Observing Japan's FinTech Scene: Issue #41
Peter Johnson- Jan 8, 2024
- 3 min read
Greetings and a warm welcome to the forty-first issue of the Japan FinTech Observer! We hope that you have a great new year!
We were exceedingly fortunate to begin the new year as we did. Initially, warnings of a tsunami with waves of 5m were issued, and two planes crashed. Thus, rather than having many victims, the toll was limited to “just” 100. Having driven the gorgeous coastline of Noto Peninsula only a year ago, I know that if a tsunami was approaching, I would not want to be along that scenic stretch of road, with few exits leading inland.
My curiosity is always piqued when understanding why such events trigger a vast outpouring of social media posts about what the rest of the world can learn from [insert country]. I can only assume that luck was on our side that the greatest wave measured was only 1.2m, and the fire aboard the JAL plane was successfully restricted in 8 or 18 minutes (as opposed to the earlier projected 90 seconds evacuation) which enabled everyone to depart the plane safely. Our hearts of course go out to all the families affected by the tragedy.
Considering the figures, Ishikawa prefecture contributes less than 1% of Japan's GDP, and fortunately no major disruptions have been reported at the factories involved in national or international supply chains. It is possible that the holidays played a role, or we may have simply been fortunate.
For the new year, we are introducing a live recap of the Japan FinTech Observer. Registration is open through the Tokyo FinTech meetup group and the first session is set for Tuesday, January 9th at 5pm JST, accommodating both the European and Asian time zones. If you would prefer a different time slot, please let us know.
This week, we are addressing the following topics:
Given the abundance of “2024 Outlook” reports available, including the ones we have posted, this edition will focus on passages from Michael Cembalest at J.P. Morgan Asset & Wealth Management. His report provides a historical view of the past year and takes a closer look at the current "special situation." You can access the full report here.
For the past 15+ years, Michael has focused on a strategy in global equity portfolios that calls for an overweighting of the US and Emerging Markets and an underweighting of Europe and Japan, which he labels "the barbell". As can be seen on the accompanying chart, the excess returns this tactic generated have been favorable. Despite a rebound in Japanese equities and mediocre results from investments in China, the barbell still produced a small positive return in 2023. Between 1991 and the present, the barbell has been successful in 84% of all three-year rolling periods, providing an average positive return of 3.0%. When it fails to do so, the average return is -1.2%.
Michael perceives potential for Japan to become more equitable. Examining the facts of the past 20-25 years, the numbers are not that dissimilar; the question, then, is “what is different now?” His response is comprised of six points.
Reforms to corporate governance and the implementation of other policies in Japan have created a more attractive environment for investors.
Michael states that despite Japan's economic growth in 2023, it still has underlying issues. He underscores that its growth rate is below 1%, largely due to population dynamics. However, he does posit that the country is entering a period of improved outlook based on deflation, corporate governance and investment stimulus. Yet he believes this won't be a long-term solution.
Estimated assets under management of the top 15 sovereign investors (in US$ billion)
Data on alterations in the total amount of Japanese Government Bonds (JGBs) over time have been released by the Ministry of Finance.
A 238-kilogram bluefin tuna caught near Oma in Aomori Prefecture was sold for an astounding JPY 114.24 million (JPY 480,000 per kilogram) on the opening day of the Toyosu Market in Tokyo’s Koto Ward on Friday, making it the first time since 2017 that a fish has surpassed the ¥100 million mark. Marine brokerage firm Yamayuki has now acquired the highest-priced tuna at the New Year’s auction for four consecutive years.
If you'd like to take a look at additional material from us, please visit the Tokyo FinTech YouTube Channel or tune in to the eXponential Finance Podcast.
We have also created two separate LinkedIn groups: one, the “Japan Startup Observer” for those with an interest in Japan beyond FinTech; and two, the “FinTechs of India” to cover the advancements in the subcontinent. We invite everyone to join these groups.
Wish you an incredible week ahead.
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