Japan Fintech

Japan is the world’s third largest economy after the United States and China, and the only Asian representative of the G7. 

Within the Japanese financial services market, the financial technology segment “fintech” shows especially strong growth potential for U.S. firms. According to the “FinTech Market 2019” published by the Yano Research Institute, the market size for fintech-related businesses in 2018 was approximately USD1.9 billion (JPY214.5 billion), and it is expected to grow to over USD10 billion (JPY1,210 billion) by 2022.

Japan’s focus on the fintech industry came relatively late compared with other countries with major global financial hubs such as the United States, the United Kingdom, China and Singapore. In 2016, the Government of Japan designated the fintech sector as a promising growth area in its “Japan Revitalization Strategy 2016.” Since then, the government has modified regulations to promote growth in the sector. For example, the “Banking Act” was amended in May 2016 encouraging banks to establish IT related subsidiaries for developing fintech businesses. This regulatory development resulted in many Japanese banks to open their application programming interfaces (APIs) to fintech firms to enhance the technical aspect of their financial products and services.

The preparation for the Tokyo 2020 Olympics Games has also accelerated Japan’s shift to cashless payments. To incentive Japanese consumers to use more cashless payment methods, the Ministry of Economy, Trade and Industry (METI) is executing a program for registered small and medium-sized retail stores and restaurants to provide five percent discount on purchases made on credit card, debit card, prepaid IC card or smartphone from October 2019 through June 2020. This program was implemented immediately after Japan raised its national consumption tax from 8% to 10%. As of April 1, 2020, over one million retail outlets have registered to this program. METI’ aims to double Japanese consumers’ cashless payments usage rate from 20 percent in 2016 to 40 percent by 2025.

Both of Japan’s central government and the Tokyo Metropolitan Government (TMG) are keen to revitalize Tokyo’s position in the international financial market, and fintech is an essential component of the effort. The Japan Financial Services Agency (FSA) and the TMG have dedicated teams to attract foreign financial services companies interested in expanding to Japan.

In April 2017, Japan amended the “Act on Settlements of Funds” - commonly referred as the “Cryptocurrency Act” - permitting cryptocurrencies as a form of payment in Japan. The new regulation requires any cryptocurrency exchanges to register with FSA in order to conduct business in Japan.

The U.S. Commercial Service in Japan welcomes your inquiry on market opportunities in Japan’s fintech industry. For further information and consultation, please contact the U.S. Commercial Service Tokyo at Office.Tokyo@trade.gov.