Japan FinTech Observer #52

Welcome to the fifty-second edition of the Japan FinTech Observer. 52! Happy first anniversary! To celebrate the occasion, the Bank of Japan ended its negative interest rate policy, the Japanese Yen keeps falling, and the Government Pension Investment Fund is starting to learn more about alternative assets, including Bitcoin.

Now that we have this seminal moment behind us, focus will shift again towards corporate governance reform. Facing annual general meetings in the May/June timeframe, any board that has not yet submitted an improvement plan will doubtless contemplate the questions they might be asked by their shareholders. At least some stragglers, including companies with high price/book ratios, are expected to convert just in time for the AGM season.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: Kyocera establishes a new CVC fund with Global Brain; DNX Ventures announced the final close of USD 177m for two new Japan-focused funds; Strategic Business Innovator Berlin rebrands to SBI Ventures Europe; HIRAC FUND by Money Forward Venture Partners has invested in Arkadiah Technology; JCB and MUFG Bank have recently undertaken a third-party allocation of shares for Logsys; Square Enix makes a strategic investment in HyperPlay; Hyperithm has invested in ether.fi
• Insurance: Tokio Marine Group could potentially spend around $10 billion on overseas acquisitions; Lifenet Insurance will launch dementia insurance; Sumitomo Life Insurance will allow cashless payment of insurance premiums for all products; justInCaseTechnologies partners with major solution providers to enhance the value of its SaaS-based insurance system “joinsure”
• Banking: SMBC’s popular “Olive” app enters next growth phase with new features; Tokyo Star Bank has launched a new service today for non-residents; SMBC Wevox has decided to issue stock options to its officers
• Capital Markets & Asset Management: Daiwa Securities Capital Markets has defended its title as the №1 sales team in the country
• Digital Assets: the Government Pension Investment Fund (GPIF) requests information on alternative assets such as forests, farmland, gold, bitcoin; Keyring Network has facilitated the transfer of a wrapped version of the Circle USDC stablecoin for Laser Digital; NTT Digital and now.gg have reached a basic agreement for the introduction of NTT Digital’s digital wallet “scramberry WALLET for Business”; Sony Bank, Sumitomo Mitsui Trust Bank (SMTB), and Securitize Japan partnered on Sony Bank’s offering of the “U.S. Dollar-Denominated Green Finance Security Token (2024 №1)“, the first public offering of a foreign currency-denominated security token by a domestic bank
• The Last Word: Ask not what your VC can do for you

Bank of Japan ends it NIRP

The Bank of Japan (BOJ) ended its negative interest rate policy, and will guide the uncollateralized overnight call rate to remain in a range between 0.0% and 0.1% as its primary policy tool. Specifically, it will apply a rate of+0.1% to current account deposits.

For the central bank geeks, what is hidden in the bottom left graph is the move from a three-tier system to a one-tier system. In the former under NIRP, the BOJ has been applying +0.1% to the basic balance, 0.0% to the macro add-on balance, and -0.1% to the policy-rate balance. From now on, a uniform 0.1% will be applied to all balances.

If you are counting, you will have noticed the subtle 0.2% increase in rates on the policy-rate balance, beyond what any headlines suggested. Many banks were surprisingly fast to act, raising their JPY deposit savings rate from 0.001% to 0.02% as of April 1. As the cost of funds is increasing, mortgage rates come into view, which are primarily of the floating-rate type in Japan, with a semi-annual review cycle, so any impact to consumer wallets will come with some delay.

Venture Capital & Private Markets

• According to Bain’s Asia-Pacific Private Equity Report 2024, Japan was the only market to buck the dealmaking slump that began in 2022; investors found comfort in Japan’s deep pool of target companies with performance improvement potential, its stable regulatory environment, and persistently low interest rates
• A new CVC fund run by Global Brain Corporation for KYOCERA will invest primarily in Japanese and Asian startups in the fields of environment and energy, information and communications, medical and healthcare, mobility, advanced materials, software (including AI), aerospace and defense, semiconductors, and nuclear fusion
• DNX Ventures announced the final close of $122M for Japan Fund IV and $55M for Japan Annex Fund III, the latter dedicated to follow-on investments; this expansion of the Japan fund family empowers DNX Ventures to support startups from their inception through to the late stages; the focus will be on nurturing startups in Japan, with the potential inclusion of select ventures within the broader Asia region
• Strategic Business Innovator Berlin rebrands to SBI Ventures Europe to better align with its strategy; SBI Ventures Europe currently manages the Future Industry Ventures Fund in collaboration with Redstone; it plans to raise a new VC Fund, continue CVC support, and strengthen SBI’s footprint in Europe
• HIRAC FUND by Money Forward Venture Partners, a group company of Money Forward, has invested in Arkadiah Technology; Arkadiah is developing a business that supports reforestation and carbon credit supply in Southeast Asia, utilizing AI and technology to measure, report and verify carbon removal projects, and enter into revenue share agreements with land owners holding idle land in the carbon credit market
• Leading the charge in fostering the Japan Metaverse Economic Zone (JMEZ), JCB and MUFG Bank have recently undertaken a third-party allocation of shares for Logsys; in this investment, JCB and Logsys have entered into a capital business partnership agreement; furthermore, MUFG Bank’s investment in Logsys marks an additional investment following May 2023, completing Logsys’ fundraising with a total of 700 million yen
• Square Enix brings Ethereum NFT game Symbiogenesis to HyperPlay amid investment; the Final Fantasy maker has made a strategic investment in HyperPlay and is extending its Symbiogenesis game to the launcher
• Hyperithm has invested in ether.fi, the leading liquid restaking protocol built on Ethereum and EigenLayer, a rising Ethereum-based infrastructure; EigenLayer enables stakers to rehypothecate their staked ETH to secure other protocols within its ecosystem; through its innovative LRT (Liquid Restaking Token) eETH, ether.fi introduces enhanced capital efficiency to assets staked on EigenLayer
• Asian online lending platform Akulaku, which is backed by China’s Alibaba , secured up to $100 million of debt financing from the Singapore branch of London-based HSBC; in 2022, Japan’s MUFG and Thailand’s SCB — Siam Commercial Bank invested $200 million and $100 million, respectively, in Akulaku

Insurance

• Tokio Marine Group could potentially spend around $10 billion on overseas acquisitions and is patiently tracking public companies around the world, the co-head of the Japanese insurer’s expanding international business said; Tokio Marine bought U.S. insurer HCC in 2015 for $7.5 billion and more recent purchases include U.S. insurer Privilege Underwriters (Pure Group) in 2020 for $3.1 billion; it started its aggressive expansion into the U.S. market in 2008 with the acquisition of Philadelphia Consolidated in 2008 for $4.7 billion
• Lifenet Insurance will launch the dementia insurance “be” that supports payment related to early detection and treatment of dementia and mild cognitive impairment (MCI); Lifenet and pharmaceutical company Eisai co-developed the dementia insurance based on the concept of early detection and treatment, by leveraging Eisai’s experience and network in drug discovery and disease awareness activities in the field of dementia
• Sumitomo Life Insurance will expand the scope of its “TREE PAYMENT” payment service, previously available only for 5-year Acculative Whole Life Insurance, to all insurance products starting from March 25, 2024, allowing cashless payment of insurance premiums for all products handled by Sumitomo Life’s sales representatives; it envisions future payments functionality that extends beyond cash-based transactions, including digital currencies, stablecoins, and points
• justInCaseTechnologies partners with major solution providers to enhance the value of its SaaS-based insurance system “joinsure”; the first three partners include AGREX under TIS Intec Group, DENTSU SOKEN, and GNUS; justInCaseTechnologies launched the “joinsure” service in January 2021, and by March 2023, the core system started operation; the company has rapidly released a wide range of applications such as support for extended warranties, comprehensive property insurance, and digital insurance claims

Banking

• SMBC’s popular “Olive” app enters next growth phase with new features; Sumitomo Mitsui Financial Group (SMBC Group), Sumitomo Mitsui Banking Corporation (SMBC), and Sumitomo Mitsui Card announced the addition of new features to the integrated financial service for individual customers, “Olive,” which has been offered since March 2023, launching “Fixed Amount Automatic Transfer Service”, “Account Tier Switching Function”, and “Family Card Issuance”
• Tokyo Star Bank has launched a new service today for non-residents to open a deposit account in Japan without having to come physically to Japan; the service will first target residents of Taiwan, and then expand to residents of Hawaii
• Sumitomo Mitsui Financial Group announced that its subsidiary, SMBC Wevox, the first domestically established startup subsidiary of a Japanese megabank, has decided to issue stock options to its officers to strengthen their commitment to management; SMBC Wevox is a 55/45 joint venture between SMFG and Atrae

Payments

• Japan’s international payment brand JCB has issued a white paper on the carbon impact of individual transactions made using various payment methods in Japan; the carbon emissions were calculated by Arbor

Capital Markets & Asset Management

• After taking the crown last year, Daiwa Securities Capital Markets has defended its title as the №1 sales team in the country; Nomura increased one position to take second this year, while J.P. Morgan had the ranking’s largest jump and moved from fifth place to third; SMBC Nikko Securities fell two spots to fourth, and Mizuho Securities was down one spot to round out the top five
• Nomura has published its progress report on the implementation of the United Nations Principles for Responsible Banking

Digital Assets

• The Government Pension Investment Fund (GPIF) requests information on the mechanism through which a global low yield environment is created and entrenched, including basic information on illiquidity assets other than those currently considered as assets under management, e.g., basic information on alternative assets such as forests, farmland, gold, bitcoin, etc., as well as investment examples, investment philosophy, and how to incorporate these into the portfolio of pension funds
• Institutional crypto firm Keyring Network has facilitated the transfer of a wrapped version of the Circle USDC stablecoin for Laser Digital, a subsidiary of Japanese banking giant Nomura
• NTT Digital and now.gg have reached a basic agreement for the introduction of NTT Digital’s digital wallet “scramberry WALLET for Business”; NTT Digital aims to provide seamless experiences without users being aware of any web3 functions, enabling corporate customers to easily introduce wallet functions into their applications for the safe and secure handling of crypto-assets, NFTs, and other items
• Sony Bank, Sumitomo Mitsui Trust Bank (SMTB), and Securitize Japan launched their partnership with a public offering and issuance of security tokens of a joint money trust backed by loan receivables in July 2023, which was the first time in Japan that (I) a joint money trust was tokenized and (II) security tokens were sold by a bank; now, Sony Bank’s offering of the “U.S. Dollar-Denominated Green Finance Security Token (2024 №1)“ will be the first public offering of a foreign currency-denominated security token by a domestic bank

The Last Word: Ask not what your VC can do for you

This made me smile last week, I hope it gives you some joy, too.

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.

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Have an awesome week ahead.