Japan FinTech Observer #64

Welcome to the sixty-fourth edition of the Japan FinTech Observer. This newsletter has exceeded 10,000 subscribers. Thank you, and please keep sharing this edition if you find value in it!

The Bank of Japan's June Monetary Policy Meeting (MPM) ended on Friday without any change to the target rate, and a decision to reduce the Bank's purchases of JGBs. The BOJ will ascertain the views of market participants and come up with a detailed plan for "the next one to two years or so" to be presented at the July MPM.

We now see some divergence among analysts on whether the next rate hike will occur in July (CLSA, GS) or October (due to the LDP leadership election expected in September, MUFG Morgan Stanley), as well whether the third hike will take place this year (CLSA) vs in January 2025 (GS, MUFG Morgan Stanley). In any case, after the third rate hike the target rate will be between 0.25% to 0.5%

While the car manufacturers are working through their own trouble, the non-life insurers submitted their first progress report on the business improvement plans put in place after the corporate insurance price-fixing and Big Motor fraudulent claims scandals. Also, at the end of the week the SESC recommended administrative action against MUFG for violation of firewall rules, with the scale of expected sanctions difficult to assess.

Lastly, we have also taken a closer look at the global rankings published over the past month, these include the startup ecosystem (StartupBlink & Startup Genome), smart cities (Z/Yen) and gender equality (World Economic Forum). See here how Japan has fared.

Otherwise, here is what we are going to cover this week:

• Venture Capital & Private Markets: UB Ventures and One Capital have made strides in raising their next funds; Nissay Capital has established a new fund for pre-seed investments; Asuene has successfully raised $26.7 million in the first close of its Series C; MUFG, through its Ganesha Fund, has invested in Battery Smart; MS&AD Ventures invests in Sidekick; Global Brain Corporation has invested in Rise
• Insurance: Progress report on business improvement plans by non-life insurers
• Banking: Daiwa Securities pushing its ownership stake in Aozora Bank to close to 24%
• Payments: LINE Yahoo Japan and LINE Pay will gradually shut down LINE Pay; JCB and iMago have launched a project to provide a new shopping experience using UWB (Ultra Wide Band) and BLE (Bluetooth Low Energy)
• Capital Markets: The Securities and Exchange Surveillance Commission has recommended administrative action against MUFG; SBI Securities announced that its customer balances have exceeded 40 trillion yen
• Asset Management: Nomura will provide the Emerging Managers Program (EMP) to promote new entrants to the asset management business
• Digital Assets: Monex Group and Coincheck intend to extend the De-SPAC agreement to January 2, 2025; the Kanto Regional Financial Bureau took administrative action against CoinBest; the FSA issued a warning to LBank Exchange that is operating crypto-asset exchange business without proper registration; HARTi has obtained a patent in the NFT x CRM field; Metaplanet purchased an additional 250 million yen ($1.58 million) worth of bitcoin; Ripple launched the XRPL Japan and Korea Fund
• The Last Word: The New "Cool Japan"

Who owns all the money in Japan?

In terms of age groups, 63% of the household financial assets today are held by the over 60 years old, a share that will only rise up to 69% over the next 20 years, according to Daiwa Securities Group.

Venture Capital & Private Markets

Funds

• UB Ventures has established the UBV Fund-II Investment Limited Partnership, aimed at investing in startups addressing challenges in legacy industries due to the declining working-age population; with investments from financial institutions nationwide as well as overseas companies, the Fund raised significantly more than the initial target, reaching approximately 10 billion yen in total committed capital; fundraising activities will continue toward the final close
• One Capital’s second fund has reached a total of 17 billion yen in committed capital after additional commitments from new domestic and international investors; combined with the first fund, One Capital’s total AUM across both funds is 34 billion yen; the final target for Fund 2, which began raising in August 2023, is around 20 billion yen
• Nissay Capital has established a new fund, about eighteen months after number 13 follows number 14, with an equal JPY 10bn fund size, an expected life time of 13 years, and the objective to invest in pre-seed opportunities
• L Catterton has reset its Asia-Pacific fund series as the firm looks to raise three new vehicles targeting the region; L Catterton is seeking $800 million for what is ostensibly its fourth pan-Asia fund; this is being accompanied by two local country-focused vehicles targeting India and Japan

Domestic

• Asuene has successfully raised $26.7 million in the first close of its Series C round, led by Sumitomo Mitsui Banking Corporation, SBI Investment, and Mirai Creation Fund III managed by Sparx Asset Management; the funding involves third-party allotment to a total of 17 domestic and international investors, including existing shareholders; Asuene plans to raise a total of $31.8 million, including the upcoming 2nd close, bringing its cumulative funding to $64 million up to Series C
• In response to the “Policy Plan for Promoting Japan as a Leading Asset Management Center” (published by the “Council of New Form of Capitalism Realization” of the Japanese government on December 13, 2023), the FSA and METI jointly held the second meeting of the “Expert Panel on Venture Capital (VC) Funds”

Global

• MUFG, through its Ganesha Fund, has invested in Battery Smart, a leading Battery as a Service (‘BaaS’) player operating in India; this deal is the Fund’s first investment in the clean tech space; MUFG participated in the $65 million Series B funding round led by LeapFrog Investments, which also included participation by Panasonic, Ecosystem Integrity Fund, Blume Ventures, and British International Investment
• MS&AD Ventures invests in Sidekick, a wealth and savings app for millennials with cash to splash; Sidekick has raised a ￡4.5m seed round led by Pact VC and TheVentureCity; MS&AD, BlackWood and 1818 Venture Capital also invested in the round
• Global Brain Corporation has invested in Rise, a financial technology company revolutionizing financial services in the MENA region, through its GB-IX Growth Fund Investment Limited Partnership (GB-IX)

Insurance

• Japan’s Financial Services Agency (FSA) issued business improvement orders to the major Japanese non-life insurance companies (Tokio Marine & Nichido Fire Insurance, Sompo Japan Insurance, Mitsui Sumitomo Insurance, and Aioi Nissay Dowa Insurance) at the end of December 2023 for price-fixing on corporate insurance premiums; this was followed by business improvement orders targeting those involved in the Big Motor scandal (fraudulent insurance claims, secondment of personnel, etc.) at the end of January; business improvement plans were due by the end of February, and updates on the implementation of the plans required every three months, by the 15th of the following month; in other words, Friday, June 14 was the due date, and press releases allowed a glimpse into the remediation undertaken to date
• In addition, Sompo Holdings published a report commissioned from an external expert group on its conduct

Banking

• Seven & i Holdings' Seven Bank closed FY2023 (ending March 31, 2024) with just over three million accounts and approximately 600 billion yen in deposits
• Daiwa Securities, which last week shared that it had obtained approval from the FSA to become a major shareholder of Aozora Bank based on the agreement reached in May, has now announced that it would acquire another ~9% of the voting rights from the Murakami Fund, pushing its ownership stake close to 24% once approved
• The FSA regularly meets with the three mega banks monthly, and with other industry group on a rotation basis; from any meeting, the FSA publishes the key points it raised from its side; the summary of the May meeting is now available
• The FSA, from the perspective of maintaining the stability of the financial system in Japan, conducts intensive monitoring of regional banks' securities investment, targeting those with large risk-taking in securities investment; it has issued a report summarizing key points and observed cases during the monitoring process; it is intended not only for the targeted financial institutions but also as a reference for risk management by other financial institutions (primarily those institutions with substantial risk exposure to securities investment)

Payments

• An English translation of the report published by the Bank of Japan's ministerial liaison meeting on CBDC has been published
• LINE Yahoo Japan and LINE Pay will gradually shut down the LINE Pay mobile money transfer and payment service in Japan with an end date of April 30, 2025; LINE Pay in Thailand and Taiwan is not affected by this service shutdown, and will continue to provide service; new user registrations for “LINE Pay” in Japan are scheduled to end in late November 2024; there will be no merging of the services, but users who wish to do so will be able to transfer their “LINE Pay” balance to PayPay
• JCB and iMago have launched the “Chikazuite-Check” project to provide a new shopping experience using UWB (Ultra Wide Band) and BLE (Bluetooth Low Energy), and have developed a prototype; as part of this concept, they have created an app for iPhone and Apple Watch that works with UWB/BLE, together with a reference model of the store cash register system, and have started user testing

Capital Markets

• The Nomura Individual Investor Market View Index (Nomura I-View Index), based on respondents' three-month outlook for share prices and calculated by subtracting the percentage of responses for "fall" from that for "rise," came in at 33.2 in June 2024, up 12.6pt versus the previous survey; the Nikkei 225 reference level (3 June 2024 close) was 38,923.03, down 1,186.20 from the previous survey (4 March 2024 close of 40,109.23)
• The Securities and Exchange Surveillance Commission has recommended administrative action against MUFG Bank and MUFG's two securities subsidiaries in Japan for violations of "firewall" compliance, i.e. the sharing of confidential client information without consent across banking and capital markets
• SBI Securities announced that its customer balances have exceeded 40 trillion yen as of the end of May 2024; while it took about two years from 20 trillion yen (as of the end of June 2021) to 30 trillion yen (as of the end of July 2023), it took only 10 months after that to reach 40 trillion yen

Asset Management

• Nomura Holdings is implementing initiatives to enhance its asset management business in order to contribute to the development of the asset management industry in Japan and help make Japan a leading asset management center; as part of this, Nomura will provide the Emerging Managers Program (EMP) to promote new entrants to the asset management business and ensure a healthy competitive environment

Digital Assets

• Monex Group and Coincheck announced at the end of May the intention to extend the De-SPAC agreement by another six months, to January 2, 2025, subject to a THCP special meeting of stockholders to be held in late June; the notification states that the parties "intend to continue [their] efforts toward completing the CCG De-SPAC Transaction in accordance with the Business Combination Agreement"
• The Kanto Regional Financial Bureau took administrative action against CoinBest, issuing both a business suspension and a business improvement order
• Based on the "Guidelines for Administrative Processes," the FSA issued a warning to LBank Exchange that is operating crypto-asset exchange business without proper registration in violation of the "Payment Services Act"
• HARTi has obtained a patent in the NFT x CRM field for a technology that enables referencing user wallet information, determining target users for marketing measures based on the wallet information, and executing marketing measures for those target users
• Tokyo-listed investment firm Metaplanet saw its shares rise 9.88% on Tuesday after announcing that it had purchased an additional 250 million yen ($1.58 million) worth of bitcoin
• Ripple launched the XRPL Japan and Korea Fund, dedicated to supporting innovation on the XRP Ledger (XRPL) in the dynamic Japanese and Korean markets, part of Ripple’s 1 Billion XRP commitment to provide financial, technical, and business support for developers building on the XRP Ledger

The Last Word: The New "Cool Japan"

The Intellectual Property Strategy Headquarters under the Prime Minister’s Office published “Japan’s New Cool Japan Strategy” last week, outlining a comprehensive plan to revitalize and expand Japan’s “Cool Japan” initiative. It recognizes the significant shifts in the global landscape, particularly after the COVID-19 pandemic, and seeks to capitalize on burgeoning international interest in Japanese culture, content, and cuisine.

This also includes setting targets for economic impact (over 50 trillion yen by 2033) and brand value enhancement (10% increase in “love for Japan” sentiment globally by 2033).

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.