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Financial License Registration

We are pleased to announce that on February 1, 2022, Keyaki Capital KK (“Keyaki”) was admitted to Type II Financial Instruments Business Firms Association. Already, Keyaki has been a member of Japan Investment Advisers Association since October 2021 following its registration for Financial Instruments Business (Type II Financial Instruments Business and Investment Advisory and Agency Business) in September 2021.

Now that Keyaki holds the license and the memberships with the two SROs, Keyaki is fully qualified to conduct these regulated businesses in Japan. Our new Japanese website will be launched soon to comply with all applicable regulations in Japan.

This English website will be maintained for our consulting business along with the regulated businesses to be conducted through our new Japanese website.

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Here’s Why Private Debt Fund Would Best Fit for Japanese HNWIs

Not to mention interest rates have remained near-zero, Japanese households have not been able to grow their assets so much. While US household assets have grown by 3.41 times between 1997 and 2019, Japanese have only grown by 1.48 times during the same period. And still, more than half of $18 trillion household assets are still held as cash.

I think one of the main reasons is lack of good investment opportunities for Japanese individuals.

There have certainly been demands for investment opportunities. What has been notably sold to individual investors is the group of mutual funds to pay monthly dividends. Monthly income funds were so popular for Japanese individual investors seeking stable income. It accounted over half of AUM of total mutual funds in Japan.
However, although those funds typically hold higher yielding assets such as HY bonds or US REITs, most of the funds had sold assets to pay dividends. FSA expressed a sense of caution for those funds in 2017, and they have become less popular now.

Recently, “Social Lending”, a platform to tie borrowers and individual investors appeared to be quite popular. In February, for a real estate debt deal by a major social lending platform, the hard cap of 360million yen was sold for less than two and half minutes. Most of the social lending deals seem to be sold instantly. This also shows that Japanese individual investors really prefer income generating investments.

However, should the underlying assets to generate income be always HY bonds, US REITs, or some construction loans? It is true that Japan is overbanked, and therefore, there is not much high yielding debt available for investors. Then how about overseas private debts? Especially if some experts underwrite risks and choose the best ones.

Private debt fund itself is hardly known by Japanese individual investors, as it is relatively new and not offered to them yet. I believe high quality international private debt funds should best fit for Japanese individual investors.

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Let’s not call distressed debt funds “HAGETAKA”

In Japan, foreign distressed debt funds are collectively called “HAGETAKA fund”, meaning vulture fund.

Why are they so disgraced? It seems to me that Japanese just envy those foreign funds for timely coming and making money, while we fell behind. Although those funds do not come for free lunch.

Now, Japanese government looks to invite foreign investors and asset managers, with the mission to promote as a financial hub. It should be beneficial to welcome various types of investors including distressed debt funds and create a win-win situation.

I think it would be good if Japanese fresh money, including individual investors can also invest in the distressed opportunities if there appears to be dispositions or distressed debts being offered at bargain price.

There are not many distressed debt funds in Japan and individual investors cannot easily invest in distressed opportunities. Why don’t we invite those funds into Japan and invest together with them?

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Japan as a financial hub and its benefit to the household assets

Tokyo metropolitan government and Japanese government have taken some measures for the ambition of becoming a financial hub. Japan has been left behind Hong Kong and Singapore over the last few decades, however, wants to get it back sensing that rival Hong Kong has been weakened by its political turmoil. They want to invite international investment managers and fintech firms.

I think the key for Japan to success lies in whether we can create synergy between the international financial companies and abundant personal financial assets so that both can benefit from each other.

Needless to say, there are benefits for Japan from becoming a financial hub. First, it should stimulate Japanese economy by inviting risk money from overseas. And also Japanese citizens may be able to benefit from the financial hub, which may provide better options for their wealth management and consequently make money for them.

For overseas financial companies, there should be considerable financial benefit in order to decide to spend money and resource to enter into Japan.  There are some difficulties of Japan including the language barrier and its tax system, although those are recently taken care of by new policies. Then, what would be the advantage of Japan? While HK has its advantage of being a gateway to China, Japan has rich household assets. It should incentivize overseas companies if they can access to them.

However, Japanese financial regulations are currently not very easy to access to the household assets. While it is relatively easier to conduct business for professional investors only, the licenses to distribute financial products or manage money for retail investors are hard to get. The organizational and capital requirements for new financial startups are considerably high. It may be reasonable and preferable for the purpose of investor protection (e.g., to avoid fraud). But at the same time, the difficulty may also prevent good emerging managers and international investment managers who wish to start small from doing so.

It may be necessary for Japan to accept the overseas investment products that may look a bit risky and complicated, but good and high quality. Then I believe we can create upward spiral between the international financial companies and Japanese abundant personal assets so that both can benefit from each other.