20/06/2023 (Tokyo, Japan) - Japan Post Bank has shared its plans to allocate 1 trillion yen ($7.05 billion) to support the startup landscape in Japan. This decision constitutes a key element of the bank's upcoming medium-term management plan, which is due to initiate in April 2026. The plan indicates a significant shift in the bank's strategy, moving towards private equity and away from its usual investment domains.
Japan's venture capital landscape, though it has seen growth in recent years, remains comparatively underdeveloped relative to other major economies. As of November 2022, Japan had produced only 11 'unicorns' – startups valued at over $1 billion. Japan Post Bank's latest venture represents a strategic effort to accelerate the growth of this nascent sector. "There are too few unicorns in Japan," acknowledged Bank President Norito Ikeda. "We will take risks and take on growth investment."
The bank's foray into growth investment was signaled last month with its participation in a 20 billion-yen fund supporting the tourism industry. Building on this, Japan Post Bank intends to launch sector-specific funds and is actively in discussions with venture capital firms, large trading companies, and turnaround firms to collaborate on these initiatives.
Central to its strategy is the bank's utilization of its vast network of approximately 24,000 postal branches throughout the country. With plans to launch a system to manage information on promising local businesses next fiscal year, the bank is in a unique position to identify and nurture startups from the grassroots. The extensive reach of Japan Post Bank, particularly in rural areas where it is often the only available financial institution, offers a profound advantage in this endeavor.
The bank's investment strategy also incorporates a commitment to foster deeper relationships with regional financial institutions. These partnerships aim to provide a comprehensive support system for local startups, with Japan Post Bank offering to boost their capital, and regional lenders providing operational expense financing.
Beyond financial backing, the bank plans to bolster its comprehensive support for startups with assistance in marketing and sales route development. Technology startups in sectors such as artificial intelligence and biotechnology are set to be the key beneficiaries. Depending on the potential of the startup, investments could range from 2 billion yen to 3 billion yen. The bank is also open to backing sectors like renewable energy, aligning its investments with broader environmental, social, and governance (ESG) goals.
This strategic pivot comes at a critical juncture for Japan Post Bank, which has seen its share value decline by 40% since its stock market debut in 2015. With this bold move to diversify its investment portfolio, the bank aims to inject new vigor into its growth strategy.
Despite some criticism over its government-backed status, which some perceive as an unfair advantage over wholly private competitors, Japan Post Bank's proactive push to support Japan's startup ecosystem could serve as a significant stimulus for the country's economy and a catalyst for innovation.