Japan FinTech Observer #124

Welcome to the one hundred twenty-fourth edition of the Japan FinTech Observer.

The TOPIX reached a record high on August 8, 2025, hitting 3038.84 points during the regular session and closing at 3024.21. This was the first time TOPIX has broken 3000 points in its history. It closed at 3,066.37 today (Tuesday, August 12, 2025), the first trading day of the week.

The Tokyo FinTech Association LinkedIn company page reached 15,000 followers. Thank you for your continued support, we are grateful and delighted!

Here is what we are going to cover this week:

• Venture Capital & Private Markets: GMO Venture Partners lead, SMBC Asia Rising Fund participates in DPDzero Series A; Unleash Capital backs India's Zype in Series B; TERASS raises Series C of 3.1 Billion Yen; WM Partners and AI Capital have completed the fundraising a new 30 billion yen secondary fund; GREE Ventures launches second Fund of Funds focused on Japanese Venture Capital
• Insurance: Sompo Holdings has created a Business Development Department to drive Group-wide growth investments
• Banking: MUFG first quarter results; Resona to increase DG Stake to 30+% as activist Oasis exits; Cathay United Bank det to mark debut in Japan with Tokyo Branch; SMBC accelerates AI utilization through development of "AI-CEO"
• Payments: PayPay (LY Corporation), AEON Financial Service, Mercari, and Digital Garage earnings; JFTC approves Visa's commitment plan to address antitrust concerns
• Capital Markets: Morgan Stanley Investment Management's "Top Ideas for August 2025" include what we termed "The Ichi Strategy"
• Digital Assets: Bakkt to acquire shares of Marusho Hotta in expansion of Bitcoin Treasury Strategy; Coincheck Group earnings; Japan Smart Chain unveils testnet and launches early preview of the Mizuhiki Suite
• The Last Word: Future Interest Rate Outlook

Venture Capital & Private Markets

• GMO Venture Partners lead, SMBC Asia Rising Fund participates in DPDzero Series A: debt collections are the backbone of lending, however collections today are run by collection agencies who care very little about the borrower and mostly care about their commissions; with a vision to build India’s best collections company, DPDzero has announced raising $7million in Series-A funding led by GMO VenturePartners, SMBC Asia Rising Fund, and Blume Ventures, which has doubled down since the previous round; it also saw participation from India Quotient, Sinarmas Group and others
• Unleash Capital Backs India's Zype in Series B: Mumbai-based digital lending startup Zype has raised Rs 90 crore ($10.2 million) in a fresh funding round led by Japanese venture capital firm Unleash Capital Partners; existing investor Xponentia Capital also participated in the round; this round comes after the 2022-founded startup raised its first major institutional round of Rs 146 crore last year, thereby bringing the total equity raised to Rs 236 crore; Zype received a non-banking finance company (NBFC) licence in 2023 and, since then, has been disbursing loans from its books; its current assets under management (AUM) stands at Rs 400 crore, and since its inception, it has disbursed Rs 1,300 crore
• TERASS Raises Series C Round of 3.1 Billion Yen: TERASS has completed a Series C round totaling 3.1 billion yen with 10 companies as underwriters, including Norinchukin Capital, Mizuho Capital, Boost Capital, and Z Venture Capital; based on this fundraising, TERASS will further accelerate business growth and aims to become No.1 in three areas by 2027: "sales as an independent real estate brokerage company," "number of real estate brokerage sales personnel," and "comprehensiveness of real estate transaction and asset formation-related services," thereby establishing its position as a main player guiding customers to better living and asset formation through "good real estate transactions"
• WM Partners and AI Capital have completed the fundraising for the 30 billion yen Japan Private Equity Opportunity 2024 Investment Limited Partnership; the fund aims to provide liquidity opportunities for investors in domestic buyout funds, venture capital funds, etc., with the creation of a domestic secondary market as its main theme; since its establishment, the fund has steadily built up a track record in meeting the liquidity needs of investors; in addition to investors in existing funds, such as SMBC Group and Development Bank of Japan Inc., who supported the significance of this fund's efforts, the partners received applications from a wide range of investors, including financial institutions, pension funds, and business companies; as a result, they were able to raise more than the original target amount of 20 billion yen
• GREE Ventures Launches Second Fund of Funds Focused on Japanese Venture Capital: GREE Ventures has established the GREE LP Fund JP 2, Limited Partnership (“JP2”), its second fund of funds (FoF) focused on Japanese venture capital; JP2 completed its first close at ¥4.4 billion, with a target final fund size of ¥6 billion; through JP2, GREE Ventures expects to gain insights and deal flow from approximately 600 startups by investing in around 20 VC funds
• Shun Sagara moved from Tokyo to Bengaluru in 2023 to expand his Japanese VC firm, Genesia Ventures; Sagara aims to invest in Indian startups with potential for global leadership and collaboration; he said that he and his wife love raising children in India because of the hospitality

Insurance

• Sompo Holdings has created a Business Development Department to drive Group-wide growth investments; launched on August 1, 2025, the new department will leverage Sompo Holdings’ strength and scale, and act as a center of excellence across the entire Group; specifically, it will target investment opportunities, mainly in Japan, to develop new businesses that have a positive social impact, as well as to promote and manage venture capital investments; Senior Executive Vice President Koichi Narasaki, Executive Officer in charge of Digital Business and Investment has been appointed General Manager to lead the department; Motoshi Tobari will move to his new role from Sompo Holdings’ Corporate Planning Department to lead the New Business Development Group, and Hiromichi Yoshitake joins from the Investment Strategy Department to head the Investment Promotion Group

Japan Launches Fully Domestically Produced Quantum Computer

A Japanese superconducting quantum computer, fully designed and built with homegrown components and software, went live at The University of Osaka’s Center for Quantum Information and Quantum Biology (QIQB). This achievement signifies Japan’s technological prowess in quantum computing, demonstrating the nation’s capacity to design, manufacture, and integrate a complete quantum system. Visitors to Expo 2025, Osaka, Kansai, Japan will have the opportunity to interact with this cutting-edge technology through a dedicated exhibit.

The project, spearheaded by QIQB, along with RIKEN and leading Japanese companies such as ULVAC, ULVAC CRYOGENICS, e-trees.Japan, QuEL, QunaSys, Systems Engineering Consultants, TIS, and Fujitsu, achieved complete technological self-reliance by replacing previously imported components, such as the dilution refrigerator and pulse tube refrigerator with domestic alternatives. Furthermore, the entire software ecosystem, from front-end to back-end, is open-source and developed in Japan, leveraging the Open Quantum Toolchain for OPerators & USers (OQTOPUS).

We highlight this news as Richard Katz has repeatedly argued (and we agree) that while Japan still has world-class component manufacturers, e.g. supporting the iPhone, it has largely lost its capability to develop a fully integrated system. Hence the launch of a fully domestically produced quantum computer offers some hope that Japan can regain that edge.

Banking

• Mitsubishi UFJ Financial Group (MUFG) reported a Profit Attributable to Owners of Parent (Net Income) of ¥546.0 billion for the first quarter of the fiscal year ending March 31, 2026 (Q1 FY25); while this figure represents a modest 1.8% year-over-year (YoY) decline on a reported basis, a more telling metric is the adjusted result, which shows a ¥12.0 billion YoY increase after accounting for the prior-year technical impact of changing a subsidiary's closing period; this performance puts the Japanese megabank on a favorable trajectory, having achieved 27.3% of its ambitious ¥2.0 trillion full-year net income target; basic Earnings Per Share (EPS) for the quarter was ¥47.55, holding nearly flat from ¥47.50 in the prior-year period
• Resona to Increase DG Stake to 30+% as Activist Oasis Exits: Resona currently holds 12.42% of Digital Garage's shares (ratio to total voting rights as of March 31, 2025), acquired through third-party allocation and market purchases, and Digital Garage positions Resona as a strategic partner for Digital Garage's medium- to long-term growth; by acquiring 8,520,200 shares of Digital Garage (voting right ratio: 18.52%) held by funds managed by Oasis, Resona's voting right ratio of Digital Garage's shares will become 30.95%, and Digital Garage is expected to become an equity-method affiliate of Resona HD
• Cathay United Bank Set to Mark Debut in Japan with Tokyo Branch: Cathay United Bank has received approval from the Financial Supervisory Commission (the "FSC") to establish a branch in Tokyo and a sub-branch in Fukuoka City, enabling the Bank to provide Taiwanese companies with cross-border financial services and expand its presence in the Asian market; this marks the Bank's debut in the Japanese market; once established, the Bank will have 70 overseas business locations across 13 regions worldwide; this expansion is poised to boost the Bank's capacity to provide cross-border services, aligning with the Bank's vision to forge strategic partnerships between Taiwanese and Japanese businesses as it strives to become a leading regional bank in Asia
• SMBC Accelerates AI Utilization Through Development of "AI-CEO": Sumitomo Mitsui Financial Group and Sumitomo Mitsui Banking Corporation announce the development and deployment of an "AI-CEO" at Sumitomo Mitsui Bank as part of their efforts to establish their brand as an "AI-leading Financial Institution"; through the experience of "casual consultation with an AI-CEO modeled after Group CEO Tatsuru Nakajima," the initiative aims to help employees naturally recognize the usefulness of AI in business applications

Payments

• PayPay Powers LY Corp's First Quarter as it Prepares for IPO: LY Corporation's revenue for the cumulative consolidated first quarter of the fiscal year ending March 31, 2026 amounted to 489.6 billion yen (up 5.7% year on year), representing the highest cumulative consolidated first quarter revenue to date; this was due to an increased revenue in the Strategic Business accompanied by the growth in PayPay consolidated, increased revenue in the Commerce Business accompanied by factors including the favorable performance of the ASKUL Group and ZOZO Group, among others, as well as increased revenue in the Media Business driven by the growth of account advertising
• AEON Financial Revises Prior Fiscal Year, Files Delayed First Quarter Results: AEON Financial Services has submitted an amended securities report and other documents for the fiscal year ending February 2025 to the Director-General of the Kanto Regional Financial Bureau on July 31, 2025, and has also corrected its financial results summary; AEON Financial's first quarter results were generally slightly below the quarterly run rate required to meet the fiscal year 2025 targets; AEON Financial has reached 36.79 million registered users across AEON Card, AEON Pay, AEON Bank, etc.; that is an addition of 630,000 registered users for this quarter, and 2.2 million year-on-year; of these, there are 26.37 million credit card holders, and 8.75 million users of AEON Pay
• Stellar FinTech Performance Drives Mercari's Full-Year Results: despite not achieving its forecast results, Mercari achieved the highest figures to date, with consolidated revenue for FY2025.6 at 192.6B JPY (+3% YoY); core operating profit was much greater than expected, landing at 27.5B JPY (+46% YoY), indicating a large increase in profitability; Marketplace, Fintech, and US all recorded a profit, driving consolidated revenue growthl the Fintech segment achieved high growth of both sales and profits, with core operating profit reaching 4.5B JPY to significantly exceed the full-year target of 3.0B JPY; Mercari reached a cumulative total of more than 5 million Mercards issued, and the user base in the credit area is growing steadily
• Digital Garage First Quarter FY3/2026 Financial Results: Digital Garage's (DG) first-quarter results for the fiscal year ending March 2026 present a stark dichotomy that requires careful dissection; the headline figure—a consolidated pre-tax loss of ¥1.3 billion—paints a misleading picture of the company's health, triggering a market sell-off; this loss was driven almost entirely by non-cash, non-operational foreign exchange headwinds within the Global Investment Incubation (GII) segment; beneath this surface-level volatility lies a core operational engine that is not only healthy but demonstrating accelerating strength and profitability
• The Hokkoku Bank has changed the point awarding timing from "monthly settlement with rewards given the following month" to "instant rewards after usage" for its digital regional currency service "Tochituka"; points are awarded as "Tochituka Points," with a 0.5% return rate on Tochika usage (1 point per 200 yen spent); tochituka Points can be used at a 1:1 ratio (1 Tochituka Point = 1 yen) at all 2,000+ Tochituka member stores
• JFTC Approves Visa's Commitment Plan to Address Antitrust Concerns: The Japan Fair Trade Commission (JFTC) has announced its approval of a commitment plan submitted by Visa Worldwide; the plan resolves an investigation into Visa's business practices, which the JFTC suspected were in violation of Japan's Antimonopoly Act; this decision concludes the matter without a formal finding of violation, focusing instead on a swift restoration of fair competition in the credit card transaction processing market

Capital Markets

• Morgan Stanley Investment Management's "Top Ideas for August 2025" include what we termed "The Ichi Strategy": Japan’s Ministry of Finance acting as a backstop to shift future issuances away from the super-long sector, and increased foreign demand enticed by attractive FX-hedged JGB long-end yields, could drive a partial reversal of the steepening trend; MSIM calls this the "Japanese Government Bond (JBG) Yield Curve Flattener Trade" - that rolls off the tongue like butter; we call it "The Ichi Strategy", and you know why 🤣
• In Amazon Web Services' "Cloud Adoption Update for Financial Market Infrastructure Providers 1H25", the Japan Exchange Group detailed how it is using Amazon Bedrock to enhance the searchability and usability of the “timely disclosure” documents that listed firms publish in high volumes; JPX serves over 140,000 documents and 1.1 million pages per year; JPX is using GenAI to generate data tags on the documents so that investors can more quickly and easily search for and find the content they need
• CCP Global has published Japan Securities Clearing Corporation's "Migration to a New Margin Calculation Method in Listed Financial Derivatives - Brief Overview and Impact Analysis"; this paper provides a brief overview of the migration of JSCC’s Listed Derivatives Margin calculation method from the Standard Portfolio Analysis of Risk (“SPAN”) to a new Value-at-Risk (“VaR”) method and the impact analysis results

Digital Assets

• NBA Top Shot collectibles are now available via Japanese vending machines, expanding their reach into the real world; collectors hoping to acquire Top Shot moments from the machines will not need any knowledge of crypto or blockchain to get started; instead, after finding a pack they would like to purchase on the machine, users are directed to scan a QR code with their mobile phone, which automatically creates a Flow-supported wallet to house the collectibles within; after, users can finish the purchase using credit card or mobile payment options on their supported device, like Apple Pay or Google Pay
• Bakkt to Acquire Shares of Marusho Hotta in Expansion of Bitcoin Treasury Strategy: Bakkt Holdings has entered into a share purchase agreement with RIZAP Group to acquire approximately 30% of the outstanding shares of MarushoHotta (MHT), a Tokyo Stock Exchange-listed company (TSE: 8105); the acquisition would make Bakkt the largest shareholder of MHT; as part of the transaction, Phillip Lord, President of Bakkt International, will become Chief Executive Officer of MHT, and MHT will include investing in Bitcoin and other digital assets as part of its treasury; in connection with the transaction, Bakkt has acquired the Web domain www.bitcoin.jp, which, subject to the approval of MHT’s shareholders, will become the new name of MHT
• Coincheck Group reported a mixed first quarter for fiscal year 2026, characterized by a challenging crypto market that impacted trading revenues, but underscored by significant strategic progress and strong underlying growth in its user base and assets; strategically, the quarter was highlighted by the announcement of a landmark partnership with Mercoin (a subsidiary of Mercari), Japan's largest C2C marketplace, which is expected to significantly expand Coincheck's customer base; the company's new staking service also gained significant traction, with revenue growing more than six-fold from the previous quarter; management expressed optimism about the future, citing favorable regulatory developments in Japan and a clear strategy for global expansion
• Japan Smart Chain Unveils Testnet and Launches Early Preview of the Mizuhiki Suite: AltX Research has launched the first Japan Smart Chain (JSC) testnet and an early preview of the Mizuhiki Suite; a modular trust and compliance layer built for invited web3 developers; JSC is a Japan-sovereign, Ethereum-compatible Layer 1 blockchain validated by domestic industry leaders; as a “compliance-first” chain, it embeds blacklist enforcement and transaction prioritization, offering trusted infrastructure for regulated digital-asset services without compromising usability; the Mizuhiki Suite builds on this foundation, providing modular tools for on-chain identity, compliance, and risk management; enabling businesses to launch compliant digital services without fragmented off-chain processes
• Casio announced a collaboration with the Web3 metaverse gaming platform The Sandbox as part of the VIRTUAL G-SHOCK project involving the G-SHOCK brand of shock-resistant watches; in an ongoing rollout beginning September 3, game content offering experiences of the G-SHOCK worldview will be made available, along with limited-edition non-fungible tokens (NFTs) and avatars

The Last Word: Future Interest Rate Outlook (NLI Research Institute)

Takeshi Ueno, Chief Economist at the NLI Research Institute, published an update to his interest rate outlook this past week. The report analyzes the recent surge in Japan's long-term interest rates (10-year JGB yield) and provides a forecast for the coming 18 months. The key argument is that the recent rise to a 17-year high of 1.6% is not driven by external factors like US rates, but by unique domestic developments.

Two primary drivers are identified:

1. Rising expectations of Bank of Japan (BOJ) rate hikes, fueled by strong wage growth and persistent inflation.
2. An expanding risk premium on JGBs, initially due to market volatility and subsequently driven by growing concerns over Japan's fiscal policy and increased government bond issuance.

Investor behavior has shifted dramatically. While domestic institutions like banks and insurers have become cautious and are reducing their JGB holdings, foreign investors have stepped in as aggressive buyers, attracted by the higher yields.

NLI's main forecast is for a continued, gradual rise in long-term rates, reaching 1.7% by the end of fiscal year 2025 (March 2026) and 1.8% by the end of fiscal year 2026 (March 2027). This is based on the expectation of further BOJ policy rate hikes and a persistently high risk premium. Risks to this forecast are balanced, with potential for both higher rates (from fiscal expansion) and lower rates (from an economic downturn).

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