Japan FinTech Observer #42

Welcome to the forty-second edition of the Japan FinTech Observer.

It has been an excellent week for Japanese players abroad, with AsiaNext launching crypto derivatives in Singapore, AEON obtaining its Islamic digital banking license in Malaysia, and Laser Digital announcing its alternative assets tokenization platform Libre.

This week, we will move the live recap of the Japan FinTech Observer, our second session, to LinkedIn Live. So you can follow it right here on the platform on Tuesday, January 16, starting 5pm JST.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Japan’s private equity opportunity; MUFG’s partner LIQUiDITY Group has announced the launch of a new $200 million debt fund; Saison Capital participates in the seed round for Mylapay, an emerging payments FinTech in India; Tokio Marine participates in the seed round of Korr, an insurtech startup based in New York City; GREE Ventures is looking to expand international access to domestic VC managers by re-opening its latest Japanese fund of funds vintage to overseas investors; the government will begin investing in start-up companies using dormant deposits that have not been traded at financial institutions for more than 10 years;
• Banking: AEON Bank gains regulatory approval in Malaysia as the first Islamic digital bank; financial management leader Money Forward reports strong full-year earnings
• Capital Markets & Asset Management: Earnings are being downgraded everywhere apart from Japan; the total market capitalization of the Tokyo Stock Exchange (TSE) regained the top position in Asia; and the TSE will today release its first list of companies that have disclosed plans to optimize its capital management and share price; Nikkei has taken a stake in Wilshire Indexes, a UK-based leading global benchmark platform; Japan’s Nikko Asset Management Group is considering acquisitions in such areas as private assets and exchange-traded funds; US investment bank Jefferies continues to experience tailwinds from its partnership with SMBC; activist investor 3D Investment Partners is soliciting buyout offers for Fuji Soft
• Digital Assets: AsiaNext, a joint venture between SBI Digital Asset Holdings (SBI DAH) and SIX, has successfully launched crypto derivatives trading; Nomura’s Laser Digital, Brevan Howard, and Hamilton Lane partner on Libre, a platform for tokenized alternative assets; trading on the newly launched Osaka Digital Exchange (ODX) has been marginal to date; Bunzz launches an AI-powered smart contract audit tool; Mercari is set to accept Bitcoin payments for purchases made on its flea market app starting in June 2024; Zebec launched its advanced web3 payment and real-time payroll services in Japan
• The Last Word: Justice for Post Office Victims

Please join us for another eXponential Finance Live 🎙️ on Tuesday, January 16, at 9pm JST | 8pm SGT | 12pm UTC right here on LinkedIn Audio, when we will discuss 2024 Digital Asset Custody Trends with Arthit (T) Sriumporn, Founder & CEO at Rakkar Digital.

Rakkar Digital is a Singapore-based company that provides digital asset custodian services to institutional clients in Southeast Asia and Hong Kong. The company is backed by SCB 10X, the investment arm of SCB — Siam Commercial Bank, and powered by Fireblocks.

Leveraging cutting-edge multi-party computation (MPC)-CMP custody infrastructure as their underlying technology, Rakkar Digital provides the highest level of security for assets along with bankruptcy remote mechanism of asset segregation.

The company supports a wide range of assets and blockchain protocols and offers highly customizable policy engine, giving clients greater control and flexibility over their assets. With fast service-level agreements (SLAs) and round-the-clock support from its team of blockchain experts and security professionals, Rakkar Digital is committed to delivering institutional-grade custody services.

Venture Capital & Private Markets

• Japanese private equity is a growing presence in the financial landscape, and private equity firms can help Japanese companies fulfill their potential, argues McKinsey in “A force for good: Japan’s private equity opportunity”
• LIQUiDITY Group has announced the launch of a new $200 million debt fund called Liquidity7; Harel Insurance & Finance has committed $30 million as the fund’s anchor investor; this fund is a part of Liquidity Group’s larger strategy, which includes utilizing advanced AI and machine learning technologies for efficient capital deployment and monitoring; in 2023, these technologies played a significant role in Liquidity Group’s growth, particularly noted by MUFG’s increased investment commitment and the establishment of new credit funds and an equity investment fund focused on technology companies
• Mylapay, an emerging payments FinTech in India, has raised INR 4.6 crore ($550K) in a seed round led by venture capital firm CDM Capital; the round also witnessed participation from Singapore-based Saison Capital (the Venture Capital arm of Credit Saison) and 77 Capital
• Korr, an insurtech startup based in New York City, has closed a USD 3.2m seed funding round led by Motive Ventures along with Tokio Marine Future Fund, marking a significant step in Korr’s journey to modernize insurance technology; early investors include Plug and Play Ventures
• GREE Ventures, a Japanese fund of funds and start-up investor owned by mobile gaming company GREE, is looking to expand international access to domestic VC managers by re-opening its latest Japanese fund of funds vintage to overseas investors; the move will test international appetites for GREE’s Japanese VC fund of funds strategy before the firm launches Fund II later this year, expected to garner 15 billion yen, of which 3 billion yen would come from overseas investors
• Starting in fiscal year 2024, the government will begin investing in start-up companies using dormant deposits that have not been traded at financial institutions for more than 10 years; the plan is to contribute up to 1 billion yen per year to the fund; under the Act on the Utilization of Dormant Deposits, which came into effect in 2018, these funds have been used for public interest activities; amendments to the law in 2023 made it possible to invest in private companies
• 2023 was a record year for non-SoftBank Japanese investment in Europe; Japanese capital was involved in a record 97 funding rounds in 2023, according to Dealroom, up from 55 five years ago
• Headline Asia’s 2023 recap, as well as Global Brain Corporation’s
• Sussex Partners provide their “Japanese Hedge Fund Review and Outlook 2023/24”

Banking

• Leading financial management company Money Forward reported strong full-year earnings (ending November 2023) with a 41% year-on-year net sales increase; in early trading today, the shares are quoted nearly 14% higher, bringing the company close to a USD 2bn market capitalization; together with the earnings, the company also released a comprehensive business overview in English
• AEON Credit Service (M) Berhad announced that AEON Bank has obtained approval from the Bank Negara Malaysia (BNM) and the Minister of Finance to commence its digital banking operations in Malaysia; the digital bank was formerly known as ACS Digital Berhad and secured the bid for a digital banking license alongside MoneyLion, which has since pulled out from the consortium; this announcement marks AEON Bank as the first Islamic digital bank in Malaysia to receive approval from BNM to launch

Capital Markets & Asset Management

• Earnings are being downgraded everywhere apart from Japan, according to the latest Schroders Equity Lens; also, the total market capitalization of shares listed on the Tokyo Stock Exchange passed that of Shanghai‘s bourse on Thursday in USD terms, regaining the top position in Asia; and the Tokyo Stock Exchange will today release its first monthly list of listed companies that have disclosed plans to optimize its capital management and share price that will help enhance investor returns
• Nikkei has taken a stake in Wilshire Indexes, a UK-based leading global benchmark platform; following a capital increase by Wilshire Indexes, Nikkei is now an 8% shareholder; Nikkei Group member the Financial Times (FT) also has a stake in Wilshire Indexes, which currently offers the “FT Wilshire 5000” stock price index; Nikkei’s investment takes the Nikkei-FT Group shareholding in Wilshire Indexes to approximately 20%, furthering the global expansion of its index business and reinforcing the Nikkei brand internationally
• Japan’s Nikko Asset Management Group is considering acquisitions in such areas as private assets and exchange-traded funds, President Stefanie Drews told Nikkei; the moves will come as the company aims to roughly double total assets under management to 60 trillion yen ($415 billion) by around 2032; Nikko Asset Management is on track to meeting the target, Drews said
• US investment bank Jefferies continues to experience tailwinds from its partnership with SMBC; the firm disclosed in its investor letter out with earnings (for the fiscal year ending November) that Sumitomo owns 8.3% of Jefferies, which is broadly unchanged from a quarter ago, and remains well below the stated 15% ownership that the partners are working towards
• Activist investor alert: Japan software developer Fuji Soft has been in talks with private equity firms over potential buyouts as part of a strategic review prompted by its top shareholder, the company said on Friday; the Yokohama-based company received buyout proposals from multiple private equity firms last September, Fuji Soft’s statement said, adding that the proposals were in response to requests from Fuji Soft’s biggest investor, 3D Investment Partners, and not something the company requested

Digital Assets

• AsiaNext, an institution-only global digital asset trading venue, has successfully launched crypto derivatives trading — a crucial development for institutional investors seeking a safe and secure venue to trade digital assets; headquartered in Singapore, AsiaNext is a joint venture between SBI Digital Asset Holdings (SBI DAH) and SIX
• A FinTech incubator backed by hedge fund billionaire Alan Howard and Nomura’s crypto arm Laser Digital have launched a Web3 platform focused on alternative asset managers; Brevan Howard and private markets investment firm Hamilton Lane have partnered with the platform, Libre, which uses tokenisation and smart contracts to improve investment execution; Libre is powered by the Polygon blockchain technology, and has been designed for regulatory-compliant issuance and automated lifecycle management of alternative assets; it is expected to go live during the first quarter of 2024
• Trading on the newly launched Osaka Digital Exchange (ODX)’s “START” security token platform is minimal, with two initial broker participants, and two issues listed; by contrast, the Equity PTS has reached record volumes
• Bunzz launches AI-powered smart contract audit tool: Bunzz is a DApp development platform that provides blockchain developers with more accessible tools to save development time through a GUI and, for advanced blockchain developers, an open-source smart contract hub to allow smart contract combinations and building of complex DApps
• Mercari, one of Japan’s largest ecommerce platforms, is set to accept Bitcoin payments for purchases made on its flea market app starting in June 2024, according to a report by Nikkei; the integration of Bitcoin payments will be facilitated through Mercari’s Tokyo-based crypto exchange subsidiary, Mercoin
• Zebec launched its advanced web3 payment and real-time payroll services in Japan, enabling real-time and continuous streams of payments and financial transactions for payroll, investments and more; founded in 2021, with investments by Circle, Coinbase, Solana Ventures, Breyer Capital, DST Global, and Lightspeed Venture Partners among others, Zebec today is positioned as a crypto payments superapp, with its suite of real-time payroll, micropayments and on-and-off ramps through the Zebec Instant Card

The Last Word: Justice for Post Office Victims

Japanese technology giant Fujitsu is in the crosshairs of British lawmakers for building the faulty accounting software that led to what has been called the country’s biggest-ever miscarriage of justice. A recently aired TV show has brought the scandal back into the headlines.

Fujitsu created the Horizon IT system that resulted in some 700 local post office managers being wrongly convicted for theft and false accounting between 1999 and 2005.

If you would like to see more of our content, please head over to the Tokyo FinTech YouTube Channel or check out the eXponential Finance Podcast.

We have also created two LinkedIn groups, the “Japan Startup Observer” if your interest in Japan goes beyond FinTech, and the “FinTechs of India” to capture the developments on the subcontinent. We invite you to join both these groups.

Have an awesome week ahead.