Japan FinTech Observer #99

Welcome to the ninety-ninth edition of the Japan FinTech Observer.

This edition, and the magical 100th edition next week, bracket one of the world's largest crypto conferences held in a suburb of Shenzhen. While we still have to spot the Energizer Bunny Steve Vallas hopping around the island, another Aussie delivered a clear statement on why stablecoin regulation will not arrive Down Under until 2026: "It's the cost of living crisis, stupid!" Diving into the crypto echo chamber, one might be forgiven to lose track of the hard real world problems that are there to solve, especially with elections coming up.

On that very topic, the Goldman Sachs economics team raised their "CPI forecasts for Japan to reflect the further rise in rice prices since late 2024 and changes to our FX and commodity research team’s various market price forecasts." We have been picking up that topic repeatedly for the last 18 months: the economic situation for those in the bottom half of the economic ladder is not that great. Rice prices, which in December were up 60% or more year-on-year, even led the government to release emergency stockpiles over the past days. Headline inflation numbers do not reflect the cost of living crisis in Japan.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Digital Garage has acquired additional shares of Pocket Change; MUFG's JACCS will invest into Malaysia's CARSOME Capital and will own a 49% stake; Hitachi Payment Services has made a strategic minority investment in Spydra Technologies
• Insurance: Sony reported earnings last week, including the Financial Services Segment, which tends to be dominated by Sony Life; Compliance Data Lab (CDL) announced that six companies within the MS&AD Insurance Group have adopted Compliance Station UBO+ for customer due diligence
• Banking: Seven Bank, Rakuten Bank, and Orix earnings; GMO Aozora Net Bank now offers business bank accounts for sole proprietors; Brazilian FinTech?CashU?secured a $17.5M?Credit Rights Investment Fund (FIDC)?backed by?Itaú BBA?and?Credit Saison
• Payments: Digital Garage earnings; BDO Unibank and Seven Bank recently reaffirmed their commitment to providing convenient and reliable remittance services to Overseas Filipinos in Japa
• Capital Markets: results comparison of major securities groups; PayPay increases stake in PayPay Securities to 75%
• Asset Management: Nippon Life India AM & Nissay AM provide access to Indian capital market for Japanese investors; SMFG and SBI said to be planning JV for Japan’s emerging rich
• Digital Assets: Metaplanet and Coincheck earnings; gumi's Board of Directors resolved to purchase 1 billion yen worth of Bitcoin; Toyota Group to issue first security token bond; SLASH VISION, Orient Corporation, and AIKITASU will partner to issue "Slash Card," Japan's first BNPL (Buy Now Pay Later) service secured by USDC (USD Coin); Kaia Labs (LINE) partners with Republic to accelerating ecosystem growth, with a focus on game development; pafin, the provider of cryptact, Japan's leading cryptocurrency calculation service for tax filing, announced its official launch in?Canada
• The Last Word: Three Worlds in 2035

Venture Capital & Private Markets

• Digital Garage has acquired additional shares of Pocket Change, making it an equity method affiliate of Digital Garage; at the same time, Digital Garage has concluded a capital and business alliance with JCB, a shareholder of Pocket Change, and the three companies have also signed a capital and business alliance; Digital Garage, Pocket Change and JCB have worked together for some time to build the Shibuya Ward digital local currency "HachiPay" app, contributing to the promotion of the smart city that Shibuya Ward is aiming for
• CARSOME Group, Southeast Asia’s largest integrated car e-commerce platform, and JACCS (Japan Consumer Credit Service), a global consumer finance company and a member of the Mitsubishi UFJ Financial Group, announced a strategic partnership via CARSOME Capital, the financing arm of CARSOME; as part of this strategic partnership, JACCS will invest into CARSOME Capital and will own a 49% stake; CARSOME Group will continue to hold a majority 51% stake; the partnership will combine JACCS' longstanding expertise and international resources with CARSOME Capital’s ecosystem and local know-how, in order to introduce tailored financing solutions in Malaysia, with an emphasis on under-served segments
• Hitachi Payment Services has made a strategic minority investment in Spydra Technologies to develop and introduce innovative offerings in the rapidly evolving domains of Web 3.0, Central Bank Digital Currency (CBDC) and Blockchain Technology; Spydra is a low-code enterprise blockchain platform specializing in real-world asset tokenization; the platform supports both permissioned and public blockchain networks, allowing flexibility in compliance and transparency requirements. It integrates with various payment systems, supports custodial and non-custodial options, and facilitates secondary market trading
• We have compiled a list of seven investments made by Global Brain during the first half of February

Insurance

• Sony reported earnings last week, including the Financial Services Segment, which is no longer consolidated as it is preparing for a re-listing later in 2025; Financial Services revenues for the quarter increased 406.7 billion yen year-on-year to 718.5 billion yen, primarily due to an increase in gains on investments at Sony Life
• Compliance Data Lab (CDL) announced that six companies within the MS&AD Insurance Group have adopted Compliance Station UBO+, a service providing immediate online access to Ultimate Beneficial Owner (UBO) and capital chain information; the six companies are MS&AD Insurance Group Holdings, Mitsui Sumitomo Insurance, Aioi Nissay Dowa General Insurance, Mitsui Sumitomo Aioi Life Insurance, Mitsui Direct General Insurance, and Mitsui Sumitomo Primary Life Insurance; CDL provides services designed to address corporate risk assessment challenges through its Compliance Station series, a comprehensive compliance data management platform; MS&AD Insurance Group is leveraging Compliance Station UBO+ to enhance its continuous customer due diligence processes, thereby strengthening Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) measures across the group

Banking

• Seven Bank reported a mixed bag of results on a consolidated basis, exhibiting growth in overall income but a significant decrease in net income compared to the same period in the previous fiscal year; the consolidated ordinary income reached ￥159.4 billion, a notable 10.0% increase from the ￥144.8 billion reported in the third quarter of fiscal year 2023; this growth was primarily attributed to two major factors: the consolidation of Seven Card Service as a subsidiary and the overall strong performance of Seven Bank's core operations

• Rakuten Bank's third quarter of fiscal year 2024, ending December 31, 2024, demonstrated significant growth across key financial metrics, solidifying its position as a leading digital bank in Japan; the bank achieved record highs in ordinary income, gross operating profit, ordinary profit, and profit attributable to owners of the parent; this impressive performance was largely driven by a substantial increase in interest income, fueled by the accumulation of diversified investment assets and the positive impact of the Bank of Japan's policy rate hike
• ORIX showcased robust financial performance in the first three quarters of fiscal year 2025 (Q1-Q3 FY25.3), with net income reaching 271.8 billion JPY; this represents a substantial 24% increase year-over-year (YoY), demonstrating the company's resilience and adaptability in a dynamic economic landscape; this result also places ORIX at 70% progress towards its full-year net income target of 390 billion JPY; the annualized Return on Equity (ROE) stood at a healthy 9.0%; the third quarter itself contributed 88.8 billion JPY to the net income; the company is focused on achieving record annual net income
• GMO Aozora Net Bank now offers business bank accounts for sole proprietors; this initiative is part of the company's improved support for small and start-up businesses, which it positions as one of its medium- to long-term strategies; first, GMO Aozora Net Bank will begin with an initiative to reduce the hassle of opening a sole proprietorship account, and will gradually expand services for sole proprietorship customers in the future
• Brazilian FinTech?CashU?secured a $17.5M?Credit Rights Investment Fund (FIDC)?backed by?Itaú BBA?and?Credit Saison?to finance its lending operations; the provision of credit is essential for small and medium-sized businesses to be able to scale at an adequate pace; with the launch of the fund, the FinTech hopes to expand its portfolio of credit clients for SMEs; the proprietary FIDC strengthens their operations and demonstrates the interest of private credit investors in portfolios generated with artificial intelligence, thus moving the FinTech one step closer to a Series A round

Payments

• Digital Garage's third-quarter report for the fiscal year ending March 2025, released on February 10, 2025, paints a picture of a company successfully navigating a complex technological landscape and making substantial progress towards its strategic goals; the overarching theme is one of consistent growth, particularly within the core payment segment, driven by strategic alliances and technological advancements; the financial performance shows a company on track to meet its full-year profit growth targets, demonstrating resilience and adaptability in a dynamic market
• BDO Unibank and Seven Bank recently reaffirmed their commitment to providing convenient and reliable remittance services to Overseas Filipinos in Japan; this partnership, initially established in 2017, leverages the strengths of two leading financial institutions from prominent Asian economies to meet the evolving needs of this significant demographic; currently, the partnership facilitates seamless money transfers from Japan to the Philippines via Seven Bank's International Money Transfer mobile application

Capital Markets

• SBI Holdings, in their quarterly results presentation, always includes a comparison of the "Income before Income Tax Expense" performance of the major securities groups; clearly, the impact of buoyant Japanese stock markets is felt very differently on the various bottom lines
• PayPay increases stake in PayPay Securities to 75%: PayPay will acquire shares in PayPay Securities from SoftBank and LY Corporation, as well as subscribe to a third-party allocation of shares conducted by PayPay Securities, with the aim of further enhancing the corporate value of PayPay Securities; Mizuho Securities, a collaborative partner in PayPay Securities' business, has also agreed to this initiative and will continue to cooperate towards enhancing the corporate value of PayPay Securities

Asset Management

• Nippon Life India AM & Nissay AM provide access to Indian capital market for Japanese investors: Nippon Life India Asset Management, acting through its IFSC branch in GIFT City, has launched the “Nippon India ETF Nifty 50 BeES GIFT"; the Fund will be a feeder fund into Nippon India ETF Nifty 50 BeES, which is the oldest and first ETF in India investing in the top 50 companies in India on the basis of market cap; NAM India's partner Nissay Asset Management Corporation, wholly owned by Nippon Life Insurance Company, has launched Nissay India Equity Fund in Japan which will feed into “Nippon India ETF Nifty 50 BeES GIFT” fund; this innovative equity fund is designed to offer Japanese investors a unique opportunity to access India’s rapidly growing market by investing in exchange-traded funds (ETFs) that track the Nifty50 Index, representing India’s top 50 companies
• SMFG and SBI Said to Be Planning JV for Japan’s Emerging Rich: Sumitomo Mitsui Financial Group and SBI Holdings are considering teaming up to start a business that will provide digital wealth management services for customers that are not the richest in Japan but still prosperous; the plan is for the new joint venture to be funded by two SMFG firms, Sumitomo Mitsui Banking Corporation and SMBC Nikko Securities, and SBI Securities, part of the Tokyo-based SBI financial group; details such as investment amount and how that will be split up are being finalized, and the new company may be announced as early as the end of March

Digital Assets

• Metaplanet has boldly declared its fiscal year 2024 a resounding success, marking a transformative shift from its previous incarnation as a legacy, asset-heavy business to Asia's premier publicly traded Bitcoin Treasury Company; its earnings presentation, emblazoned with the tagline "Secure the Future with Bitcoin," underscores the company's unwavering commitment to a Bitcoin-centric strategy
• gumi's Board of Directors resolved this week to purchase 1 billion yen worth of cryptocurrency (Bitcoin); reason for the decision: gumi is promoting various initiatives to further strengthen the financial domain in its blockchain and related businesses, which are pillars of its growth strategy; within this context, gumi's node operation business has been steadily expanding its portfolio, and in the second quarter of fiscal year 2025, gumi became the first listed company in Japan to participate as a validator in "Babylon," a staking protocol that allows inactive Bitcoin to be used as security for other blockchains

• Coincheck reports first earnings as a public company: Coincheck Group, a Dutch holding company for the leading Japanese crypto exchange Coincheck, reported its fiscal 2025 third-quarter results (for the period ending December 31, 2024); the report and subsequent earnings call highlighted significant growth, strategic milestones, and ambitious future plans; the key takeaway is that Coincheck experienced substantial quarter-over-quarter growth, successfully completed its listing on the Nasdaq, and is positioning itself for further expansion both within Japan and globally; listen to Oki Matsumoto's comments on the earnings call
• Toyota Group to issue first security token bond: Toyota Financial Services, Toyota Finance, Daiwa Securities, MUFG Bank, Mitsubishi UFJ Trust and Banking, and Progmat plan to issue the Toyota Group's first publicly offered security token bonds; Daiwa Securities will underwrite the bonds and sell them to individuals at 100,000 yen per unit; the unique feature of this digital bond is that in addition to the usual interest rate, purchasers will receive Toyota Group electronic money worth between 1,000 and 10,000 yen depending on the number of units purchased
• SLASH VISION, Orient Corporation, and AIKITASU will partner to issue "Slash Card," Japan's first BNPL (Buy Now Pay Later) service secured by USDC (USD Coin); the three companies are currently preparing to issue the "Slash Card" by the end of June at the latest; they are working hard to meet the requests of customers who are looking forward to early issuance, but some adjustments may be necessary depending on the situation
• Kaia Labs Partners with Republic to engineer economies for the next wave of mass adoption: Kaia’s ecosystem, built around the millions of active users on LINE, has the potential to bring Web3 into the lives of everyday people across Asia; Kaia DLT Foundation, the not-for-profit driving the ecosystem expansion of the Kaia public blockchain, has partnered with?Republic, a leading Web3 advisory firm, to engineer innovative token economics and unlock new growth opportunities for Kaia’s blockchain ecosystem; this strategic partnership focuses on accelerating ecosystem growth, with a focus on game development through the?Kaia Wave?accelerator and incubator program
• pafin, the provider of cryptact, Japan's leading cryptocurrency calculation service for tax filing, announced its official launch in?Canada; founded by former Goldman Sachs executives with extensive experience in finance and investment, cryptact leverages institutional-level expertise to deliver accurate and efficient crypto tax solutions

The Last Word: Three Worlds in 2035

Senior fellows in the Atlantic Council’s foresight practice have produced three possible scenarios for the world in the year 2035 by assessing how current trends and uncertainties across a variety of categories—including geopolitics, the economy, demography, the environment, technology, and society—might interact with one another in the years to come:

• The reluctant international order
• China ascendant
• Climate of fear

These are not forecasts or predictions of what the future will bring. Instead, these scenarios are intended to inspire imagination and spur readers to consider possible futures, including future worlds that do not align with the readers’ expectations. The point of working with future scenarios is to find out what you don’t know and should know but that you didn’t even know you didn’t know.?Have a read yourself!

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