Japan FinTech Observer #112

Welcome to the one hundred twelfth edition of the Japan FinTech Observer.

We are almost through earnings season, with mainly the three mega insurers scheduled for this week. So you will find quite a few highlights of financial results in this edition, and we are hosting a webinar on Tuesday, May 20, to discuss key developments. Registrations are open on Luma.

Undisputed highlights this week were (I) the Sumitomo Mitsui Card (Olive) partnership with Softbank (including PayPay), bringing together the leaders in credit & debit cards and QR code payments, and expanding Olive beyond financial applications towards super app status; and (II) Sony providing a detailed schedule and mechanics for the spin-off of its financial services business - the business plan for the standalone entity will be revealed at a later investor day.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Acompany has completed its Series B round; AgeWellJapan has secured new funding; ASUENE has acquired 100% of the shares of NZero; new funds from MPower Partners and CryptoGames
• Insurance: Dai-ichi Life Holdings has decided to make an additional investment of approximately 10.3% in Capula
• Banking: ExaWizards has entered into a strategic partnership with Fukuoka Financial Group (FFG); Sustainable Lab has signed an agreement with Tottori Bank to cooperate in helping regional companies achieve ESG and sustainability management; Hitachi ZeroCarbon and MUFG have joined forces to supercharge the global transition to electric vehicles; Credit Saison's Indian subsidiary has begun raising funds through External Commercial Borrowing (ECB) loans
• Payments: Digital Garage and Resona Holdings have signed an amendment agreement to their capital and business alliance contract; Adyen and JCB announced the rollout of JCB's card-on-file (COF) tokenization service
• Digital Assets: Starts Group, Mizuho Securities, and Securitize Japan have announced their collaboration on the public offering and issuance of security tokens
• The Last Word: The Forty-Year JGB

Venture Capital & Private Markets

• Acompany has completed its Series B round, raising approximately 1.1 billion yen through a third-party allocation of new shares; SBI Investment served as the lead investor, with participation from Globis Capital Partners, Central Japan Innovation Capital, Hiroaki Sugita, and Kunihiro Tanaka, among others; with this funding, the company's total capital raised has reached approximately 2.1 billion yen
• AgeWellJapan has secured new funding; this round marks the first investment from the "Region, People, and Future CJS2 Fund" and UNERI Corporation, bringing the total amount raised to 310 million yen; moving forward, the company will focus on promoting business co-creation to realize an Age-Well society and strengthen talent acquisition
• ASUENE has acquired 100% of the shares of NZero, a US-based climate tech company providing real-time GHG emissions visualization and AI energy management cloud services; through this acquisition, ASUENE will accelerate the visualization of CO2 emissions and implementation of reduction measures for US companies; by combining ASUENE's achievement as Asia's No.1 in CO2 emissions visualization business with NZero's top-class AI-powered energy management system technology implemented by US state governments, ASUENE will build a world-class decarbonization platform
• JETRO has published an "Overview of Japanese Startup Investments for US Venture Capitalists"; the publication, coming out of JETRO's San Francisco office, was prepared to dispel the prevailing perceptions among U.S. investors regarding Japanese startup investments; by describing the characteristics of Japanese startup legal practices from the perspective of U.S. startup legal practices, the publication aims to provide U.S. and international investors with a clearer and more detailed understanding of the Japanese startup legal practices

New Funds

• MPower announced the launch of MPower Partners Fund II, a global venture capital fund that backs growth state startups in Japan and overseas; in addition to existing Limited Partners, the Japan Investment Corporation (JIC) has joined as a new investor in Fund II
• CryptoGames, a developer of blockchain games, has launched “CG Ventures” as a new corporate venture capital business; to date, CG Ventures has invested in 17 companies, mainly in the Web3 field, where CryptoGames expects business synergy, but going forward they will also consider investing in the trading card field

Not FinTech

• Mitsubishi UFJ Trust and Banking (MUTB) has entered into a Preferred Shares Investment Agreement with Euglena in which MUTB invests up to USD 30 million in preferred shares issued by Euglena Sustainable Investment Limited (ESIL), Euglena's overseas special purpose company (SPC); by engaging in a project to construct and operate a biofuel manufacturing plant in Malaysia through the investment in ESIL, MUTB will support establishing a sustainable aviation fuel (SAF) supply chain and contribute to Japan's decarbonization together with Euglena
• Mitsubishi UFJ Capital participates in ARCS' funding round: ARCS, which aims to automate assisted reproductive technology, has raised an additional 270 million yen following its 1st close of the Pre-Series A round (approximately 530 million yen) conducted on January 17, 2025, bringing the total for the Pre-Series A round to approximately 800 million yen
• SBI Investment and Mizuho Capital participate in Tabist's funding round: Tabist, which promotes DX (Digital Transformation) in the accommodation and tourism industry, has completed its Series C round with an additional 600 million yen for a total of 1.65 billion yen; this round was through a third-party allotment to Otaru Green Hotel, Tosho Corporation, betaspace, Shibuya Construction, SBI Investment, Mizuho Capital, and Hirogin Capital Partners; the cumulative capital raised since the Series A round amounts to 3.24 billion yen, including this round
• Mabuchi Kogyosho has raised approximately 90 million yen through the equity crowdfunding service "FUNDINNO"; Fundinno is Japan's first equity crowdfunding service, allowing users to invest in unlisted venture companies with as little as 100,000 yen, and has publicly announced over 650 funding projects to date; Mabuchi Kogyosho has raised approximately 90 million yen in applications this time, making it the 8th largest fundraising company on Fundinno and the 9th largest fundraising company in Japan

Insurance

• Sony Group is embarking on a significant strategic shift by partially spinning off its Financial Services business; the motivation behind this move is multifaceted, encompassing a desire for greater focus on core entertainment and technology areas, enhanced operational agility for both Sony and the financial services entity, and an improved capital allocation strategy; the decision follows a period where Sony Financial Group Inc. (SFGI), a wholly-owned subsidiary, achieved operational successes after initially becoming fully integrated within Sony; despite this integration, Sony believes a spin-off is the next logical step to unlock further value and drive sustainable growth; Sony emphasizes that the Financial Services business, while valuable, has somewhat constrained Sony's ability to efficiently allocate capital toward its highest-growth potential areas, primarily the entertainment sector (including gaming, music, and movies) and the image sensor business; these sectors are seen as holding the key to Sony's future innovation and market leadership; by separating the financial services arm, Sony aims to free up resources to invest more aggressively in these core areas
• Dai-ichi Life Holdings has decided to make an additional investment of approximately 10.3% in Capula, a leading UK-based alternative management firm with world-class expertise in fixed-income arbitrage, crisis alpha and global macro strategies, while agreeing to transfer all shares held by Dai-ichi Life International in Ocean Life Insurance, a Thai life insurance company, to the founding family of Ocean Life, who are the controlling shareholder

Financial Results

• LIFENET Insurance Company has released its results for fiscal year 2024 (ending in March 2025), providing a comprehensive overview of its financial performance, strategic initiatives, and future outlook; LIFENET's key achievements in FY2024 include significant growth in annualized premium of policies-in-force, strong insurance service results, and steady growth in comprehensive equity despite market volatility and tax changes; looking ahead, LIFENET is focused on reaccelerating investment for growth in FY2025, enhancing market valuation through transparent disclosure of its internal economic solvency ratio (ESR), and transitioning to a new management team to drive further business expansion

Banking

• ExaWizards has entered into a strategic partnership with Fukuoka Financial Group (FFG), intended to leverage AI agents to drive FFG’s business transformation, enhance productivity, and create new banking models; following an AI agent implementation and the subsequent successful value creation, the decision was made to formalize the partnership
• Sustainable Lab has signed an agreement with Tottori Bank to cooperate in helping regional companies achieve ESG and sustainability management; Sustainable Lab will collaborate with Tottori Bank to provide the opportunity to use "TERRAST for Enterprise" as a special benefit for the bank's "Tottori Bank Sustainability Start Loan" program; companies using this loan will have the opportunity to visualize their ESG and sustainability management status through "TERRAST for Enterprise"
• Hitachi ZeroCarbon and MUFG have joined forces to supercharge the global transition to electric vehicles by removing the technical and capital constraints to decarbonisation; in combining Hitachi’s technology and operational expertise with MUFG’s financial strength, fleets benefit from strategic EV guidance and support, and reliable access to low-cost capital that protects long-term asset value
• Credit Saison's Indian subsidiary has begun raising funds through External Commercial Borrowing (ECB) loans; the subsidiary has signed a contract to execute a 150 million US dollar ECB loan from Mizuho Bank, which is a capital participant in Credit Saison India; Credit Saison India has previously promoted diversification of its funding sources through borrowings from over 35 local financial institutions, as well as by issuing corporate bonds and commercial paper
• The Bank of Japan has published "Recent Developments in Non-Bank Financial Intermediation and Initiatives to Enhance Its Resilience", presenting an overview of NBFI's financial intermediation, summarizing policy initiatives designed to enhance its resilience, and providing perspectives on issues surrounding NBFI through a review of the FSB's regular issue of the "Global Monitoring Report on Non-Bank Financial Intermediation" and its policy recommendations

Financial Results

• SMBC Group reported on its financial performance for the fiscal year ending March 2025; the organization highlighted record achievements, primarily fueled by the robust performance of its core domestic market business; these gains were strategically leveraged to fortify future initiatives and address potential vulnerabilities arising from evolving trade dynamics, particularly those connected to U.S. tariffs; looking ahead to the fiscal year ending March 2026 (FY3/2026), the group intends to produce ¥1.3 trillion in bottom-line profit, an increase of 10% year over year
• MUFG concluded the fiscal year ended March 31, 2025, showcasing a complex picture of both challenges and notable successes; while Net Operating Profits experienced a decrease, the institution witnessed a remarkable surge in customer segments, demonstrating the effectiveness of its customer-centric strategies; this year marked a pivotal point in MUFG's strategic trajectory, with initiatives aimed at enhancing long-term profitability taking center stage, impacting the immediate figures
• Mizuho Financial Group has released its financial results for FY24, showcasing a year of significant progress and notable achievements; the organization has demonstrated a solid increase overall, primarily driven by larger non-interest income and a positive impact from the Bank of Japan's rate hikes; these factors have contributed to the attainment of record highs in both Consolidated Net Business Profits and Profit Attributable to Owners of Parent, marking a significant milestone for the company; Mizuho has also successfully met its targets for the current medium-term business plan, achieving this accomplishment one year ahead of schedule; furthermore, the organization has strategically realized losses in its securities portfolio and recorded forward-looking reserves, positioning itself for future financial stability and growth
• Rakuten Bank announced its FY3/25 financial results, exceeding expectations in both ordinary and net profits; full-year ordinary profits reached ¥71.5 billion, representing a 47.8% year-over-year increase and surpassing the company's guidance of ¥69.0 billion; net profits also demonstrated strong growth, totaling ¥50.8 billion, up 47.4% year-over-year and exceeding both the company's guidance of ¥48.9 billion and Bloomberg consensus of ¥48.9 billion

Payments

• Sumitomo Mitsui Card and SoftBank have signed a basic agreement regarding a comprehensive business alliance in the digital field; based on this alliance, PayPay Corporation and Sumitomo Mitsui Card will begin new collaborative initiatives; by combining "Olive" with various digital services offered by SoftBank, the non-financial service area of "Olive" will be further expanded, evolving "Olive" into a super app that transcends the boundaries of finance; further, PayPay, which has surpassed 69 million users and holds the No. 1 share in the code payment market, and Sumitomo Mitsui Card, which holds the top share in the domestic credit card market, aim to create an overwhelmingly convenient and beneficial cashless payment service through "PayPay" and "Sumitomo Mitsui Card" by connecting their respective smartphone apps and enabling mutual exchange between "PayPay Points" and "V Points"
• Digital Garage and Resona Holdings have signed an amendment agreement to their capital and business alliance contract, aimed at further strengthening the alliance established in November 2022 and updated in December 2023; through this strengthened partnership, both companies aim to further integrate their management resources and expand their share in the payment business, which is positioned as a focus business in both companies' medium-term management plans; in particular, they will promote "joint development of BaaS/digital finance business" and "joint development of next-generation applications that seamlessly integrate various services of this business with multi-payment solutions," aiming to expand their market share in the SME market, where cashless payment adoption is lagging and access to financial systems remains challenging
• Adyen and JCB announced the rollout of JCB's card-on-file (COF) tokenization service, aimed at enhancing the security of credit card transactions for e-commerce merchants; Adyen is the first to offer and implement JCB’s new technology both domestically and globally; the introduction of COF tokenization will further enhance the security of online payments, providing JCB’s cardholders and merchants with even greater peace of mind and safety

Financial Results

• Digital Garage's financial report for the fiscal year ending March 2025 presents a nuanced picture of growth and strategic realignment, characterized by significant progress in its core payment solutions segment alongside challenges and forward-looking initiatives in its long-term incubation and global investment sectors; Digital Garage highlights the PS (Platform Solution) segment as a primary growth engine, achieving a notable 22% profit increase and meeting full-year guidance targets; this growth is attributed to the continued strength of payments, the company's core business, and the increased adoption of Square, a payment processing platform, which contributed to a significant rise in transaction volume, now reaching ¥7.5 trillion; Digital Garage is proactively forging strategic alliances to bolster medium-to-long-term growth and penetrate new areas, collaborating with companies like Resona, Toshiba, JCB, and ANA to accelerate expansion

Digital Assets

• In the latest episode of the eXponential Finance Podcast, we explore avenues to create legal entities for Decentralized Autonomous Organizations (DAOs), with a particular focus on the structure set up in the Marshall Islands; Adam Miller is the Co-Founder and Chief Executive Officer of MIDAO; Adam is a passionate member of several DAOs such as Purple, Builder DAO, CryptoMondays, and Beaver DAO, to name a few; previously, Adam conducted research on blockchain for emerging technology innovation at Capital Group; please check out our Spotify page for the podcast, and links to all major platforms
• Starts Group, Mizuho Securities, and Securitize Japan have announced their collaboration on the public offering and issuance of security tokens (STs) backed by real estate assets utilizing the "Securitize Platform"; this ST is a real estate security token with two "welfare contribution-type buildings" as the target investment properties; these buildings have a proven track record as complex facilities including licensed childcare centers and communal housing, operated under the "Public-Private Partnership Welfare Contribution Infrastructure Fund" jointly established by the Tokyo Metropolitan Government and Starts Group; Starts Trust will manage the private keys and other information necessary for recording and transferring the property value related to this ST using the Securitize Platform

Financial Results

• Coincheck Group has reported its first full fiscal year results, after listing on Nasdaq through a SPAC transaction at the end of last year; driving synergies across Monex Group, Monex Securities is considering obtaining a crypto assets brokerage business license, which is currently being formulated, while Coincheck and 3iQ plan to collaborate in crypto asset management

The Last Word: The Forty Year JGB

With Japanese interest rates moving back to levels seen before the "tariff shock", and the benchmark ten year JGB yielding close to 1.5% again, the yield of the forty year JGB has reached record levels.

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