Korean financial firms are buying into Japan's brokerage market

Japan's stock market rally and retail investing boom are attracting Korean financial firms seeking overseas growth, as mounting pressure on smaller brokerages creates acquisition opportunities, industry officials said Monday.

Viva Republica, the operator of Korean fintech platform Toss, plans to acquire Cheer Securities through its Singapore-based subsidiary, Toss Global, in a deal valued at 4 billion yen ($25.35 million). It would mark Toss' first overseas acquisition.

Cheer Securities, established in 2019 by Tokai Tokyo Financial Holdings, specializes in mobile trading, allowing customers to invest in stocks and exchange-traded funds in increments of 100 yen through its app. It also handles security token offerings.

Mirae Asset Securities also signed an agreement Thursday to acquire Sanko Securities, a unit of Okasan Securities Group, through its U.S. subsidiary. Mirae Asset plans to inject 12 billion yen into its U.S. subsidiary, allocating about 5 billion yen toward the acquisition and the remainder to expanding its business in Japan after the transaction closes.

Hanwha Investment & Securities also agreed on Oct. 12 to acquire the securities business of GI Capital Management, a Japanese investment firm.

This flurry of deals comes as Japan's financial industry undergoes a structural shift.

The Nikkei 225 surpassed its bubble-era peak of 38,915.87 in 2024 for the first time in more than 34 years, supported by government efforts to improve corporate governance and boost shareholder returns. The benchmark crossed 70,000 in June this year.

Japan's revamped Nippon Individual Savings Account program has also helped draw more retail investors into the market. Expanded tax benefits introduced in 2024 have attracted younger investors, with people in their 20s and 30s accounting for a combined 29.8 percent of accounts as of the end of June.

Yet the boom has coincided with growing pressure on smaller securities firms, according to industry officials, creating acquisition opportunities for foreign buyers.

Large Japanese brokerages have tightened their grip on the retail trading market by offering commission-free services, putting pressure on smaller rivals that rely heavily on brokerage fees, according to the Japan Research Institute.

Succession issues are adding to the pressure. Many regional brokerages remain controlled by founding families or individual owners, whose advancing age has made it difficult to find successors and prompted some to consider selling their businesses.

For well-capitalized Korean financial firms, acquiring existing brokerages could provide a faster route into Japan's securities market than establishing new operations. Both Cheer and Sanko Securities are registered as Type I Financial Instruments Business operators in Japan, allowing them to trade stocks, bonds and other securities.

Still, regulatory scrutiny could complicate the strategy.

The practice of acquiring brokerages to gain access to their registrations has faced criticism as a form of "backdoor registration," Nikkei reported. Japan's Financial Services Agency revised its oversight guidelines in 2022 to subject changes in major shareholders to scrutiny comparable to that applied to new registrations.

"Their ability to gain market share will depend on how effectively they compete with established Japanese brokerages and adapt their services to local investors' needs," an industry official said.