Japan FinTech Observer #163

Welcome to the one hundred sixty-third edition of the Japan FinTech Observer. This week, we are excited to have new subscribers join us from the Financial Conduct Authority, PT OCBC Sekuritas Indonesia, the Global Association of Risk Professionals (GARP), and Global Financial City Osaka（国際金融都市OSAKA）, among others 🙏

We have left amazing Uzbekistan behind and turned further West, but not without noting the unique challenges the country is facing in terms of AML, cashless payments, and tax evasion:

As not only my compliance friends well know, making rules is one thing, but enforcing them is an entirely different pair of shoes. Let's just say these rules where loosely observed.

With three Golden Week national holidays last week, the news cycle was rather limited, although the Nikkei cracked 63,000, catching up with US markets on re-opening. We shall have more to report again next week, when we will be back in Japan.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: how Japan’s "Japan Invest" LLCs are re-engineering the US industrial backbone
• Insurance: misconduct at Sony Financial Group
• Banking: Tokyo Kiraboshi surpasses targets as rate hikes and digital pivot drive 35% profit surge; Gojo & Company expands offline branches, cuts defaults to 2%; deposit growth trails lending at Japanese megabanks
• Payments: Travel Wallet targets global scale with Japan launch and projected US expansion
• Capital Markets: Matsui Securities taps Broadridge for securities lending automation amid JASDEC regulatory overhaul
• Digital Assets: Japan’s great crypto migration; NETSTARS and Aptos partner to advance Web3 payment adoption; HODL1 medium-term business plan goals
• The Last Word: Everything, everywhere, all at once

Venture Capital & Private Markets

• How Japan’s "Japan Invest" LLCs are re-engineering the US industrial backbone: the Japan Bank for International Cooperation (JBIC) has announced significant financial backing for three major industrial ventures in the United States as part of a bilateral Strategic Investment Initiative; these projects focus on developing a deep-water crude oil export terminal in Texas, establishing natural gas power facilities integrated with data centers, and launching an industrial synthetic diamond manufacturing plant; by providing loans and co-financing alongside private institutions, the bank aims to enhance supply chain resilience and bolster economic security for both Japan and the U.S; these investments are designed to ensure a stable energy supply, support advanced AI infrastructure, and provide critical materials for the semiconductor and automotive sectors; ultimately, the initiatives foster economic growth while creating new opportunities for Japanese companies to provide essential technologies and equipment within the American market

Insurance

• Misconduct at Sony Financial Group: Sony Financial Group and its subsidiary, Sony Life Insurance, have disclosed financial misconduct involving an insurance agent and approximately 30 customer complaints regarding inappropriate activity; in response to these incidents, the company has decided to abolish its exclusive agency system and transition existing branches to general agencies; Sony Life is currently performing a comprehensive review of all customer contracts and expects to release a progress report by the end of May 2026; to prevent future fraud, the firm is enhancing internal controls, strengthening identity verification, and implementing a team-based "Joint Maintenance" system for client oversight; consequently, the Financial Services Agency has issued an official order requiring the company to submit detailed reports on these issues and their remediation efforts

Banking

• Tokyo Kiraboshi surpasses targets as rate hikes and digital pivot drive 35% profit surge: Tokyo Kiraboshi Financial Group (TKFG) delivered a definitive earnings beat for the fiscal year ended March 31, 2026, capitalizing on the Bank of Japan’s hawkish policy shift to outpace its own conservative projections; amidst the first meaningful rise in domestic interest rates in a generation, the Group reported a consolidated net income of ¥42.3 billion—a 35% surge that significantly exceeded expectations; however, the quality of this beat includes a strategic "special factor": ¥7.4 billion of the gain was derived from the sale of shares specifically earmarked for the redemption of preferred shares, a move aimed at streamlining the Group’s capital structure
• Gojo & Company expands offline branches, cuts defaults to 2%: amid the rise in non-face-to-face digital transactions, there is an entrepreneur who insists, “We must meet people in person,” and is expanding offline branches worldwide; Taejun Shin, founder and CEO of Gojo & Company, a Japanese FinTech startup advocating microfinance services for financially underserved populations in developing countries, is that person
• Deposit growth trails lending at Japanese megabanks: Deposits are growing at a slower pace than loans at Japanese megabanks, potentially crimping lenders' securities investments and even lending; Mitsubishi UFJ Financial Group (MUFG), SMBC Group, and Mizuho Financial Group all reported slower deposits in most quarterly periods since March 2024 when the Bank of Japan ended its negative interest rates policy, data from S&P Global Market Intelligence show
• SMBC Group has published the latest edition of STORYBOOK, an interview series that highlights how employees across the SMBC organization are creating social value in their day‑to‑day work; these stories reflect SMBC's belief that long-term growth and social impact go hand in hand, and that meaningful change happens when all employees work together with their stakeholders

Payments

• Travel Wallet targets global scale with Japan launch and projected US expansion: Travel Wallet’s formal entry into the Japanese market takes the localized South Korean FinTech into the realm of a highly competitive environment against legacy banks over cross-border FX; by exporting its proprietary payment rails to Tokyo, the firm is signaling that its ambitions lie in becoming a foundational provider of global financial infrastructure; the move represents the first phase of an interoperable cross-border payment rail designed to bypass the frictional costs of traditional correspondent banking

Capital Markets

• Matsui Securities taps Broadridge for securities lending automation amid JASDEC regulatory overhaul: Matsui Securities announced a definitive partnership with Broadridge Financial Solutions to implement the JASDEC Processing Solution (JASDECPS); this deployment aims to modernize Matsui’s securities lending business; by offloading the operational burden of bespoke Japanese back-office requirements to a global infrastructure leader, Matsui intends to accelerate revenue growth and enhance institutional agility; Matsui has carved out a dominant position as an online-focused broker specializing in the democratization of investment for Japanese retail participants; offering everything from NISA and iDeCo accounts to forex and investment trusts, the firm’s mission is to "make investment fun and interesting"; this strategy of "gamifying" the investment experience requires a frictionless, high-volume back-office capable of handling thousands of small-scale retail trades without manual friction—a need that the Broadridge partnership directly addresses
• The Japan Exchange Group has published its "JPX Derivatives Market Highlights Q1/2026", a report providing key highlights of its derivatives markets, presented through statistical charts and data on major products

Digital Assets

• Japan’s great crypto migration: 2026 legislative reforms will transition the oversight of crypto-assets from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA); by categorizing crypto-assets as investment products rather than simple payment methods, the government aims to strengthen investor protection and market integrity; the transition introduces rigorous disclosure requirements for issuers, mandatory registration for trading services, and a comprehensive framework to combat insider trading and market manipulation; additionally, the new laws mandate audited financial reporting and the strict segregation of customer assets to prevent financial loss; these changes essentially align the digital asset regulatory landscape with the high standards applied to traditional securities; this shift represents a significant evolution in Japan’s approach to fintech governance and financial stability
• NETSTARS and Aptos partner to advance Web3 payment adoption: NETSTARS has formalized a partnership with the blockchain provider Aptos to advance the integration of Web3 payment solutions into mainstream finance; this collaboration centers on the StarPay-X initiative, a gateway concept designed to merge traditional Web2 financial systems with decentralized technologies like stablecoins; by leveraging the high-speed Layer 1 blockchain infrastructure of Aptos, the companies aim to create a multi-chain environment that offers secure and efficient transactions for users; this partnership intends to move blockchain technology beyond theoretical use cases into practical, real-world financial applications; ultimately, the agreement seeks to innovate the cashless payment landscape by providing consumers with more flexible and diverse digital transaction options
• HODL1 medium-term business plan goals: HODL1 is a Japanese firm specializing in Web3 and blockchain technology; the company’s primary operations are divided into two segments: the HODL business, which focuses on the long-term accumulation and management of Ethereum, and the BUIDL business, which provides consulting and development support for decentralized projects; by utilizing AI-driven operations and avoiding dilutive financing methods, the firm aims to maximize shareholder value while contributing to the stability of the digital finance ecosystem; their financial roadmap through 2028 targets 30 billion yen in Ethereum holdings and significant growth in operating profit; the medium-term management plan also analyzes the shifting global regulatory landscape, noting that a transition from speculation to practical utility will drive the adoption of programmable money in Japan; overall, HODL1 seeks to bridge the gap between traditional finance and the on-chain economy through technical innovation and strategic asset holding

The Last Word: Everything, everywhere, all at once

The Atlantic Council this week published an essay titled "Everything, everywhere, all at once: Japan’s geoeconomic reckoning".

It argues that:

• Japan's economic model and geopolitical alignment are under strain amid rising geoecomic pressures and scrutiny from allies
• Prime Minister Sanae Takaichi faces challenges from Chinese diplomatic retaliation, US trade tensions, and a weakening yen despite major interventions
• At the same time, structural issues such as low interest rates, fiscal stimulus, and energy dependence, are fueling currency pressure and economic vulnerability

Please have a read at the link provided above.

In a related chart, Bloomberg maps Japan's currency interventions since 2022:

Also, Robin Cook, whom we introduced last week, maps the 10y10y forward rates across major economies, with Japan coming in at close to 5%, about a percentage point higher than Germany

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