Japan FinTech Observer #119

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

With the last update on the Shunto wage negotiations behind, and the Upper House elections ahead of us, it is worth taking another look at the situation the average Japanese consumer finds herself in.

In September 2022, we wrote "The Japanese consumer is about to get whacked", and boy, we did not even imagine 100% price increases for rice. Now the good news: the final Shunto results show a base pay rise of3.70% and headline wage growth of 5.25%, both exceeding the high figures of 3.56% and 5.10%, respectively, from last year. Given current inflation expectations, this will bring real wage growth into positive territory for the first time in four years.

You read that right. Inflation in 2022, 2023, and 2024 ate up all the wage increases, and then some. Looking at one without taking into account the other is like Rakuten celebrating nine million subscribers, but constantly missing revenue targets (note from the editor: apologies, he is really grumpy this morning).

While we leave the political analysis of the Upper House elections to the many much more qualified, it is worth noting that all parties except for the LDP (which suggests a JPY 3trn cash payout instead) propose consumption tax cuts; Komei, the CDP, and Ishin are looking for cuts on food; the DPP, Communists, and Reiwa for a uniform rate of five percent.

In somewhat related action, Tokyo was to waive the basic water charge for four months during the summer at a cost of JPY 36.8bn. Take this all as indication that there is a real cost of living crisis taking place. If we actually get real wage growth in 2025, the average Japanese consumer will start making back what she lost the three years prior, before we are able to leave thirty years of stagnant wages behind, and will actually see an increase in living standards.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: ORIX will acquire an approximately 71.4% ownership in Hilco Global; Sumitomo Life Insurance Company has invested an undisclosed amount in Preferred Networks; Japan Investment Corporation (JIC) has made an LP investment of JPY3.5 billion in Genesia Venture's fourth fund; Jamm has completed a fundraising of 496 million yen; new funds from Fukuoka Financial Group, AN Venture Partners, and Asu Capital Partners
• Insurance: Hokan Group has acquired shares of Frich, making it a subsidiary
• Banking: GMO Aozora Net Bank has reached 200,000 corporate accounts and deposit balances surpassing 1 trillion yen
• Payments: Digital Wallet Corporation has entered into a global strategic alliance with Philippine National Bank; Hokkoku Financial Holdings' Hokkoku Bank and Soft Space have commenced the development of a SoftPOS solution for deposit-type stablecoins; Minna Bank, Fireblocks, and TIS will conduct technical verification for issuing stablecoins on the Solana blockchain
• Capital Markets: Japan Exchange Group's 2025 Shareownership Survey
• Asset Management: Nissay Asset Management's generative AI platform has won the "Model Buy-Side Award 2025 Digital Transformation and Generative AI Utilization Category" hosted by Celent
• Digital Assets: Mitsui & Co. Digital Asset Management (MDM) and Sumitomo Mitsui Trust Bank have jointly established "ALTERNA Trust", a trust company specializing in digital securities
• The Last Word: NEDO's Innovation Outlook

Venture Capital & Private Markets

• ORIX Corporation USA has decided and entered into a Purchase Agreement with Hilco Global to acquire an approximately 71.4% ownership; ORIX plans to complete the Acquisition by the end of September 2025, subject to receipt of regulatory approvals, and satisfaction of customary closing conditions; this transaction follows the the May 12, 2025, disclosure of a nonbinding Letter of Intent by Orix
• Sumisei Innovation Fund, a CVC jointly operated by Sumitomo Life Insurance Company and SBI Investment, has invested an undisclosed amount in the latest extension of Preferred Networks' funding round that started in December 2024; through this investment, Sumitomo Life will begin exploring collaboration with Preferred Networks, a leading AI technology startup, to enhance service quality in the insurance business and create new customer experience value
• Japan Investment Corporation (JIC) has decided to make an LP investment of JPY3.5 billion in Genesia Venture Fund IV Investment Limited Partnership (“GV-4”), which is managed by Genesia Ventures; JIC’s mission is to create a virtuous cycle of risk capital that supports the next generation of domestic industries by providing funds to help companies grow and strengthen their competitiveness through open innovation, promotion of private investment, and the development of investment professionals. To achieve its mission, JIC invests in policy-relevant strategic business areas through LP investments in funds under JIC’s umbrella and in private funds
• Jamm has completed a fundraising of 496 million yen through third-party allocation with ANRI and XTech Ventures as co-leads, and DG Daiwa Ventures and Riku Sugie (former Paidy CEO) as participants; Jamm is a new payment service that allows direct payment from a regular bank account

New Funds

• Fukuoka Financial Group has established the "CVC Fund No. 2" with a total fund size of 3 billion yen, jointly with SBI Investment and FFG Venture Business Partners, in order to strengthen investment functions aimed at realizing alliances with promising startup companies
• AN Venture Partners Announces Final Close of $200M Fund I, MUFG & SMBC Participate: AN Venture Partners (ANV), a global biotech venture capital firm, announced the final close of its first fund, AN Venture Partners I, achieving its target of USD 200m (JPY 29bn), one of the largest Japan-focused biotech venture capital funds to date, and also one of the largest first-time biotech venture capital funds raised in the past year; more than 20 Limited Partners (LPs) have invested in the fund, led by Japan Investment Corporation, Shionogi & Co., Otsuka Pharmaceutical, MUFG Bank, and Sumitomo Mitsui Banking Corporation
• Asu Capital Partners has completed the final close of the "Asu Capital Partners Fund No. 1"; in this fourth round of fundraising, the company received investments from Yamanashi Chuo Bank, Yostar, Kashima Antlers FC, Yitu Capital, and individual investor Kazuya Fujii; the total number of portfolio companies has reached 12, and Asu Capital Partners will continue to strengthen its support system for founding investments and startups aiming for "Japan to Global" expansion

People Moves

• Citi has appointed Akira Kiyota and Taiji Nagasaka as co-heads of investment banking for Japan, effective 1 October 2025; Kiyota joins Citi from Nomura, where he has served as a senior managing director and global head of mergers and acquisitions since 2022; Nagasaka, meanwhile, is currently a managing director, head of IB products, and head of ECM for Citi in Japan
• Masayuki Kimura has joined Sompo as Group Chief Digital Officer
• Chihiru Ban has left the FSA's FinTech & Innovation team, and will take up a new position in the private sector in September; Takaya Sugino, whom most will know from his recent engagement at the Blockchain Governance Initiative Network, will return from his academic secondment in the US and take over international outreach

Insurance

• Hokan Group has acquired shares of Frich, making it a subsidiary; this marks Hokan Group's first M&A and is positioned as an important strategic move for future growth; Hokan provides insurance distribution business infrastructure in SaaS format to support efficiency improvement and governance/compliance support for insurance solicitors and agents

Banking

• GMO Aozora Net Bank has reached 200,000 corporate accounts and deposit balances surpassing 1 trillion yen; GMO Aozora Net Bank began its internet banking business in July 2018, aiming to be an online bank that is easy to use for both individual and corporate customers; approximately 40% of the bank's employees are engineers, and many of its sales staff are also well-versed in IT fields, enabling the bank to make proposals that align with customers' new business creation and operational challenges
• The Bank of Japan, in its latest "Review", covers the "Changing Landscape of NBFIs in Financial Systems: A Comparative Analysis of Japan, the US and Germany"

Payments

• Digital Wallet Corporation has entered into a global strategic alliance with Philippine National Bank, a distinguished former state-owned bank and one of the most trusted and largest financial institutions in the Philippines
• Hokkoku Financial Holdings' Hokkoku Bank and Soft Space have commenced the development of a SoftPOS solution that enables touch payments from international payment networks including Visa, and for the first time in the world, payments using deposit-type stablecoins; at the same time, QR Investment, a group company of Hokkoku Financial Holdings has executed an investment in Soft Space from QR Fund No. 2
• Minna Bank, a subsidiary of Fukuoka Financial Group, has begun joint studies with Solana Japan, Fireblocks, and TIS, with a view to commercializing stablecoins and web3 wallets in the future; in this joint study, the partners will conduct technical verification for issuing stablecoins on the Solana blockchain, and consider the practicality of a wide range of use cases, both for individuals (B2C) and corporations (B2B)
• The Financial Services Agency has published "Analysis for the Healthy Development of Stablecoins", a joint research with Deloitte

Capital Markets

• The Japan Exchange Group has published its "2024 Shareownership Survey", including the above distribution of market value owned by type of shareholder
• The Financial Services Agency has published its "2025 Report on the Monitoring of Foreign Bank Branches and Foreign Securities Companies in Japan", also in a summary version; this report provides a comprehensive overview of the business trends, governance frameworks, and key supervisory topics for foreign bank branches and foreign securities companies operating in Japan
• Japan’s bond market has long been seen as voice-heavy, with established traditions of relationship-based trading and an aversion to electronic, less personal alternatives, according to The Desk; however, as Japanese debt markets continue to grow in volume, the economy makes its way out of a thirty-year era of deflation and global investors get more interested in the region’s offerings, the pressure to electronify trading is ramping up

Asset Management

• Nissay Asset Management announced that its generative AI platform "NAM-GPT" has won the "Model Buy-Side Award 2025 Digital Transformation and Generative AI Utilization Category" hosted by Celent; incidentally, we recently hosted Michinori Kanokogi, the Head of Solution Research at Nissay Asset Management, who shared his perspective of "AI in Asset Management"

Digital Assets

• Double take: First, Chengyi Ong, Head of Policy (APAC) at Chainalysis, has an insightful discussion with Ryosuke Ushida (Chief FinTech Officer, Financial Services Agency of Japan) about the pioneering role their agency had in crypto regulation; then, Ari Redbord, Global Head of Policy at TRM Labs, follows to discuss with Ushida how Japan became a global leader in regulating digital assets
• Mitsui & Co. Digital Asset Management (MDM) and Sumitomo Mitsui Trust Bank have jointly established "ALTERNA Trust", a trust company specializing in digital securities, with a view to further development of the digital securities market, with MDM holding 85.1% and Sumitomo Mitsui Trust Bank holding 14.9% of the shares; ALTERNA Trust anticipates structuring digital securities worth 100 billion yen in its first year and aims for cumulative trust assets of 1 trillion yen within 5 years; initially focusing on real estate, the company envisions future expansion to more diverse asset classes including alternative assets other than real estate, corporate bonds, and debt assets held by Sumitomo Mitsui Trust Bank; the company also plans to advance trust acceptance from asset management companies other than MDM
• The Financial Services Agency has conducted an examination of the state of regulatory systems related to cryptoassets, based on the current actual state of cryptoasset transactions, as outlined in FSA Strategic Priorities for July 2024-June 2025; they have issued a discussion paper in Japanese as the result of the examination on April 10, 2025, and have published an English version and a summary of the discussion paper this week (sic!)
• Japan’s Ponta Loyalty Program on Avalanche L1 is a Perfect Web3 Use Case, according to Ian Anderson
• Benchmark Equity Research has published a note on Metaplanet and its Bitcoin Treasury Strategy

The Last Word: NEDO's Innovation Outlook

At the beginning of July 2025, the Innovation Strategy Center of Japan's New Energy and Industrial Technology Development Organization (NEDO) published its "Innovation Outlook Version 1.0," outlining a new strategic direction for national research and development.

It pivots from a traditional, linear model of R&D to a dynamic, mission-driven approach aimed at tackling complex societal challenges and fostering "Transformative Innovation."

The outlook identifies key "Frontier Domains"—high-priority areas for investment and development—across six major technological fields, determined by a back-casting methodology that starts with a desired future vision for society.

Key Takeaways

• Strategic Pivot to "Transformative Innovation": NEDO is shifting its strategy from technology-focused R&D to a mission-oriented approach. The goal is to address overarching societal challenges like climate change, an aging population, and economic security by creating new social systems and industries, a concept termed "Transformative Innovation."
• New "Innovation Strategy Center" and "Innovation Outlook": The former Technology Strategy Center (TSC) has been reorganized into the Innovation Strategy Center to lead this new agenda. The "Innovation Outlook" is its flagship publication, designed to identify and communicate priority R&D areas ("Frontier Domains") to a wide range of stakeholders, including government, industry, and finance.
• MFT Framework as a Core Methodology: The outlook uses a back-casting model based on the Mission/Market, Function, Technology (MFT) framework. It starts by defining a desired future social vision (Mission), identifies the necessary functions and values to achieve it (Function), and then determines the technologies required (Technology). This problem-driven approach is a departure from a purely technology-push model.
• "DARPA-Style" Management: The outlook advocates for an agile, flexible project management style inspired by the US DARPA model. This involves empowering Program Directors (PDs) with the authority and resources to guide projects from ideation to implementation, with a greater tolerance for risk and the ability to adapt to changing circumstances.
• Identification of 12 Key Frontier Domains: The core of the outlook is the identification of twelve priority areas across six major technological fields for Japan to focus its innovation efforts.

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