Japan FinTech Observer #76

Welcome to the seventy-sixth edition of the Japan FinTech Observer.

For the audiophiles amongst you, we have launched Finance and FinTech news episodes of less than five minutes in duration on its own podcast channel. Currently available on Spotify and YouTube, we will add more platforms in the coming weeks.

We will host the Japan FinTech Observer weekly call again tonight, as every Monday, starting at 8pm JST on LinkedIn Audio. You can find this week's event here.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: SmartRound has taken investment from Mizuho, MUFG and Nomura, with the aim of building a platform to optimize secondary trading of unlisted stocks; Samsung NEXT invested in Startale Labs; V has completed a third-party allotment of new shares to Square Enix, Nippon Venture Capital, Itochu, FFG Venture Business Partners, and the Sony Startup Acceleration Program; GMO Payment Gateway and SMBC invest in Drip Capital, a leading digital platform for trade finance; Sozo Ventures, which primarily invests in the US and Japan, is preparing to raise a new USD 500m fund
• Insurance: MS&AD Insurance Group has not purchased any of its own shares yet under its current buyback program; justInCaseTechnologies has started providing its SaaS insurance system “joinsure” to Hokkaido Electric Power; its sister company justInCase and ANA X have begun awarding ANA SKY COINS for small-amount, short-term insurance products
• Banking: Keiyo Bank started offering 50-year mortages; SMBC Consumer Finance and NTT DATA have launched Loan Digital Platform? services; Japan’s three mega banks are expected to stop issuing paper bills and checks in FY2025
• Payments: Progmat and Datachain have jointly launched project “Project Pax”, aimed at building a cross-border remittance infrastructure for stablecoins;
• Capital Markets: Dukascopy Japan has introduced commodity CFD trading; a unit of Ryobi Holdings, a bus route operator in rural Japan, is setting up an AI-powered hedge fund specializing in FX
• Asset Management: Mizuho Financial Group's asset management unit is planning to launch an active fund, targeting to reach ￥500 billion ($3.4 billion) in AUM over the next five to ten years; Goldman Sachs is launching a business called OCIO (Outsourced Chief Investment Officer); the asset management arm of Goldman Sachs and the founding family of Nihon Housing have completed a take-private deal valuing the Tokyo-based property manager
• Digital Assets: the Financial Services Agency (FSA) has recently submitted its key requests for tax system reforms for the fiscal year 2025, including an item on crypto taxation
• The Last Word: Koizumi gets to work

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Venture Capital & Private Markets

• SmartRound has formed a capital alliance with Mizuho Financial Group (Mizuho Trust & Banking), MUFJ Morgan Stanley Securities, and Nomura, with the aim of jointly building a platform to optimize secondary trading of stocks issued by unlisted startups
• Samsung NEXT invested in Startale Labs because the company is at the forefront of solving key challenges in the Web3 ecosystem by providing essential tools and infrastructure, such as the Astar Network, Soneium, and Startale Cloud Services that simplify the development and deployment of decentralized applications (dApps) and smart contracts; their solutions effectively reduce barriers like high entry costs, lack of interoperability, and technical complexity, making Web3 technologies more accessible and scalable for developers and businesses alike
• V has completed a third-party allotment of new shares to Square Enix, Nippon Venture Capital, Itochu, FFG Venture Business Partners, and Sony Startup Acceleration Program; with this funding, V will promote business collaborations with their investors, recruit talent for business expansion, and make technological investments to maximize the value V provides to their client companies, advancing various Metaverse initiatives in Japan
• Drip Capital, a leading digital platform for trade finance, has secured $113 million in new funding; this includes $23 million in equity from Japanese institutional investors, GMO Payment Gateway and Sumitomo Mitsui Banking Corporation (SMBC), and $90 million in debt financing, led by the International Finance Corporation (IFC) and East West Bank
• Sozo Ventures, which primarily invests in the US and Japan, is preparing to raise a new USD 500m fund, its recently filed Form D shows

Insurance

• In its share buyback program that started in May and runs until December 23, 2024, MS&AD Insurance Group has not purchased any of its own shares yet (as of the end of August)
• justInCaseTechnologies has started providing its SaaS insurance system “joinsure” to Hokkaido Electric Power to support its digitalization of customer touch points and operational efficiency in its insurance business; Hokkaido Electric Power has launched a new service called “Enemall Hoken” with the aim of providing peace of mind and support for its web service “Hokuden Ene Mall”; the former offers medical insurance, cancer insurance, and long-term care insurance underwritten by Tokio Marine Nichido Fire Insurance, providing customers comprehensive risk coverage and peace of mind
• justInCase, a small-amount, short-term insurance provider and InsurTch company, and ANA X have begun awarding ANA SKY COINS for small-amount, short-term insurance products handled by ANA Facilities; customers will earn between 10 ANA SKY Coins for a daily plan, and 100 ANA SKY Coins when signing up for smartphone insurance or an annual plan

Banking

• With real estate prices rising steadily and wages not (yet) keeping up, 50 year mortgages had become available as early as 2022 with Miyazaki Bank; several other lenders followed; this week, Keiyo Bank joined the party; as their example shows, compared to a 35 year mortgage, the 50 year mortgage requires JPY 28,000 less in monthly payments for a JPY 40m loan at current interest rates; you need to be 30 years or under to qualify for this mortgage product
• SMBC Consumer Finance and NTT DATA have launched Loan Digital Platform? services for The Bank of Sanjusan; this marks the second implementation of the platform, following The Ehime Bank in October 2023; this platform is the first in the industry to automate data transmission and credit review retry processes between multiple financial institutions and guarantee companies; it digitizes conventional processes such as phone calls, mail, and fax for personal loans, thereby improving the customer experience for loan applicants and enhancing operational efficiency; as a SaaS-based service, financial institutions and guarantee companies can utilize the platform for a monthly fee
• Japan’s three mega banks are expected to stop issuing paper bills and checks in FY2025, with customers seen shifting to electronic payments and bank remittances; SMBC said Thursday that it will completely end the issuance of paper bills and checks at the end of September 2025; it has already stopped issuing paper bills and checks to new account holders; MUFG Bank and Mizuho Bank are slated to make similar announcements soon, reports Jiji Press

Payments

• Progmat and Datachain have jointly launched project “Project Pax”, aimed at building a cross-border remittance infrastructure for stablecoins; for cross-chain transactions across blockchains, the infrastructure will utilize the blockchain inter-communication protocol “IBC”, the middleware “LCP” developed by Datachain, the stablecoin contract jointly developed by Progmat and Datachain, and the liquidity pool provided by TOKI, which provides cross-chain infrastructure; Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group will join Project Pax as its first members, with international participants expected to be announced soon

Capital Markets

• Dukascopy Japan has introduced commodity CFD trading following approval from Japan’s Ministry of Economy, Trade and Industry and the Ministry of Agriculture, Forestry and Fisheries, Japan; the company can now offer commodity CFDs, such as oil, gas, and precious metals, to its clients
• A unit of Ryobi Holdings, a bus route operator in rural Japan, is setting up an AI-powered hedge fund specializing in FX to survive a sharp drop in the country’s population outside Tokyo; Ryobi has enlisted Kyosuke Kevin SUZUKI, a former currency trader at Societe Generale, to set up the fund by the end of the year; the hedge fund, part of Ryobi’s subsidiary, Ryobi Systems, will begin investing around the beginning of 2025
• The Korea Institute of Finance analyzes Japan's push on capital market reforms and its implications for Korea's Corporate Value-Up Program

Asset Management

• Mizuho Financial Group Inc.’s asset management unit is planning to launch an active fund specializing in large-cap Japanese stocks by the end of this year, betting investors that have been flocking to foreign equity index products will return to the home market; Asset Management One aims to expand the size of the investment trust to ￥500 billion ($3.4 billion) over the next five to 10 years, the company’s president, Noriyuki Sugihara, said in an interview; he said the fund will invest in about 50 large-cap shares
• Goldman Sachs is launching a business called OCIO (Outsourced Chief Investment Officer), through its asset management division Goldman Sachs Asset Management (GSAM), and will offer this service first to pension funds of subsidiaries of foreign companies from October, and then will expand the customer base to include institutions such as foundations, medical corporations, and educational institutions
• The asset management arm of Goldman Sachs and the founding family of Nihon Housing have completed a take-private deal valuing the Tokyo-based property manager at JPY 77 billion ($530 million); Nihon Housing has 500,000 units under management in Japan, Taiwan, Singapore and Vietnam; in May, the company announced plans for a management-led buyout and Goldman tender offer at a premium of 45.9 percent to the trailing three-month average share price; under the new ownership structure, Goldman Sachs Alternatives holds a 50 percent stake in Nihon Housing while the other half is held by entities controlled by the family of founder and chairman Fumio Osano

Digital Assets

• The Financial Services Agency (FSA) has recently submitted its key requests for tax system reforms for the fiscal year 2025 (starting April 2025), focusing on promoting investment, improving social security, and facilitating a stable national life; what caught the headlines in the crypto world is a single bullet point in the 15 page document referencing taxation of digital assets, which currently are treated as “other income”, which limits loss offsets and taxes gains at the taxpayer’s marginal income tax rate (up to 55%); treatment as an investable financial asset would put digital assets on par with securities

The Last Word: Koizumi gets to work

As the LDP leadership race is entering its final week of nominations, we would like to provide a shoutout to Tobias Harris' "Observing Japan" blog. For the latest on all the candidates, please follow Tobias, and read his latest post, "Koizumi gets to work".

Today, Monday, Sanae Takaichi also officially declared her candidacy.

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.