Japan FinTech Observer #78

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

Congratulations to the 32 (out of 32) analysts polled by CNBC who predicted that the Bank of Japan would not change its policy rate at the Monetary Policy Meeting last week.

The General Insurance Association of Japan and Nissay Asset Management cast doubt on the substance of the TSE's "action to implement management that is conscious of cost of capital and stock price." The GIAJ issued guidelines for the classification of strategic (or cross-) shareholdings vs investment securities, addressing concerns that insurers may have simply re-classified holdings without a change in economic substance.

Nissay Asset Management investigated the actual disclosure status of 445 of their holdings, and found that of the 394 companies that disclosed their goals/policies, only 27% were aware of capital costs and stock prices and disclosed specific initiatives, including not only profit margins but also capital efficiency and capital policies. The annual TSE report on these initiatives is expected before the end of September.

For this and the coming weeks, we will host the Japan FinTech Observer weekly call on Tuesdays, starting at 10pm JST on LinkedIn Live. You can find this week's event here .

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Sakana AI has received new investment from MUFG, SMBC, Mizuho, SBI Group, Dai-ichi Life Insurance, and Nomura, among others; LocationMind has raised a total of 3.17 billion yen in Series B funding from investors including Shizuoka Bank, JA Mitsui Leasing, and SuMiTRUST; Nstock has raised 3 billion yen from WiL, Coral Capital, East Ventures, and others; SBI Sumishin Net Bank has invested in and signed a business alliance agreement with Green Carbon; the Longreach Group has announced the final closing of the funds comprising Longreach Capital Partners 4, sized with total commitments of JPY 78 billion; SBI Holdings agreed to buy a minority stake in Dubai's Gateway Partners Group
• Insurance: the General Insurance Association of Japan issued guidelines for the classification of strategic shareholdings; Tokyo Marine & Nichido Fire Insurance will begin selling policies for the Japanese version of ridesharing; SwissRe sees opportunities for insurers in the grey area
• Payments: Mizuho, MUFG, SMBC & SBI Shinsei Bank will join the BIS' Project Agorá; Japan’s Central Bank Digital Currency should go big, not go home; Dinii decided to integrate Adyen’s payment platform; JCB International partners with Azerbaijan's Azer Turk Bank for merchant acquiring
• Capital Markets: Nomur has jumped into the race to acquire India's homegrown investment bank Avendus, with Mizuho also considered a strong contender; SMBC raises its stake in Jefferies close to the agreed 15% maximum; Japanese real estate giant Hulic has launched a takeover bid for Raysum, a Tokyo-listed builder controlled by Hong Kong activist investor Oasis Management; IHI, Fujitsu, and Mizuho Bank partner in a new business to optimize the J-Credit creation process
• Asset Management: Chocolate Finance looks to Japan even as it continues Singapore rollout
• Digital Assets: Sony joins a crypto push in Japan as calls grow for looser rules; double jump.tokyo announced the development of “SG Verse,” a gaming-focused Verse Layer (L2 blockchain) built on the Oasys platform in collaboration with AltLayer; Soramitsu will focus specifically on SORA, CBDCs, and Hyperledger Iroha in a partnership with the Nigerian Institute of Social and Economic Research (NISER)
• The Last Word: 25 Years of Womenomics

The Bank of Japan holds policy rate steady

The Bank of Japan maintained its current monetary policy stance, aiming to keep the policy rate around 0.25% and guiding the short-term interest rates. The BOJ recognized that while there are signs of weakness in certain sectors, the Japanese economy is still experiencing a gradual recovery. This optimism is fueled by the expectation that global economic growth will continue at a moderate pace, and the favorable financial environment will eventually lead to a stronger income-to-expenditure cycle, exceeding the country’s potential growth rate.

Governor Ueda’s press conference on September 20, 2024 , provided valuable insights into the BOJ’s current thinking on the Japanese economy, monetary policy, and the global economic landscape. He emphasized the BOJ’s commitment to achieving its 2% inflation target, highlighted the importance of continued wage growth and tight labor markets, and acknowledged the need for careful consideration of the potential impacts of global economic developments. The BOJ remains vigilant in monitoring data and market movements, demonstrating a flexible and data-driven approach to policy decisions. While acknowledging the challenges posed by global economic uncertainty, Governor Ueda expressed confidence in the BOJ’s ability to navigate these complexities and maintain a stable and healthy economic environment for Japan.

Venture Capital & Private Markets

• Sakana AI has received new investment from some of Japan’s leading companies as part of its JPY 30bn Series A funding round; the investors include leading Japanese banking groups, MUFG, SMBC, and Mizuho, as well as leading companies from various industries, such as 日本电气股份有限公司 , SBI Group, Dai-ichi Life Insurance, 伊藤忠商事株式会社 , KDDI Corporation , 富士通 , and Nomura; Sakana AI also continues to receive investment from Japanese VCs, led by Global Brain , JAFCO, and Miyako Capital
• LocationMind, an AI and space venture spun out of 日本东京大学 , has raised a total of 3.17 billion yen in Series B funding from investors including Hakuhodo DY Ventures, Shizuoka Bank, Shizuoka Capital, Gogin Capital, JA Mitsui Leasing, and SuMiTRUST; LocationMind is a venture company that aims to become the world’s largest location information bank and develops two businesses: AI and space related to location information
• Nstock has raised 3 billion yen in third-party allocation of new shares from WiL, Coral Capital, Chiba Dojo Fund, ALL STAR SAAS FUND, and East Ventures; the newly raised funds will be used primarily for product development, business registration under the Financial Instruments and Exchange Act, preparations for the launch of new businesses, and hiring members to carry out these tasks; the company also plans to use the funds to expand the functionality of its stock-based compensation SaaS and build an exchange for unlisted stocks for startups
• SBI Sumishin Net Bank has invested in and signed a business alliance agreement with Green Carbon for the joint creation of carbon credits in the forestry and agriculture sectors; in addition to using the domestic J-Credit Scheme, the partners will also expand their business by considering the use of voluntary credits and the Joint Crediting Mechanism (JCM), a system in which Japan cooperates with developing countries to reduce greenhouse gas emissions, and the benefits of the reductions are shared between the two countries
• The Longreach Group has announced the final closing of the funds comprising Longreach Capital Partners 4 (“LCP4”), sized with total commitments of JPY 78 billion , compared with the JPY 65 billion fund size of the predecessor fund, Longreach Capital Partners 3; through LCP4, Longreach will continue its well-established strategy of focusing on Japan related control buyout investments, focused on the mature industrial and technology, business services and consumer related sectors; corporate carve-out, founder succession and bolt-on platform building buyouts also remain a core focus; consistent with this strategy, at the final closing Longreach had deployed LCP4 into its first three buyout investments
• Japanese financial conglomerate SBI Holdings and former Federal Reserve official Roger Ferguson agreed to buy minority stakes in Gateway Partners Group , the latest Dubai financial firm to attract overseas interest; Gateway manages two private equity funds and is active in private credit; it plans more funds next year and will continue to focus on its main markets of South and South East Asia, the Middle East, and Africa; since its launch in 2015, the fund has made investments worth $1.5 billion across 25 portfolio companies

Insurance

• The General Insurance Association of Japan issued guidelines for the classification of strategic shareholdings , addressing concerns that these have been reduced merely accounting-wise by re-classifying them as investment securities; the association believes that, in light of the administrative action taken against its member companies in December 2023 by the Financial Services Agency, it is necessary to completely eliminate the influence of strategic shareholdings, which is one of the root causes of distortions in the fair competitive environment
• Tokyo Marine & Nichido Fire Insurance will begin selling “Automobile Insurance for Mobility Service Providers” that addresses the Japanese version of ridesharing, which utilizes local private cars and drivers to provide transportation services in cases where taxis are insufficient, from January 2025; this insurance policy provides coverage that takes priority over the automobile insurance contracted by rideshare drivers in the event of an accident; additionally, for the first time in the non-life insurance industry, the policy provides insurance that calculates premiums on an hourly basis , enabling subscription at rates that reflect the actual service provision
• NN Group and impact venture fund Rubio Impact Ventures will collaborate on the launch of the NN Social Innovation Startup Awards , a new pitch event that takes place during Impact Week Europe. The awards are designed to discover and support Europe’s and Japan’s early-stage people tech start-ups, fostering collaboration and innovation; finalists will receive a supporting grant of EUR 50,000, while the winner will receive a EUR 100,000 supporting grant, along with tailored support and a year-long venture development programme
• SwissRe sees opportunities for insurers in the grey area

Banking

• MUFG Bank has received a fine of JPY 250m and a recommendation that it steadily implement effective business improvement plans, and MUMSS has received a fine of JPY 200m and a recommendation that it steadily implement effective business improvement plans from the Japan Securities Dealers Association Association in relation to acts subject to administrative actions issued by Japan’s Financial Services Agency on June 24, 2024
• SBI Shinsei Bank, a consolidated subsidiary of SBI Holdings, resolved at the Board of Directors’ meeting held on September 17, 2024, to propose to shareholders the acquisition of treasury stock from certain shareholders (commonly refered to as the “former Murakami fund”, now S-Grant Corporation) and the disposal of shares by means of a third-party allotment; the Acquisition of Treasury Stock and the Third-Party Allotment are scheduled to be officially decided following approval at the Extraordinary General Meeting of Shareholders to be held in September 2024
• The Bank of Japan has issued its semi-annual Financial System Report with an Annex that covers the financial results of Japan's banks for fiscal 2023

Payments

• More than 40?private sector financial firms, convened by the Institute of International Finance, will join the BIS and a group of leading central banks in Project Agorá to explore how tokenisation can enhance wholesale cross-border payments; Mizuho, MUFG, SMBC & SBI Shinsei Bank will join Project Agorá
• Japan’s Central Bank Digital Currency should go big, not go home , wrote SAYURI Shirai , Professor of Economics at the Faculty of Policy Management, Keio University (慶應義塾大学) , and a former board member of the Bank of Japan, in the East Asia Forum
• Dinii decided to integrate Adyen’s payment platform into “Dinii Cashless”, a cashless payment service exclusively for restaurants, and support both offline and online payments through APIs; for stores that wish to accept face-to-face payments, Dinii will provide Adyen’s latest POS terminals in a plug-and-play state through Dinii
• JCB International, the international operations subsidiary of JCB, Japan’s only international payment brand, and Azer Turk Bank, Azerbaijan’s state-owned bank with state participation in authorized capital, have launched JCB merchant acquiring operations across the Republic of Azerbaijan , allowing cardholders to make payments seamlessly across Azer Turk Bank’s extensive ATM and POS terminal network

Capital Markets

• Nomura, Japan's largest investment bank and broking firm, has jumped into the race to acquire India's homegrown investment bank Avendus , a KKR portfolio company, switching from advisor on the deal to interested party; the Avendus sale process has already seen keen interest from Japanese financial conglomerate Mizuho, perceived as the most aggressive contender, and US buyout fund 凯雷投资集团
• According to a filing from last week, SMBC acquired another 9.247m shares in Jefferies; with SMBC holding about 10.9% of Jefferies as of mid-(calendar)-year, this latest purchase will put it close to the maximum 15% holding agree between the partners
• Japanese real estate giant Hulic has launched a takeover bid for Raysum , a Tokyo-listed builder controlled by Hong Kong fund manager Oasis Management, at a total acquisition cost of JPY 173.5 billion ($1.2 billion); Oasis acquired its controlling stake?in November 2022?from Raysum founder Takeshi Tanaka for JPY 1,700 a share, with the activist investor pledging at the time to work with management to maximise Raysum’s corporate value; a successful exit would put Oasis in line to more than triple its initial bet made less than two years ago
• Hedge fund firms including Brevan Howard Asset Management and Millennium Management continue to boost their ranks of Japan-focused traders after economic and monetary policy swings roiled markets
• IHI, Fujitsu, and Mizuho Bank have entered into a memorandum of understanding regarding a joint business venture to provide the “J-Credit Creation Total Support Service” to optimize the J-Credit creation process in J-Credit scheme and to support rapid monetization for J-Credit creators
• The Ministry of Finance's monthly JGB newsletter covers several events relevant to JGB investors; first, the MOF announced an update on central government debt as of the end of June 2024; second, the Cabinet Office released its second preliminary GDP estimate; third, Takahiro Tsuji, Deputy Director-General, Financial Bureau, gave a presentation on “Japan’s Economy and Public Debt Management” at the 19th Annual Japan Investment Forum in Tokyo; finally, the MOF held a seminar on the development of the JGB market and debt management policy for Central Asian and Caucasus countries
• The Japan Exchange Group has published its Integrated Report 2024

Asset Management

• ChocFin looks to Japan even as it continues Singapore rollout: Chocolate Finance is a simple app that launched in Singapore to provide users with a predictable yield above bank deposit rates; it took founder Walter de Oude longer than he expected to launch, but now that the app is live, he’s already looking to enter the Japanese market

Digital Assets

• "Japan is crypto friendly,” said Fernando Luis Vázquez Cao , CEO at SBI Digital Asset Holdings , part of the group that operates the country’s top online brokerage, "but it’s not crypto easy", as Sony joins a crypto push in Japan as calls grow for looser rules
• double jump.tokyo announced the development of “SG Verse,” a gaming-focused Verse Layer (L2 blockchain) built on the Oasys platform in collaboration with AltLayer; SG Verse will support double jump.tokyo’s new blockchain game, licensed from SEGA and featuring artwork from the popular Sangokushi Taisen series, an arcade strategy-based card game set in the Three Kingdoms period of Chinese history
• Soramitsu and the Nigerian Institute of Social and Economic Research (NISER) , Nigeria’s premier public policy think-tank, collaborate to establish a Knowledge-Industry partnership, where NISER provides local context knowledge and analysis through research, while Soramitsu deepens the capacity of NISER’s research faculty and other Nigerian knowledge centres in blockchain technology; Soramitsu will focus specifically on SORA, CBDCs, and Hyperledger Iroha

The Last Word: 25 Years of Womenomics

Twenty-five years ago, Goldman Sachs research analyst Kathy Matsui wrote a report about the Japanese economy called Womenomics, stating that future potential economic growth will depend on increased female labor participation.

So how much progress has been made in Japan and around the world? Sharon Bell, Senior Strategist on the European Portfolio Strategy Team within Goldman Sachs Research, and Asahi Pompey, Goldman Sachs Global Head of Corporate Engagement and President of the Goldman Sachs Foundation, discuss the gains — and gaps — in female workforce participation and the impact to economic growth on the Goldman Sachs Exchanges podcast .

Please follow us to read more about Finance & FinTech in Japan, like hundreds of readers do every day. We invite you to also register for our short weekly digest, the “Japan FinTech Observer”, on Medium or on LinkedIn .

We also provide a daily short-form Japan FinTech Observer news podcast, available via its Podcast Page . Our global Finance & FinTech Podcast, “eXponential Finance” is available through its own LinkedIn newsletter , or via its Podcast Page .

Should you live in Tokyo, or just pass through, please also join our meetup . In any case, our YouTube channel and LinkedIn page are there for you as well.