Tokyo and London from FinTech Perspective

In early December 2017, Tokyo and City of London signed a Memorandum of Understanding (MoU). It’s intent is to increase cooperation primarily in fintech and asset management, and aims to promote investment between the two cities. In 2016, UK Financial Professional Service (FPS) exports to Japan topped £4.6 billion, an increase of nearly £1.3 billion on 2015. In the same period UK imports in FPS from Japan hit £959 million, an increase of £135 million, according to Office for National Statistics. Closer collaboration between the two cities is much more needed, in the background of Brexit and the launch of Tokyo Metropolitan Government’s (TMG) “Global Financial City Tokyo” program.

Together with the TMG delegation, members of JIAM visited London in late January 2018, meeting with officials from City of London, Department of International Trade and many other organizations related to fintech and asset management in London. The JFS (JIAM FinTech Square) team also had discussions with various government agencies, industry associations and private fintech firms to learn about London’s activities in fintech. We found that there are a number of areas that Tokyo could borrow London’s experiences in order to accelerate the growth of fintech. 

TMG and JIAM meeting with City of London at Mansion House (left center Tajiri-san from TMG and Aritomo-san from JIAM, right center Lord Mayor Charles Bowman and ex Lord Mayor Sir Roger Gifford)

  • Business Opportunities

Japan and UK are both fully fledged countries with a sizable economy, ranked 3rd and 6th in the world, respectively, in terms of GDP. However, the UK financial sector is much larger than Japan’s, with a million people employed, an annual revenue of approximately $400 billion, making up 11% of GDP in 2015. [1] London is also ranked No.1 in the Global Financial Center Index. [2] This provides a strong institutional customer base for fintechs compared to other cities. We saw  global financial giants, FCA and fintech startup offices co-locating in the Canary Wharf area enabling them to collaborate and communicate closely. This great market scale and environment of close collaboration makes London a hotbed for fintech.

Even though Tokyo is ranked the fifth largest global financial center[2], it is less than half of the scale of London. Japan’s financial sector (largely centralized in Tokyo) generated $152 billion, roughly 4.4% of GDP in 2015. It has been slowly declining from 5.9% of GDP since 2005. [3]  Nevertheless, it still has a very big and mature financial institutional client base for fintechs. We have seen strong interest from largest Japanese institutions, such as Mitsubishi UFJ Financial Group which has created a Digital Innovation Division since 2015 and started a MUFG Digital Accelerator programme in 2016; and Mizuho Financial Group is planning to cut thousands of jobs in the next ten years in order to promote efficiency and greater profits by using AI and robotics technologies. 

For consumer facing fintech, Japan has a big market with 120 million population nearly all connected to the Internet, even on subways. But on the institutional side, similar to the UK, it can take longer than expected for companies to integrate fintech solutions with legacy systems. And large corporates are confident with their capabilities and prefer to build internally through their own IT teams.

  • Government Support

Both UK and Japanese governments have been supportive of fintech growth. But during our visit, we learnt that the UK had a more scaled and integrated government support model. It has mobilized resources among government bodies, regulators and public organizations to promote fintech.

For example, the City of London has founded Innovate Finance sine 2014, the biggest association for fintech firms in the UK, which currently has 250 members, with 20% are large financial institutions such as Barclays, RBS, etc. who can provide funding and feedback to fintech startups. Innovate Finance provides wide range of support and promotion services, from capital raising, talent development, business matching for fintech firms to policy and regulation proposals to government agencies. The Department of International Trade has set up a framework to help fintechs in their overseas growth plans, called FinTech Bridge. It can easily help fintech firms who just came to London to expand business to South Korea, Singapore and Hong Kong. TheCityUK runs FinTech Steering Group in FSTIB (Financial Services Trade and Investment Board) focusing on issues impacting the attractiveness of the fintech ecosystem for incumbent companies. There’s also a focus group in the Parliament to raise awareness amongst MPs.

TMG has launched “Global Financial City Tokyo” program since 2017 aiming to bolster Tokyo financial sector, and one of the focus domains is FinTech. TMG has started a program to entice foreign fintech firms to Tokyo by providing end-to-end assistants with no charge, including business matching, free workspace and Japanese language support. In 2017, TMG conducted “FinTech Business Camp Tokyo” program in order to entice overseas fintechs to set up in Tokyo with subsidies provided. There were 8 companies joined this program. However, these efforts are yet to be known by international communities. TMG and JIAM teams have been introducing these programs to other countries through roadshow events and embassy connections.

Fintechs in Japan are self organized, represented by few associations, such as Japan FinTech Association, Japan Blockchain Association etc. There are regular events for business matching, technology discussion and networking organized by these associations. The biggest annual fintech event FinSum is organized by Nikkei during late summer with support from FSA and fintech associations.

Compared to London, Tokyo needs a deeper and wider supporting and promotional system by both government and private sector in order to make Tokyo a regional and even global fintech hub. With the recent MoU signed with City of London, Tokyo has a great opportunity to learn best practices from London.


  • Regulatory Environment

The UK regulators have taken a proactive approach and launched a number of initiatives for fintech regulation. The “FCA Regulatory Sandbox” has helped to create an open field for both fintechs and other players to try and learn in a more relaxed regulatory environment. The FCA Innovation Hub has also been planning a fast-track authorization program.

The Japanese FSA has been very supportive as well. With a similar “FSA Innovation Hub program”, fintech firms can have close discussions with regulators for potential changes in regulation in order to authorize some disruptive solutions. FSA is also known for its open minded stance on blockchain and digital currencies. Bitcoin was legalized as a payment method in Japan in early 2017. FSA has also issued licenses to a number of cryptocurrency exchanges recently. Mega banks in Japan have been experimenting with inter-bank wiring system on blockchain to replace costly legacy system. MUFG has issued internal MUFG Coin for employees as a proof of concept.

Both Japan and the UK have begun to open bank APIs. FSA has revised the Bank Law in 2017 in order to make bank open API an obligation. We have seen many fintechs started utilizing bank APIs to to access bank data and support a host of lower cost and innovative services.

On the legal service side, both British and Japanese law firms and associations have been actively involved in lobbying and consulting on fintech related regulation changes. The Law Society of UK has not only been contributing in domestic regulations and law upgrades, also has been working with other governments to enhance regulatory environment. In Tokyo, Atsumi & Sakai, for example, is one of the law firms actively participating in discussions related to fintech regulation changes, by working with FSA and fintech associations.


  • Capital Investment

The UK provides sufficient access to capital for early-stage fintechs, supported by an active angel investor network and government initiatives. Investors and entrepreneurs can benefit from fintech specific benefits, such as Small Business Rate Relief which has recently changed from 50% to 100% since April 2017. And  SEIS(2012) provides tax relief for investors in high risk start-ups and Entrepreneurs Relief(2008) provides capital gains relief.

In Japan, although there are few government policies benefiting investors and entrepreneurs, angel investors and private VC firms have been quite active on the scene, such as East Venture and Money Design. Japan’s VC market is relatively smaller compared to other major countries, and is occupied by CVCs. In 2016, fintech investment in Japan was only $154 million on 14 deals, while China reached over $10 billion on 55 deals representing 90% of APAC. [4]

Both the UK and Japan lack growth capital in supporting late stage fintechs. Most of firms will seek funding in the U.S. and some even have to go through a process of restructuring and registration in the U.S.


  • Talent

The UK fintech industry employs over 60,000 people, larger than those in Singapore, HK and Australia combined. [5] However market participants have indicated UK had strong talent in financial services but lack of depth of tech and entrepreneurial skills compared to some leading tech hubs such as in the U.S. and Israel. There are a number of academic networks and tech education were set up such as government STEM policy for growing tech education in schools and Tech City UK’s Digital Academy to provide online courses.

Japan has more home grown programming and engineering resources, who have invented many of the latest technologies including popular Ruby language. But Japan is also lack of entrepreneurial skills due to the traditional “keiretsu” system in corporate culture.

On Visa schemes, UK government has Tech Nation Visa Scheme and Graduate Entrepreneur Visa aiming to attract startups. Japan has also recently started issuing high-skill professional visa too. But Japan can still come up with more ways to attract global talent.


  • Infrastructure

Fintechs face challenges in accessing low cost office space. Start-ups have started working from co-working spaces with great flexibility and lower cost. In 2016, coworking reached almost 9% of total office take-up. [5] Real estate firms from all around the world have invested in co-working space in London. Level 39 in Canary Wharf is the biggest one in London with hundreds of start-ups seated, and 60% are fintechs. There are over 20 designer co-working spaces opened by the U.S. office designing company WeWork in London.

Tokyo is a great city for it’s clean environment, efficient transportation systems and its high number of Michelin star restaurants. In recent few years, many co-working spaces have opened in central Tokyo. There will be special economic zones established around financial district in central Tokyo with plenty of lower cost office spaces for fintechs.

It’s worth mentioning that the UK has been promoting government wide adoption of cloud computing, where Japan has yet to catch up.

TMG and JIAM team meeting with L39 Rep at One Canada Square, London.

JIAM’s Activities

Within TMG’s “Global Financial City Tokyo” program, JIAM has been focusing on enhancing the asset management industry of Japan. And JIAM FinTech Square (JFS) is focusing on FinTech for the asset management industry. For fintech start-ups, JFS helps to promote in Japan, localize interface and data with our partners and gather feedback from Japanese asset managers. The JFS showroom is a facility for demonstrating advanced asset management oriented fintech solutions from all around the world. Please feel free to reach out to our team for more details.





  • The value of fintech, KPMG UK, Oct 2017



  1. Brexit: The United-Kingdom and EU financial services, Europa, Dec 2016
  2. Global Financial Center Index, Z/Yen, Sep 2017
  3. 平成28年度国民経済計算年次推計 生産(産業別GDP等),内閣府,2017
  4. Global fintech investment up 10 pct in 2016, driven by China – Accenture, Feb 2017
  5. Take-up of flexible space confirms London’s status as a global co-working power, Workspace insight, 2017


Jeff T.   

Feb 2018   

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