Japan FinTech Observer #69

Welcome to the sixty-ninth edition of the Japan FinTech Observer.

Security token issuances are becoming routine. This week, we include Kenedix’s 12th real estate security token offering, with the total ST asset size managed by Kenedix Group companies amounting to approximately JPY 140bn. The company aims to have JPY 2.5trn worth of real estate tokenized in the entire market by 2030. This follows last week’s news of the tokenization of silent partnership interests in Sony’s “Hero’s Island” movie production, scheduled to hit the theaters in 2025.

Two new core banking platforms went live this past week. Norinchukin Bank completed its migration to the cloud version of Biprogy’s BankVision, and Fukushima Bank became the first adopter of SBI Holdings’ new core banking system, built specifically for regional banking clients (several of which SBI holds minority stakes in). Elsewhere, SMBC announced plans to migrate to its new core banking system built on the NEC mainframe over four weekends in 2025 and 2026.

Lastly, Sota Watanabe is teasing us with a new Startale website.

Otherwise, here is what we are going to cover this week:

• Venture Capital & Private Markets: the FSA published the minutes of the third “Expert Panel on Venture Capital”; Mizuho Bank and Sumitomo Mitsui Trust Bank invest in avatarin; Daiwa Securities made a capital investment in the Kepple Group; Saison International enters Mongolia with two investments
• Insurance: justInCaseTechnologies reports deployments of its “joinsure” SaaS platform
• Banking: MoneyForward’s individual customer business joins SMBC’s “Olive”; Fukushima Bank and Norinchukin Bank roll out new core banking systems; MUFG, MUFG Bank, and MUMSS have submitted business improvement plans
• Payments: Sumitomo Mitsui Card has introduced personal identification using the public personal authentication service of My Number cards in the V Point Pay app; a deeper dive into DeCurret DCP’s August launch; Rakuten Card launches an English language app; the Japan Fair Trade Commission probed the Japanese unit of Visa
• Capital Markets: Financial stocks as candidates for future TOPIX inclusion
• Digital Assets: Kenedix, SMBC Trust Bank, Nomura Securities, and BOOSTRY have completed the public offering and issuance of a real estate security token; the Sei Foundation launches a $50 Million Japan Ecosystem Fund; Dentsu launches advertising in NAVER Z’s ZEPETO metaverse; Immutable and DM2C Studio enter into a strategic partnership; Metaplanet buys more bitcoin
• The Last Word: Job satisfaction

Venture Capital & Private Markets

• Among the 12 largest private equity fund closes during Q2, there are two Japan-focused buyout funds (The Carlyle Group, Integral Corporation) and one activist fund (Newton Investment Management); read more in ION Analytics’s Asia private equity 2Q analysis
• The Financial Services Agency (FSA) has published the minutes of the third “Expert Panel on Venture Capital” meeting held on June 26th, 2024; the meeting discussed the draft document titled “Recommended and Expected Practices for Venture Capital”, which will be released for public comment after the feedback from this session has been incorporated
• Mizuho Bank and Sumitomo Mitsui Trust Bank are among the investors that have subscribed to a third-party allocation of shares totaling ¥3.7 billion by avatarin, an ANA Holdings startup, in order to collaborate on the creation of industry-specific AI services where people and AI coexist, as envisioned by avatarin; with this capital increase, avatarin has completed a cumulative total of JPY 7.7bn in funding, including investments from ANA Holdings, Development Bank of Japan, and Mitsubishi UFJ Financial Group
• Daiwa Securities, expecting future growth of the secondary market-related business for unlisted stocks in Japan, has made a capital investment in the Kepple Group , which operates the “Kepple Liquidity Fund,” a secondary fund specializing in pre-IPO companies
• Saison International, the international arm of Credit Saison, has made its first foray into Mongolia with a USD 14 million investment through Golomt Bank and M Bank; this investment will be managed by Saison Investment Management Private Limited (SIMPL)

Insurance

• “JAL Insurance” has started providing “Medical Insurance” and “Cancer Insurance”, which allow customers to earn miles; the insurance coverage is provided by Tokio Marine & Nichido Fire Insurance; the technology platform is “joinsure”, a SaaS insurance system by justInCaseTechnologies that supports the digitization of customer touchpoints and operational efficiency
• Also, justInCaseTechnologies announced that Tokio Marine X Small Amount and Short Term Insurance has developed a fully web-based life/non-life integrated insurance product called “Comprehensive Life Support Insurance” using “joinsure”

Banking

• Money Forward and Sumitomo Mitsui Card have signed a memorandum of understanding concerning a capital and business alliance, including the establishment of a joint venture (planned for December 2024), covering individual customers; this includes Money Forward’s various financial services for individual customers, centered on the №1 household bookkeeping and asset management app “Money Forward ME”, and Sumitomo Mitsui Card’s cutting-edge digital-based cashless services and SMBC Group’s comprehensive financial services for individual customers, “Olive”
• Fukushima Bank first to implement SBI Group’s new core banking system: Fukushima Bank has completed the migration to their “Next Generation Banking System”, a “cloud-based core banking system for regional financial institutions” developed from scratch by Fukushima Bank, SBI Regional Revitalization Banking System, an SBI Group company, and Future Architect
• Norinchukin Bank has adopted “BankVision on Azure,” a full banking system utilizing public cloud provided by BIPROGY, and began operating its core banking system using this service from July 16, 2024; this marks the first operation of a full banking system in a public cloud environment for a national financial institution
• MUFG, MUFG Bank, and MUMSS have submitted documents including business improvement plans to the Financial Services Agency based on its business improvement orders and request for reporting, for the unauthorized sharing of client information across “fire walls”.

Payments

• Sumitomo Mitsui Card has introduced personal identification using the public personal authentication service of My Number cards in the V Point Pay app; this service uses the electronic certificate stored in the IC chip of the My Number card to prevent fraud such as forgery of identification documents, impersonation by others, and data tampering, thereby realizing safe and reliable personal identification; with the introduction of this function, in addition to eliminating the need to take a facial photograph for identification, some application content such as name and address will not need to be entered, making the procedure smoother
• With last week’s announcement that the DeCurret DCP network has been moved into production for pre-launch testing, we look back at the original announcement from October 2023 to see what exactly will be launched in August: DeCurret DCP, GMO Aozora Net Bank, and Internet Initiative Japan agreed to jointly promote the first commercial service using the DCJPY Network (a two-tier digital currency platform) provided by DeCurret DCP; this service will utilize the digital currency DCJPY issued by GMO Aozora Net Bank for the digitization of environmental value (non-fossil fuel certificates, etc.) transactions conducted by IIJ, and for transactions and settlements using the digital currency DCJPY
• Japan’s financial institutions are discovering the underbanked foreign residents as a potential area for growth: after Credit Saison has just launched its “SAISON JP Life Assist” portal, Rakuten Card released “Rakuten Card Lite,” the first English language app from the credit card company focused on the international community in Japan; this has come alongside players like Digital Wallet Corporation (Smile Remittances), Sony Bank, and GIG-A (had to abandon its first implementation with Kiraboshi’s UI Bank, but is working on an alternative) who have targeted this segment explicitly
• The Japan Fair Trade Commission probed the Japanese unit of Visa for allegedly pressuring card companies to use only its credit information system, sources familiar with the matter said, a practice that could stifle competition and disadvantage consumers; the Visa unit is suspected of charging higher fees to credit card companies that did not use its network to check credit information, forcing them to stop using its rivals’ networks or switch to using its network, according to the sources

Capital Markets

Source: Japan Exchange Group

As we highlighted four weeks ago, the TOPIX revisions currently in progress, using the opportunity provided by TSE’s market restructuring in April 2022 to enhance TOPIX’s functionality as an investable index, are set to be completed in January 2025.

Following this, a second stage of revisions will commence (as per the graph above) to further enhance TOPIX‘s broad coverage and its functionality as an investable index; periodic reviews will be conducted with a greater emphasis on liquidity and include the Standard Market and Growth Market as well.

Among the stocks with the highest average daily trading volume in these markets are two financial names: SBI Sumishin Net Bank (Standard) and WealthNavi (Growth). As the market is looking for new catalysts, and names outside of the Prime Market are still largely undiscovered by international investors, those with a long-term investment horizon might want to take a second look at these stocks. Please always DYOR.

Digital Assets

• Kenedix, SMBC Trust Bank, Nomura Securities, and BOOSTRY have completed the public offering and issuance of a real estate security token (ST) utilizing the consortium-type blockchain platform “ibet for Fin”; this ST uses the beneficiary rights of a real estate trust as trust property, which consists of the rental detached houses of the Kolet series with smart home features provided by Kenedix, which owns Japan’s largest portfolio of rental detached houses; the securities information and transaction information related to these beneficiary rights are managed using ibet for Fin
• The Sei Foundation launches a $50 Million Japan Ecosystem Fund; the fund’s initial focus will be on the areas of Web3 gaming, social, and entertainment use cases, as Sei V2, the EVM’s most performant blockchain to date, has the potential to unlock new design space for consumer-facing blockchain applications
• Dentsu, CARTA COMMUNICATIONS (CCI), Dentsu Digital, and Septeni have launched Japan’s first “Creator Collaboration Packages” for advertising using NAVER Z’s ZEPETO metaverse app; the service, a collaboration with persuasive ZEPETO creators and influencers, facilitates corporate branding and awareness-raising measures; its main targets are the feeds of young people from Gen Z and Gen Alpha
• Immutable, the leading blockchain technology company focused on building next-generation Web3 games, and DM2C Studio, a Web3-focused subsidiary of the multibillion-dollar Japanese conglomerate, DMM.com Group, have entered into a strategic partnership to grow Web3 gaming on a global scale
• Japanese investment firm Metaplanet saw its stock price jump 25.8% during the Tuesday morning session after announcing that it has purchased additional bitcoin worth about $1.26 million

Reading List

• Schroders’ recent Equity Chart Pack included a number of slides relevant to Japan, which we extracted for you
• Sumitomo Mitsui Trust Bank shares its highlights for Japanese equities in the 2nd half of 2024
• The Ministry of Finance — Japan has published its annual Debt Management Report
• It has also released the Japanese Government Bond (JGB) Newsletter for July
• The Bank of Japan has published a Research Paper that analyzes the effects of the monetary easing measures over the past 25 years on the financial system from three perspectives: financial cycles, banks’ lending in the low interest rate environment, and potential risk factors

The Last Word: Job satisfaction

Source: PwC’s Asia Pacific Workforce Hopes and Fears Survey 2024.

Indonesians are looking forward to going to work tomorrow, Japanese & Koreans not to much.

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.