Japan FinTech Observer #58

Welcome to the fifty-eighth edition of the Japan FinTech Observer.

A quiet Golden Week? Not quite. Two interventions in the FX markets to push the value of the Japanese Yen up, the first of which on Monday is thought to have involved approximately JPY 5trn. At the time of writing we are at 153.50 JPY to the USD, significantly down from the over JPY 160 peak on Monday morning.

Also, the “Expert Council on Venture Capital” held its first meeting right in the middle of Golden Week. The “Digital Asset Co-creation Consortium” published its “Interim Report”, and will look to continue its work on digital securities.

Here is what we are going to cover this week:

• Venture Capital & Private Markets: the first “Council of Experts on Venture Capital” meeting was held, co-hosted by the Financial Services Agency and the Ministry of Economy, Trade and Industry; Sony unit backs British insurance start-up Urban Jungle Insurance; IVC portfolio company CARV raises USD 10m led by Tribe Capital and IOSG Ventures to build out modular data layer for gaming and AI; Japan Investment Corporation (JIC) has decided to make an LP investment of JPY3 billion in Spiral Capital Japan Fund III (SCJ3); Sparx Asset Management, a subsidiary of Sparx Group, has established the “Space Frontier Fund №2” and MUFG Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank, Sumitomo Mitsui Trust Bank, Development Bank of Japan, and others will participate as investors
• Insurance: Aioi Nissay Dowa Insurance has concluded a capital and business alliance agreement with Aeronext, which has core technologies essential for safe drone flight; Mitsui Sumitomo Aioi Fire & Marine Insurance and Aioi Nissay Dowa General Insurance of the MS&AD Insurance Group have started selling the “Special Clause for Driving Borrowed Commercial Vehicles” to solve the “2024 Problem”
• Banking: LayerX and MUFG Bank have concluded a basic agreement regarding a business alliance in the area of corporate expense management; Sumitomo Mitsui Financial Group has decided to introduce the Standard Plan of the organizational capability improvement platform “Wevox” to 100,000 employees
• Payments: the Bank of Japan has published a summary of the “Future Vision of Wholesale Payments powered by the Bank of Japan” discussion held at FIN/SUM this year; Japan Post Bank has started an account-linked payment service via API with the “PG Multi-Payment Service” provided by GMO Payment Gateway; Infcurion has added new functions for Payers (Buyers) to the invoice payment platform “Winvoice“
• Capital Markets: Japan Exchange Group has published full-year results; Nomura and Mizuho are facing more than USD 100m of potential losses tied to a series of failed stock trades made by investment fund All Blue Capital; activist investor Elliott Investment Management has built a “large” holding in Sumitomo Corporation
• Asset Management: Resona Bank has partnered with fintech platform iCapital to launch multi-strategy private market offerings for Japanese corporate pensions
• Digital Assets: The “Digital Asset Co-creation Consortium” hosted by Progmat has released the “Interim Report” of the discussions conducted by the “Working Group on Promoting Startup Investment”; Ripple has entered into a strategic partnership with HashKey DX, the Tokyo-based specialized consulting company of the HashKey Group; just like in FY2023, the Tokyo Metropolitan Government is subsidizing security token issuances
• The Last Word: The world’s top startup cities

We are going to throw our hat into the ring during SusHi Tech Tokyo Week with a rare 100% offline, in-person Tokyo FinTech Meetup on Monday, May 13, starting at 18:30 JST.

Please join us to hear from Samantha Ghiotti, Co-Founder and CEO of Habitto, why the time to build your venture in Japan is now.

A few spots remaining. Venue close to Tokyo Station, Yaesu side. Register here.

Venture Capital & Private Markets

• On April 30, 2024, the first “Council of Experts on Venture Capital” meeting was held, co-hosted by the Financial Services Agency and the Ministry of Economy, Trade and Industry, with the aim of obtaining recommendations on matters that should be included in the principles for venture capitalists, while leveraging the knowledge of private experts; the first session included presentations by the Secretariat (Japan FSA), METI, the Japan Venture Capital Association, Japan Investment Corporation, as well as key considerations for developing principles for venture capital funds in Japan
• Sony unit backs British insurance start-up Urban Jungle Insurance: the Sony Innovation Fund is among the investors in a funding round which takes the total raises by Urban Jungle to over £43m since its 2017 launch
• IVC portfolio company CARV raises USD 10m led by Tribe Capital and IOSG Ventures to build out modular data layer for gaming and AI; the company plans to use the new funding to continue building out its data layer, which it has integrated with over 40 chain ecosystems and 700 games; CARV Play, it’s gaming superapp, currently has around 2.5 million users; CARV is also planning to launch its verifier node sale in the near future
• Japan Investment Corporation (JIC) has decided to make an LP investment of JPY3 billion in Spiral Capital Japan Fund III (SCJ3), which is managed by Spiral Capital and invests primarily in early-stage deep tech, fintech, healthcare, smart infrastructure, AI, and other sectors
• Sparx Asset Management, a subsidiary of Sparx Group, has established the “Space Frontier Fund №2” and MUFG Bank, Sumitomo Mitsui Banking Corporation, Mizuho Bank, Sumitomo Mitsui Trust Bank, Development Bank of Japan, and others will participate as investors; following on from the Space Frontier Fund launched in June 2020, the aim is to support personnel and technology related to space development, foster globally competitive space companies originating from Japan, and further contribute to technological innovation in Japan as a whole
• DLA Piper have published their take on Japanese venture capital

Insurance

• Aioi Nissay Dowa Insurance, a member of the MS&AD Insurance Group, has concluded a capital and business alliance agreement with Aeronext, which has core technologies essential for safe drone flight and is deploying a new smart logistics system called “SkyHub”
• Mitsui Sumitomo Aioi Fire & Marine Insurance and Aioi Nissay Dowa General Insurance of the MS&AD Insurance Group have started selling the “Special Clause for Driving Borrowed Commercial Vehicles” as dedicated automobile insurance for relay transportation from May 1, in order to resolve the “2024 Issue” faced by the transportation industry, arising from the revision of the Labor Standards Act in April 2024
• KPMG Law has published its “Insurance Regulatory Atlas”; we have extracted the Japan pages for you

Banking

• LayerX and MUFG Bank have concluded a basic agreement regarding a business alliance; through the collaboration between the two companies in the area of corporate expense management, which is essential for corporate activities, the partners will support business transformation for companies to improve operational efficiency, sophistication, and capital efficiency
• Sumitomo Mitsui Financial Group has decided to introduce the Standard Plan of the organizational capability improvement platform “Wevox” provided by Atrae to approximately 100,000 employees; in 2020, Sumitomo Mitsui Banking Corporation, a subsidiary of SMBC Group, introduced Wevox company-wide, visualizing and analyzing employee engagement, and promoting agile organizational development led by frontline staff

Payments

• On March 6, 2024, the Bank of Japan held a planning session titled “Future Vision of Wholesale Payments powered by the Bank of Japan” at FIN/SUM 2024 sponsored by Nihon Keizai Shimbun and the Financial Services Agency; the Bank of Japan has published a summary of the discussion last week
• Japan Post Bank has started an account-linked payment service via API with the “PG Multi-Payment Service” provided by GMO Payment Gateway; through this service, payment for services can now be made by immediate deduction from Japan Post Bank accounts via the PG Multi-Payment Service; as the first service to introduce this, Japan Post Bank has started a service to charge the proprietary e-money “Coke ON Wallet” attached to the official Coca-Cola app “Coke ON” by linking to a bank account
• Infcurion has added new functions for Payers (Buyers) to the invoice payment platform “Winvoice“; newly added functions allow users to pay their received invoices by credit card, debit card or prepaid card; the card payment enables users to extend actual payments until the withdrawal date which will improve their cash flows; it is also expected to improve business operations by reducing the time required for bank transfers, together with preventing errors; in addition to the new functions for Payers, this update expands the use of Winvoice, which had been limited to corporates, to be available for individuals such as sole proprietors and freelancers; furthermore, JCB and Mastercard have been added to the list of accepted card brands

Capital Markets

Japan Exchange Group full year results

• Good work at the Japan Exchange Group during the past fiscal year, limiting the increase in Operating Expenses to a mere 6% while Revenue grew more than twice that; an ROE of 19% is the best since FY2017, and the PBR moves up to 6.5; there were 131 IPOs last year, only eclipsed by the 133 during FY2021, while the amount of money raised comes in second-lowest over the past decade, only FY2022 yielded even less
• Nomura and Mizuho are facing more than USD 100m of potential losses tied to a series of failed stock trades made by investment fund All Blue Capital; All Blue, led by trader Matt Novak, made a series of wrong-way short bets with multiple counterparties earlier this year and is allegedly unable to settle the trades, according to New York legal filings and people familiar with the matter; two units of the fund were placed into liquidation in the British Virgin Islands in March, the filings show
• AGM season is coming up, so this is the time for activist investors to show their cards: Elliott Investment Management has built a “large” holding in Sumitomo Corporation after investing “several tens of billions of yen” in the trading house backed by Warren Buffett; founded by billionaire Paul Singer, Elliott also recently invested in developer Mitsui Fudosan, after previously targeting Toshiba, SoftBank Group Corp. andDai Nippon Printing

Asset Management

• Resona Bank has partnered with fintech platform iCapital to launch multi-strategy private market offerings for Japanese corporate pensions; the offerings include private equity, infrastructure, private credit, and real estate strategies managed by US investment firm KKR

Digital Assets

• The “Digital Asset Co-creation Consortium” (abbreviated as DCC, with 266 member organizations) hosted by Progmat has released the “Interim Report” of the discussions conducted by the “Working Group on Promoting Startup Investment” established to contribute to the realization of the “Five-Year Plan for Nurturing Startups,” which aims to increase startup investment tenfold in five years; in addition, to expand the range of assets subject to digital securitization, which broadens the options for individual asset formation, including the direction of regulatory reforms compiled in this Joint Study, DCC has established the “Working Group on Trust Accounting Rules” to comprehensively formulate the necessary rules for trust accounting across industries to achieve overall optimization
• Ripple has entered into a strategic partnership with HashKey DX, the Tokyo-based specialized consulting company of the HashKey Group, to introduce XRP Ledger (XRPL)-powered enterprise solutions to the Japanese market; through SBI Ripple Asia, a joint venture between SBI Holdings and Ripple, SBI Group companies will become the first Japanese corporations to utilize this supply chain finance solution
• Just like in FY2023, the Tokyo Metropolitan Government is subsidizing security token issuances, covering up to JPY 7.5m in funding for priority areas; applications have opened on April 30 and will close once funds run out

The Last Word: The world’s top startup cities

Tokyo as the #10 startup city in the world

PitchBook’s VC Ecosystem Rankings compare global cities based on the size and maturity of their startup networks. The framework helps founders, operators and investors assess locations when deciding where to expand or invest.

Network effects matter in venture capital: Investors get more than half of their deals through referrals, according to research led by Harvard professor Paul Gompers. So it stands to reason that dealmakers should seek these networks out when deciding where to do business.

The list is based on a scoring system that uses PitchBook’s proprietary data on private companies. Development and growth scores are based on data related to deals, exits fundraising and other factors from the last six years.

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. Registrations for the Tokyo FinTech Meetup have moved to Luma.

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.