Japan FinTech Observer #62

Welcome to the sixty-second edition of the Japan FinTech Observer.

What a week! Another crypto-currency exchange hack, two CBDC summmits hosted by the MoF and the BoJ, respectively, more stablecoin announcements, our favorite FinTech startup shutting down (for now), BaaS profitability challenges, and a very detailed look at Sony Financial.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: IGNITION POINT announced investments by Mizuho Capital and Mitsubishi UFJ Capital; Hyperithm invested in Plume Network
• Insurance: Sony held its “Business Segment Meeting 2024”, and provided the most detailed information to date for Sony Financial Group, which is due to be partially spun off in October 2025
• Banking: SMBC's US-based Jenius Bank has reached $1 billion in deposits for its high-yield savings product; Ehime's regional bank Iyogin Holdings has delivered record net income for two years in a row; consumer finance company Acom has launched an embedded BNPL service
• Payments: NTT DATA has agreed to acquire a 58.7% stake in Malaysia's GHL Systems, with the intention to make a tender offer for the remaining stake; SMBC’s Olive is the first in the world to roll out Visa’s new "Flexible Credential"; Mizuho Bank has newly connected its smartphone code payment service, J-Coin Pay, to The Bank of Yokohama; "My Number" cards will be launched in iPhone wallets in 2025, after having been available on Android since 2023
• Stablecoins: Nomura Holdings and Laser Digital partner with GMO Internet Group to explore the issuance of JPY and USD stablecoins in Japan; Datachain and Progmat have partnered to maximize the circulation of stablecoins issued using “Progmat Coin”
• CBDC: The Ministry of Finance held its ninth “Experts’ Meeting on CBDC”, one day later followed by the Bank of Japan holding its seventh “CBDC Forum”
• Digital Assets: DMM Bitcoin was hacked for $308 million; the Digital Asset Co-Creation Consortium, led by Progmat, published the Interim Report of the Startup Investment Promotion Working Group; SBI XDC Network APAC, a joint venture with TradeFinex Tech, and SBI R3 Japan have successfully completed a proof-of-concept; NTT Digital has joined the OpenWallet Foundation
• The Last Word: When will real wages grow again?

Banking-as-a-Service

GIG-A is dead, long live GIG-A! The winner of the Tokyo Financial Award 2021 closed its doors, temporarily at least, after its contract for Banking-as-a-Service with UI Bank, regional lender Kiraboshi Bank Co., Ltd. 's digital unit, was terminated. As the service notification reveals, the team is busy re-launching on a different platform.

In other news this week, the Nikkei reported that Fukuoka Financial Group is considering shutting down its digital bank and BaaS platform "Minna no Ginko". However, the bank issued a press release denying that was the case, aiming for profitability by FY2027, which is significantly later than originally planned.

Lastly, as we have previously reported, JR East has launched its "JRE Bank" as the first BaaS customer of Rakuten Bank. JR East also announced that it is planning to unify the IDs across its 20 or so different services not only to simplify the user experience, but also to better link the data across 50+ million user accounts.

Venture Capital & Private Markets

• IGNITION POINT announced that Mizuho Growth Support Fund No. 5, operated by Mizuho Capital, and Mitsubishi UFJ Capital have acquired shares in the company; Ignition Point is an innovation firm that supports clients' innovation and transformation while engaging in business creation and co-creation
• Hyperithm has invested in Plume Network, the first modular L2 blockchain dedicated for all real-world assets; Plume is the first modular L2 blockchain dedicated for all RWAs that integrates asset tokenization and compliance providers directly into the chain; Plume's mission is to simplify the convoluted processes of RWA project deployment and offer investors a blockchain ecosystem to cross-pollinate and invest in various RWAs

Insurance

• Sony held its “Business Segment Meeting 2024”, with all business segments presenting; in light of its planned partial spin-off from Sony Group Corporation (“SGC”) in October 2025, Sony Financial Group (“SFG”) was no longer included in the mid-term projections for the group as communicated with the annual results, but it detailed review was promised for the Business Segment Meeting — and management delivered the most detailed look at SFG to date ; Sony Life Insurance is the core entity of SFG

Banking

• In a recent presentation on the projected Japanese demand for US Treasuries, Apollo Global Management included the above chart, detailing the Net Interest Margin for selected banks in the US, Japan, and China; maybe not co-incidentally, Sumitomo Mitsui Financial Group's stock closed higher than JPY 10,000 for the first time since 2007
• Sumitomo Mitsui Financial Group announced that the deposit balance of “Jenius Bank”, the digital banking division of SMBC MANUBANK, a subsidiary of SMBC Group based in Los Angeles, California, has reached $1 billion for its high-yield savings product; the business, launched in 2023, provides personal loans and deposit accounts to individual customers residing in the United States as a branchless digital retail bank
• Iyogin Holdings, a regional bank based in the Ehime prefectural capital of Matsuyama, has delivered record net income for two years in a row, driven by returns on its investments in Treasuries and other foreign bonds; that makes the bank the only one of the country’s 73 regional lenders to book gains from bonds over that time period
• GeNiE has launched the embedded financial service “Money Lamp” for e-commerce companies to add lending functions to their existing businesses; GeNiE is a subsidiary of ACOM, a publicly listed consumer finance company established to promote embedded finance in the lending domain

Payments

• NTT DATA has agreed to acquire a 58.7% stake in GHL Systems , a leading payment service provider which has strength in various services through payment terminals, is headquartered in Malaysia, and listed in BURSA MALAYSIA, from its major shareholders; NTT DATA plans to propose a tender offer to its other shareholders as well
• Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, and Sumitomo Mitsui Card Company have launched “Flexible Credential”, a new feature for “Olive”, a comprehensive financial service for individual customers; SMBC’s Olive is the first in the world to roll out Visa’s new functionality that allows customers to add other credit cards they have to Olive Flexible Pay; with the launch of this service, up to 5 credit cards can be consolidated into one Olive Flexible Pay card
• Mizuho Bank has newly connected its smartphone code payment service, J-Coin Pay, to The Bank of Yokohama ; as a result, Yokohama Bank account holders can now make payments at approximately 1.5 million J-Coin Pay merchants nationwide; furthermore, registering a Yokohama Bank account with J-Coin Pay enables free person-to-person money transfers
• Changes to the "My Number Act" have passed the Diet, allowing for all required functions to be served through a mobile phone wallet; the "My Number" card could be added to Android wallets since 2023, but negotiations with Apple were stuck on security issues for a while; now an agreement has been reached for a 2025 launch, important for the 54% of the population using iPhones
• Japan has issued a "National Declaration for Promoting Cashless Payment of National and Local Taxes "

Stablecoins

• Nomura Holdings and Laser Digital partner with GMO Internet Group to explore the issuance of JPY and USD stablecoins in Japan; GMO-Z.com Trust Company, the U.S. subsidiary of the GMO Internet Group, issues stablecoins on major blockchains such as Ethereum, Stellar, and Solana under the regulatory framework of the New York State Department of Financial Services
• Datachain and Progmat have partnered to maximize the circulation of stablecoins issued using “Progmat Coin”, a stablecoin issuance and management platform developed by Progmat; the collaboration will see Datachain and Progmat jointly promote the development of stablecoin contracts and global market development, in addition to their existing multi-chain/cross-chain expansion

Central Bank Digital Currency (CBDC)

• The Ministry of Finance held its ninth “Experts’ Meeting on CBDC ”, and published the secretariat’s presentation (in Japanese), which delves into the deliberations and preliminary framework for the potential introduction of a CBDC in Japan; it examines the current landscape of cash and digital payment systems, outlines key considerations for a Japanese CBDC, and details the potential benefits, challenges, and necessary safeguards associated with such a transformative monetary innovation
• The Bank of Japan held its seventh “CBDC Forum ” and published the secretariat’s presentation (in Japanese); the document outlines the BOJ’s fundamental stance on CBDC, delves into the specifics of the pilot experiment currently underway, and elaborates on the structure and activities of the CBDC Forum, which involves numerous private sector stakeholders

Asset Management

• Mitsubishi UFJ Trust and Banking Corporation and Gaxi will commence a joint study to establish a grant-type scholarship fund through the investment of donations ; this will be the first of its kind in Japan, as a scheme that accepts contributions from an unspecified number of donors and allows them to select beneficiaries based on their wishes; a patent application has been filed for this entire scheme

Digital Assets

• The Digital Asset Co-Creation Consortium, led by Progmat, published the Interim Report of the Startup Investment Promotion Working Group , exploring the potential of tokenizing Venture Capital Funds in Japan, focusing on the benefits, legal and regulatory considerations, proposed scheme mechanics, and necessary actions for implementation
• SBI XDC Network APAC, a joint venture with TradeFinex Tech, and SBI R3 Japan have successfully completed a proof-of-concept experiment that was previously announced in December 2023 as the JV’s first initiative; the PoC demonstrated that value via digital assets can be transferred over different distributed ledger technologies (DLT) , in this case the XDC Network and the R3 Corda platform, as a form of payment to improve efficiency and facilitate inter-business settlement in trade transactions
• NTT Digital has joined the OpenWallet Foundation , aiming to strengthen the international interoperability of its digital wallet and expand its services globally
• Japanese crytpo-currency exchange DMM Bitcoin was hacked for $308 million
• Mt. Gox appears to have transferred out at least 42,830 BTC , worth about $2.9 billion, from its cold wallets, according to data from Arkham Intelligence; the move marked the first time in five years that Mt. Gox transferred assets out of its wallets; Mt. Gox still holds about $9.42 billion worth of bitcoin in its identified wallets tracked by Arkham
• Alchemy has provide a complete overview of "Web3 in Japan "

The Last Word: When will real wages grow again?

The “2024/2025 Economic Outlook (May 2024) ”, authored by Taro Saito, the Economic Research Director at the NLI Research Institute, and published in mid-May, delivers a comprehensive analysis of the Japanese economy, projecting key economic indicators and outlining the contributing factors behind these forecasts.

As one of the key data points we are watching to assess the health of the Japanese consumer, this report predicts that nominal wages will continue to rise, ultimately leading to positive real wage growth by late 2024.

Real wages for March (reported in early May) declined again, making it the 24th straight-month and the longest such period since comparable data became available in 1991.

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 . Registrations for the Tokyo FinTech Meetup have moved to Luma.

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.