Attention Southeast Asia Startups! Have You Ever Wanted Access To Japan’s Lucrative Market?
Well, Now You Can with Japan’s ADX Initiative.
The move by Japan’s Ministry of Economy, Trade and Industry (METI) to allow Asian startups to list on the Tokyo Stock Exchange (TSE) is an unprecedented opportunity for emerging startups in the region to gain access to the lucrative Japanese market, which is robust in its depth and hardware technologies, such as robotics, Internet of Things (IoT) and 3D printing. Now Southeast Asian startups can leverage on the strengths of Japanese companies and form strategic business partnerships and collaborations to either build a solid foundational base in the country, or to use it as a springboard to launch their operations throughout the Southeast Asian region.
In line with this announcement for Asian startups to list on the TSE, the Japanese government has also initiated the Asia Digital Transformation Partnership Initiative (ADX Initiative), which will support the efforts of Asian startups to list on the TSE and with their initial public offerings (IPO), which is the world’s fourth largest stock exchange by aggregate market capitalization of listed companies, and Asia’s largest.
There are a few advantages and benefits for startups to list on the TSE. Foremost among them is that they now have a solid foothold in the Japanese market with increased visibility and more avenues and opportunities for growth. Additionally, with support from Mitsubishi UFJ Trust Bank, which is one of Japan’s largest trust banks with total assets of 38.7 trillion yen as of 2018, and also from securities companies for investor relations activities, the liquidity is high. Another draw is that the private equity ratio in Mothers – the high-growth and emerging stocks in TSE – is around 100x, which is substantially larger than either Hong Kong or Singapore.
In order for Southeast Asian startups to list themselves, they must fulfill the following:
- They should prepare documents in Japanese for investor relations activities, though this can be circumvented by listing domestically or listing in Singapore
- The startups must comply with Japan’s accounting and internal governance regulations, such as the generally accepted accounting principles (GAAP) and Japan’s Financial Instruments and Exchange Law (J-SOX), but they will have support from METI.
- For those countries that formally forbid listing abroad without a domestic listing, such as India, they are recommended to have a Singaporean registration. Singapore is an attractive destination for companies who seek to establish a foothold in the Asian market as it has a healthy and innovative business environment coupled with tax-friendly laws. Besides, due to its strategic location, it also serves as a base for many trading and logistics companies both local and foreign.
A great example of this initiative in action is the partnership between Japan’s health equipment company Fukuda Electronics and Indian healthcare startup Tricog, which have banded together to develop an artificial intelligence based diagnostic program for heartbeat patterns. Already the business has developed footholds in countries as diverse as India, Indonesia and Kenya.
Southeast Asian startups now have a golden opportunity to leverage on technological know-how and prowess of Japanese companies and form fruitful partnerships to bring about impactful changes, whether in Japan or throughout Southeast Asia. The ADX initiative is an opportunity that startups should seriously consider.
