Japan FinTech Observer #128

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

Prime Minister Ishiba announced his resignation right after he "gave away the store" to Trump, as Richard Katz observed.

As the governmental budget season is under way, the Financial Services Agency has requested the highly anticipated review of taxation of crypto asset transactions, i.e. a move towards separate taxation like other financial assets (20% tax rate, plus local tax).

However, to quote another famous economist, Jesper Koll stated: "Specifically, I very much doubt anyone at the Ministry of Finance will agree to either a cut in taxes nor out-of-the-normal expenditure increases. Whatever politicians in their desperation to build coalitions may call for, the MoF will be more than ready to counter attacks and stonewall."

Brace for an interesting autumn in Japan.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: MUFG Bank and MUFG Innovation Partners Invest in LayerX; SMBC Group, alongside the Development Bank of Japan and Sumitomo Mitsui Trust Bank, has invested in Commonwealth Fusion Systems; Saison Capital Participates in Pointsville's Series A
• Insurance: SOMPO to Acquire Aspen Insurance Holdings for USD 3.5bn
• Banking: The first meeting of the Financial System Council's Working Group on Strengthening Regional Financial Power was held
• Payments: PayPay Integrates with “WeChat Pay”; merger of au Payment and au Financial Services; Stripe Tour Tokyo - Roundtable: A Policy Discussion on Stablecoins
• Asset Management: establishment of new joint venture company between SBI Group and SMBC Group
• Digital Assets: a new partnership between SBI VC Trade and Convano for large-scale Bitcoin operations; SBI Securities' launch of crypto CFDs, underpinned by B2C2 as a liquidity provider; Coincheck Group to acquire Aplo, a registered crypto prime brokerage for institutional investors; Startale to lead Entertainment Tokenized Assets (ETA) in Japan; the second meeting of the Financial System Council's Working Group on Crypto Assets was held
• The Last Word: Bank of Japan Deputy Governor Himeno's Hokkaido Speech

Venture Capital & Private Markets

• MUFG Bank and MUFG Innovation Partners Invest in LayerX: MUFG Bank and MUFG Innovation Partners (MUIP), both consolidated subsidiaries of Mitsubishi UFJ Financial Group (MUFG), have made an investment in LayerX, a startup focused on equipping society with AI-centered software; MUFG Bank also signed a strategic partnership memorandum of understanding with LayerX to further deepen their collaborative relationship; MUIP’s investment, through the MUFG Innovation Partners No. 3 Investment Limited Partnership, is a follow-on investment after participation in LayerX’s Series A round in 2023; the 15 billion yen Series B funding round was led by TCV; other investors include Coreline Ventures, JAFCO Group, Keyrock Capital Management, and Japan Post Investment
• Sumitomo Mitsui Banking Corporation (SMBC), alongside the Development Bank of Japan, Sumitomo Mitsui Trust Bank as well as nine other Japanese companies, has invested in Commonwealth Fusion Systems (CFS), a US-based start-up company in fusion space; this is the inaugural investment for SMBC in a fusion-related start-up company; the fusion industry is drawing attention as a disruptive new technology that could supplant existing solutions, given its contributions to decarbonization, the abundance of fuel resources, inherent safety, and stability as a baseload power source; whereas demonstrations were previously led primarily by the public and academic sectors, an ecosystem centered on private startups is now taking shape toward commercialization; SMBC views this as a promising candidate for a new industry in which technologically capable Japanese companies can play important roles across the supply chain
• Saison Capital Participates in Pointsville's Series A: Pointsville, a pioneering platform for digital asset infrastructure and loyalty, has completed its Series A funding round led by Valor Capital Group, with participation from an exceptional group of global investors and industry leaders; backers include Tether, Itaú Unibanco's founding family, Nubank's co-founder, Temasek-backed Superscrypt, SNZ, Saison Capital, K2 Integrity, Citrino, and Dynamo's partners
• The Japan Securities Dealers Association has been holding a "Roundtable Meeting on the Supply of Growth Funds to Startup Companies and Other Entities" to consider issues regarding the trading system for unlisted shares based on the needs of market participants, and the FSA has been participating in this meeting as a co-host and to advance the discussions; after publishing its draft report as of July 31, 2025, the final report has been published on September 5, 2025, without material differences. Hence you might refer to our previous report, outlining the key points in English, or to the Japanese final document

Insurance

• SOMPO to Acquire Aspen Insurance Holdings for USD 3.5bn: SOMPO Holdings, through its subsidiary Sompo International Holdings (SIH), has entered into a definitive agreement to acquire 100% of the outstanding ordinary shares of Aspen Insurance Holdings; the Acquisition has been unanimously approved by the Board of Directors of SOMPO and of Aspen
• The Financial Services Agency (FSA) reported on its meetings held with Japan's financial industry associations during July 2025, outlining its key priorities and concerns

Banking

• The first meeting of the Financial System Council's Working Group on Strengthening Regional Financial Power was held on Friday, September 5, 2025, focusing on the evolving role of regional financial institutions in Japan's regional revitalization efforts and the profound implications of accelerating population decline on urban and regional development; regional financial institutions are being encouraged and enabled to expand their business scope and consulting functions to support local businesses, including through M&A, business succession, and future-oriented lending; however, these institutions face a challenging operating environment marked by stagnating deposits, increasing non-competitive costs (e.g., cybersecurity, AML), and emerging signs of business performance bifurcation; concurrently, Japan is experiencing an accelerating demographic decline, with projections indicating a significant reduction in total population and a dramatic shift in urban distribution, leading to a concentration in fewer, more distant large cities and the potential for widespread "ghost towns"; this necessitates a strategic "triage" approach to regional policy, moving beyond a one-size-fits-all "local revitalization 2.0" to a focused strategy of consolidation, smart growth, and planned contraction for certain areas
• The Financial Services Agency (FSA) reported on its meetings held with Japan's financial industry associations during July 2025, outlining its key priorities and concerns

Payments

• PayPay Integrates with “WeChat Pay”: PayPay announced that WeChat Pay (微信支付) will become available for use at PayPay merchants nationwide through HIVEX starting from mid-September this year: "HIVEX®” offers common business rules, system integration for cashless payment providers (MPSP), and a consistent neutral brand, bringing greater scalability at a commercial level to deliver a better user experience; by collaborating with “HIVEX®”, it becomes possible to conduct cross-border payments that were previously unattainable
• Merger of au Payment and au Financial Services: au Payment and au Financial Services, both 100% owned and consolidated subsidiaries of au Financial Holdings, have decided to merge as of July 1, 2026 (scheduled) for the purpose of centralizing payment business strategy and accelerating business promotion; the intent is for an absorption-type merger with au Payment as the surviving company and au Financial Services as the dissolving company
• Stripe Tour Tokyo - Roundtable: A Policy Discussion on Stablecoins: prior to the start of the Stripe Tour Tokyo main event, Stripe hosted a policy-themed breakfast discussion to explore the transformative potential of stablecoins, bringing together representatives from finance, technology, and regulatory bodies; the session provided a deep dive into the past, present, and future of this emerging financial technology, focusing on its global utility, key use cases, regulatory importance, and specific implications for the Japanese market

Capital Markets

• Nomura has published its quarterly "Outlook for FY25-26 Corporate Earnings"

Asset Management

• Establishment of New Joint Venture Company between SBI Group and SMBC Group: SBI Holdings, SBI Securities, Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corporation, and SMBC Nikko Securities announced on June 16, 2025, the establishment of a preparatory company to plan and provide new joint services, subject to approval by relevant authorities; they have now established Olive Consulting as the next step in implementing that strategy; Olive Consulting will provide a new asset management service called "Flexible Consulting" starting next spring; this service features human consulting by advisors from SMBC Nikko Securities and Sumitomo Mitsui Bank who belong to Olive Consulting

Digital Assets

• Over the past week, there were two additional announcements regarding SBI Group's strategic expansion within the Japanese cryptocurrency market; these key developments include a new partnership between SBI VC Trade and Convano for large-scale Bitcoin operations and SBI Securities' launch of crypto CFDs, underpinned by B2C2 as a liquidity provider; with crypto ETFs most likely to launch only in January 2027, the crypto CFDs provide the first product to gain direct crypto exposure in the domestic securities market; SBI Group is leveraging its various subsidiaries (SBI VC Trade, SBI Securities, and B2C2) to offer a full spectrum of crypto services, from direct asset management and trading to derivative products and institutional liquidity
• Coincheck Group to Acquire Aplo, a Registered Crypto Prime Brokerage for Institutional Investors: Coincheck Group, the holding company of Coincheck, one of Japan’s leading crypto asset exchanges, has entered into a stock purchase agreement to acquire Aplo, a digital asset prime brokerage for institutional crypto investors; pursuant to the agreement, all issued and outstanding shares of Aplo are to be exchanged for newly issued ordinary shares of Coincheck Group; closing of the transaction, subject to certain undertakings and conditions, is expected in October 2025
• Startale Group to Lead Entertainment Tokenized Assets (ETA) in Japan: Startale Group develops products and standards that span payments, digital identity, gaming, and entertainment; each initiative is built to operate responsibly and securely, with global distribution in mind; now, Startale Group is defining a new frontier for Japan’s cultural economy: Entertainment Tokenized Assets (ETA); to bring Entertainment Tokenized Assets (ETA) from concept to reality, Startale Group is partnering with Twin Planet, one of Japan’s fastest-growing entertainment companies with deep roots across talent, creators, and IP activation
• Layer 1 blockchain Somnia has launched its mainnet and SOMI token; in 2022, Improbable ranked as one of the buzzier metaverse startups after raising $150 million from investors like SoftBank Vision Fund 2 and Andreessen Horowitz
• SBI-FERI has published "Who Holds Crypto Assets?" - this study investigates the determinants of crypto-asset investment behavior using original survey and experimental data from Japan, the United States, Germany, and China
• The second meeting of the Financial System Council's Working Group on Crypto Assets, held on September 2, 2025, highlights a significant push in Japan towards strengthening crypto asset regulation, primarily by considering a shift from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA); this move is driven by the increasing investment-oriented nature of crypto assets, the need for enhanced investor protection, and a desire to foster market reliability and innovation; concurrently, the US is also advancing its regulatory framework, with key legislation like the "Digital Asset Market Structure Bill (CLARITY Bill)" aimed at clarifying supervisory authorities (SEC vs. CFTC) and establishing comprehensive regulatory frameworks for digital commodities and stablecoins; challenges remain in effectively classifying crypto assets (especially distinguishing between "funding/business activity type" and "non-funding/non-business activity type"), implementing robust information disclosure, and managing the unique risks associated with the asset class, such as price volatility and cyber-attacks
• S&P Global Assigns Sky Protocol 'B-' Rating; Outlook Stable: at the beginning of August, S&P Global Ratings assigned its 'B-' issuer credit rating to Sky Protocol (previously MakerDAO); the outlook is stable; subsequently, S&P Global Ratings hosted webinar titled "Understanding Our Credit Approach to Sky," which detailed the methodology and rationale for assigning an inaugural credit rating to the decentralized lending protocol

The Last Word: Bank of Japan Deputy Governor Himeno's Hokkaido Speech

Bank of Japan (BOJ) Deputy Governor Himeno provided insights into Japan's economic outlook, monetary policy, and regional economic conditions during a press conference and a speech in eastern Hokkaido on September 2, 2025. Given the next Monetary Policy Meeting taking place on September 18 & 19, 2025, we parse the speech for further clues on the bank's thought process.

Key themes include the ongoing impact of US trade policy, the trajectory of underlying inflation, the BOJ's cautious approach to rate hikes, and the strategy for reducing the BOJ's balance sheet. Himeno emphasized the need for careful monitoring of both upside and downside risks, particularly regarding global uncertainties and the delayed effects of tariffs. He also highlighted the resilience and unique growth characteristics of the Hokkaido economy.

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