Japan FinTech Observer #33

Welcome to the thirty-third edition of the Japan FinTech Observer. The theme of the previous "Last Word" about information leakage echoed strongly this week as the Nikkei reported "exclusively" that Mizuho would make a further investment in Rakuten Securities, and the latter would scrap its public listing. With the later confirmation of the transaction, after the requisite board meeting, and indication that this decision was taken because a listing within 2023 was increasingly unlikely, it serves as another indication of the dire liquidity situation at Rakuten, which is facing significant bond redemptions over the coming 18 months.

And if you were unlucky to be out and about on Saturday, you might have been unable to pay with your credit card, as a JCB subsidiary had an outage. This just weeks after an upgrade to the Zengin system caused issues with bank transfers. There could not be a better argument for the avalanche of stablecoins that will be launched over the coming twelve months.

This is what we are going to cover this week:

• Venture Capital & Private Markets: SBI Investment announced its new JPY 100bn flagship fund “SBI Digital Space Fund”; SBI Holdings and SC Ventures, Standard Chartered’s innovation, fintech investment and ventures arm, plan to establish a Digital Asset Joint Venture investment company in the United Arab Emirates (UAE); Ricoh has established the JPY 5bn “RICOH Innovation Fund” as a Corporate Venture Capital (CVC) fund; SBI Holdings has concluded a capital and business agreement with Mynavi Corporation by acquiring 10.59% of Mynavi’s total number of shares issued
• Banking: Sumitomo Mitsui Financial Group's US digital bank, Jenius Bank, has launched a savings account after initially offering lending products only; SMBC has also strengthened its leadership team in Asia Pacific; Musim Mas and MUFG Bank have joined forces to establish a verified deforestation-free palm oil value chain
• Insurance: Agents and brokers are the primary distribution channels in Asian insurance markets, and nowhere more so than in Japan; Sumitomo Life Insurance Company has increased its investment in Singlife through a capital injection
• Payments: A nationwide disruption of credit card transactions was reported on Saturday; arrests have been made in a fraud concerning JPY 171m worth of au Pay reward points; Reserve Bank of India Governor Shaktikanta Das has suggested linking India's UPI with Japan's local fast payment system
• Capital Markets & Asset Management: Mizuho Securities and Rakuten Securities further strengthen the strategic capital and business alliance between the two companies originally announced on October 7, 2022, by entering into a share transfer agreement for the 29.01% of the common stock in Rakuten Securities held by Rakuten Securities Holdings; SuMi TRUST Asset Management and Osmosis Investment Management, a UK-based sustainable investment manager specializing in a resource efficient strategy, have entered into a legally binding agreement to form a strategic partnership
• Digital Assets: Ginco, Mitsubishi UFJ Trust and Banking, and Progmat are starting a joint study to introduce an “infrastructure stablecoin” with the aim of improving the settlement efficiencies among the players in the crypto asset market; Oasys, a blockchain designed exclusively for the gaming community, has partnered with cross-chain payment solution Singularity; Slash Payment (Slash Fintech Limited) now supports Arbitrum; nanameue, a leading company of the democratizing of social media from Japan, has released its “YAY White Paper”
• The Last Word: Real Money Flows

Venture Capital & Private Markets

• SBI Investment, a wholly-owned subsidiary of SBI Holdings that operates and manages venture capital funds, announced that its new flagship fund “SBI Digital Space Fund” with a maximum of JPY 100bn will formally commence investments; the Fund will focus on a wide range of areas with innovative technologies and services that are expected to be growth industries in the future, including “Digital Space” such as Web3 and the metaverse, as well as “AI”, “fintech”, “healthcare”, “DX (digital transformation)”, and “climate tech”
• SC Ventures, Standard Chartered’s innovation, fintech investment and ventures arm, is partnering with SBI Holdings, a Japanese financial conglomerate, to establish a Digital Asset Joint Venture investment company in the United Arab Emirates (UAE); the parties intend to capitalise the vehicle with $100 million
• Ricoh has established the “RICOH Innovation Fund” as a Corporate Venture Capital (CVC) fund; aiming to generate innovation in the Business-to-Business area, this Fund executes strategic investments in start-ups that drive leading-edge digital services; the Fund will be operated by SBI Investments as the General Partner, is expected to scale to JPY 5bn, and run for 10 years
• SBI Holdings has concluded a capital and business agreement with Mynavi Corporation by acquiring 10.59% of Mynavi’s total number of shares issued; SBI Holdings is advancing its “Open Alliance Strategy,” which materializes win-win relationships with numerous external companies across various industries; through this Open Alliance, SBI Holdings is collaboratively building a framework with diverse partners to provide comprehensive services that cannot be achieved by a single entity alone, in order to meet various demands from customers

Banking

• In July, Sumitomo Mitsui Financial Group (SMFG) began providing personal loans to U.S. residents through Jenius Bank, a division of Manufacturers Bank, a California state-chartered bank that is a wholly-owned subsidiary of SMBC Group; Jenius Bank has now launched the Jenius Bank Savings Account, designed to empower customers to achieve their financial goals with greater ease and flexibility; following these two product launches, Jenius Bank plans to offer a mobile app in the coming months
• Japan’s?Sumitomo Mitsui Banking Corporation?has appointed Junwei Wu and Sukrit DEWAN to leadership roles in Asia-Pacific; Junwei Wu is joining as head of structured credit for Asia-Pacific, based in Singapore; the team in which Wu and Dewan operate is a new one for the bank
• Musim Mas and MUFG Bank have joined forces to launch a POC (Proof of Concept) to trial the application of Web3 in establishing a verified deforestation-free value chain with independent smallholders in the Sambas region of Kalimantan, Indonesia

Insurance

• Agents and brokers are the primary distribution channels in Asian insurance markets, and nowhere more so than in Japan, according to McKinsey's report on Asia's P&C Insurance
• Sumitomo Life Insurance Company has increased its investment in Singapore Life (Singlife) through a capital injection; as a long-term strategic investor, Sumitomo Life has fully underwritten the allotment of shares to existing shareholders, solidifying Singlife’s financial foundation and supporting its business growth; with this capital injection, Sumitomo Life’s stake in Singlife has increased from 23.22% to 27.00%

Payments

• A nationwide disruption of credit card transactions was reported on Saturday, with East Japan Railway's ticketing machines and major convenience stores temporarily experiencing an inability to accept credit card payments; major credit card firm JCB said a subsidiary that handles card settlement data experienced system trouble, apparently causing the disruption
• A 37-year-old man and five others have been arrested on suspicion of fraudulently acquiring JPY 171m worth of au Pay reward points through fictitious purchases via thousands of accounts, according to Tokyo police
• Reserve Bank of India (RBI) Governor Shaktikanta Das has suggested linking India's UPI with Japan's local fast payment system; this proposal follows the successful linking of UPI with Singapore's fast payment system; Das believes that such linkages between fast payment systems can leverage fintech to make cross-border payments more efficient and cost-effective

Capital Markets & Asset Management

• Mizuho Financial Group announced that Mizuho Securities, a consolidated subsidiary of Mizuho Financial Group, and Rakuten Securities Holdings, a consolidated subsidiary of Rakuten Group, have today agreed to further strengthen the strategic capital and business alliance between the two companies originally announced on October 7, 2022, by entering into a share transfer agreement for the 29.01% of the common stock in Rakuten Securities held by Rakuten Securities Holdings; the Rakuten Securities Holdings board of directors has resolved to temporarily withdraw its Tokyo Stock Exchange listing application; after the share transfer to Mizuho Securities, Rakuten Securities Holdings will hold a 51% stake in Rakuten Securities, and Rakuten Securities will continue to be a consolidated subsidiary of the Rakuten Group and Rakuten Securities Holdings
• SuMi TRUST Asset Management and Osmosis Investment Management, a UK-based sustainable investment manager specialising in a resource efficient strategy, have entered into a legally binding agreement to form a strategic partnership; this follows the July announcement of a non-legally binding agreement that we have previously reported on

Digital Assets

• Ginco, Mitsubishi UFJ Trust and Banking, and Progmat are starting a joint study to introduce an “infrastructure stablecoin” with the aim of improving the settlement efficiencies among the players in the crypto asset market by leveraging the "Progmat Coin" platform: a stablecoin issuance and management platform that is fully compliant with the Japanese stablecoin regulations; this collaboration aims to issue two stablecoins by the summer of 2024: “XJPY”, denominated in JPY, and “XUSD”, denominated in USD
• Oasys, a blockchain designed exclusively for the gaming community, has partnered with cross-chain payment solution Singularity; the collaboration will offer users a seamless payment experience across the Oasys ecosystem, solidifying its commitment to providing unparalleled convenience, ease of use and utility to gamers
• Slash Payment (Slash Fintech Limited) now supports Arbitrum
• nanameue, a leading company of the democratizing of social media from Japan, has released its “YAY White Paper” explaining Yay!’s tokenomics created using the unique cryptocurrency “YAY”; with this, they aim to foster a future where people can seamlessly utilizes tokens in the Yay! community, thus realizing their own SocialFi ecosystem

Other Media

• AIMA - The Alternative Investment Management Association , "Elevate Japan's Stature as a Global Financial Centre"
• ニッセイアセットマネジメント株式会社 , "Sustainability Report 2023"
• Eastspring Investments , "Six questions on Japan's ESG progress"

The Last Word: Real Money Flows

We are as excited as anyone else about the "Five Year Startup Plan" that the Kishida administration is pushing, although we prefer to judge its success by the actual implementation steps taken rather than the written word. In the meantime, Dealroom and Flow Traders have tallied up the venture capital investments by country up to September, highlighted in the graph above. For further analysis, consider putting these absolute numbers in relation to GDP.

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.

We have also created two LinkedIn groups, the "Japan Startup Observer" if your interest in Japan goes beyond FinTech, and the "FinTechs of India" to capture the developments on the subcontinent. We invite you to join both these groups.

Have an awesome week ahead.