on July 25 & 26 for Asia's leading web3 conference, hosted by?CoinPost Inc. ; use the Tokyo Taxi QR code at?registration ?and receive 40% off the current ticket price

Venture Capital & Private Equity

• Mizuho will launch a venture debt fund worth JPY 10bn (USD 72m) in Japan , to address the scarcity of startups in the country; the fund, to be created as early as this month, will provide financing to middle and late stage startups without diluting their existing shareholder equity
• Tractable, a leader in artificial intelligence (AI) using computer vision to assess the condition of cars and homes, raised USD 65m in Series E investment led by SoftBank’s Vision Fund 2 ; existing investors Insight Partners and Georgian participated in the round
• On the flip side, SoftBank has divested another 2% stake in One97 Communications, owner of Indian FinTech giant PayTM , worth about USD 300m; Softbank retains a 9.15% stake
• Indian Insurtech startup?RenewBuy, operated by D2C Insurance Broking, secured USD 40m in an ongoing Series D funding round from Japanese life insurance firm Dai-ichi Life Holdings ; RenewBuy?will deploy the fresh proceeds to expand its presence across Asian markets and improve its product stack and technology experience.??
• Fraud and identity decisioning platform Bureau raised an additional USD 4.5m from GMO VenturePartners, GMO Payment Gateway , and existing investors to complete its Series A funding round at USD 16.5m; with the completion of the latest round, total funding for the startup has reached USD 20.5m?to date
• WebN Group, an incubation hub for?FinTech?and?web3?innovators, backed by Alan Howard, announced an investment from?Laser Digital,?Nomura’s digital asset subsidiary
• Vertex Venture Holdings, the venture capital arm of Singapore's state investor Temasek Holdings, has raised over USD 900m in the first fundraising round for its latest fund, with a total of USD 80m coming from four Japanese investors , namely Marubeni, the Development Bank of Japan, Risa Partners, an investment firm owned by leasing company NEC Capital Solutions, and an institutional investor

Banking

• 15 years after?MUFG?bailed out?Morgan Stanley, the companies revealed their "Alliance 2.0" concept ; the USD 9bn for a 21% in Morgan Stanley might well be the best investment the Japanese mega bank has ever made, currently valued at around USD 33bn, and making up more than one third of MUFG's market capitalization
• Goldman Sachs updated their estimates on the potential impact of monetary policy normalization by the Bank of Japan (BOJ), including yield curve control (YCC) adjustment, on the Japanese banking sector; GS confirmed their Buy rating on MUFG, upgraded Mizuho to Buy from Neutral, and downgraded SMFG to Neutral from Buy ?
• “GIG-A”, a global provider of multi-lingual financial services and one-stop financial services to Japan’s “underbanked” and foreign population, appointed FinTech and Health Care veteran Camilo Sandoval to its advisory board

Insurance

• A chart in McKinsey's recent report, "Why Asian insurers are ideally positioned for embedded market gains", demonstrates the importance of the Japanese insurance market in terms of sums assured in relation to GDP

Payments

• The?Bank of Japan?(BOJ) held its first meeting with the “Central Bank Digital Currency (CBDC) Forum” , a newly-established group of 60 participants that will convene to discuss the development of a potential?digital yen; there was good representation of FinTech and infrastructure providers, including firms like? BOOSTRY , Coincheck, Inc. ,? 株式会社Datachain ,? ソラミツ SORAMITSU | 8 YEARS 2016-2024 , SBI R3 Japan , Startale , and ナッジ株式会社（Nudge Inc.）
• PayPay Corporation will add a feature to its cashless payment service “PayPay” that will allow users to make offline payments ; with this new function, users will be able to make payments with both PayPay Balance and PayPay Atobarai (Pay Later) when there are network outages, or when the connection is unstable
• Tokyo-headquartered payments specialist Atlas Technologies will acquire 100% of the outstanding shares of Kapronasia , a Singapore-based strategy consulting firm specializing in the FinTech domain, and to make it a wholly owned subsidiary

Capital Markets & Investment Management

• Webull Securities (Japan) launched the trading of US Single Stock Options (SSOs) and a suite of US Index Options for Japanese retail investors after launching US stock trading in April and Japanese stock trading in June
• Man Group, a leading asset management firm offering advanced and innovative asset management strategies with a focus on hedge funds, and SBI Holdings will form a joint venture company to offer investment products that leverage Man Group’s extensive and diverse capabilities in alternative asset management, including hedge funds, primarily to retail investors in Japan
• Nomura announced the expansion of its International Wealth Management business with new premises in the Dubai International Financial Centre (DIFC), the leading global financial hub in the Middle East, Africa and South Asia (MEASA)
• LUCA Japan, a digital platform for alternative investments, will join the exclusive Maybach Luncheon together with the Maybach Foundation at Pebble Beach Concours d'Elegance in an effort to target High Net Worth Individuals (HNWIs)

Digital Assets

• Seven Bank has started a campaign that will run until October 16, 2023, during which donations to the Seven-Eleven Memorial Foundation for environmental causes are accepted at the more than 26,000 Seven Bank ATMs, and rewarded with a limited edition NFT created by Nozomu Kubota , a contemporary artist and CEO of Creators Next; the NFTs are minted on the Astar Foundation network by SUSHI TOP MARKETING

• A similar campaign by Japan Railways in Kyushu, with the aim of establishing an NFT market place with a limited number of rare NFTs, carefully selected from 6 types of trains operating in Kyushu since 1976 , failed due to overwhelming demand (or undersized infrastructure)
• Komainu, a joint venture between Nomura, digital asset manager CoinShares, and digital asset security company Ledger, and a leading provider of digital asset custody solutions, announced the integration of Kiln's comprehensive staking suite of products, initially for Ethereum and Tezos
• Nomura launched its "Web3 Pocket Campus" app , aiming to provide a curriculum and learning support functions that help systematically organize knowledge about Web3 and blockchain that can be used in business

Other Media

• Peter Tasker at Arcus explains what the yen is telling us
• CLSA Japan Strategist Nicholas Smith appears on CNBC ahead of the Bank of Japan's Monetary Policy Meeting (MPM) this week
• In fiscal 2022, the FSA and the BOJ coordinated to conduct a joint experiment to deliberate on a more effective and efficient?framework?for data collection and management (common data platform); they have published a summary of the progress and next steps
• The Australian Trade and Investment Commission's "FinTech Playbook: Japan " is always worth a read

The Last Word: Japanese Consumers under Pressure

Fitch Ratings reports the default-rate index for Japanese auto ABS has increased to pre Covid-19 pandemic levels. The three-month average annualized default rate reached 0.45% in March 2023, from 0.33% in September 2022.

Inflation Challenges Performance: Inflation that exceeds wage growth has eroded household income and expenditure, pressuring auto-loan performance. Real wage growth has been consistently negative since April 2022, with the latest rate at -3.2% yoy in April 2023.

Households are managing the high inflation by controlling spending. Real consumption expenditure of working households was a low 96.1 (2020=100) in April. Household finances will be encumbered if negative real wage growth persists, which may result in asset performance deterioration.

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.