State Street’s acquisition of Mizuho’s global custody business presents a hybrid model combining global scale and local expertise that could reshape the asset servicing business across the Asia-Pacific ( APAC ) region.

On the surface, the deal looks like a basic outsourcing arrangement. But a closer look indicates that it is a more nuanced hybrid model since it is fundamentally an acquisition with a partnership component that balances Mizuho’s local client requirements with State Street’s global scale and capabilities.

The landmark deal may actually be signalling a deeper consolidation in the asset servicing industry following the completion State Street Corporation’s acquisition of Mizuho Financial Group’s global custody and related securities services businesses outside Japan on October 1 2025.

The transaction, valued at approximately US$580 billion in assets under custody ( AUC ), will see State Street acquiring ownership and taking over management of Mizuho’s custody operations in the United States, Luxembourg, Cayman Islands, and Bahamas, thus bolstering the US global custodian’s footprint in serving Japanese institutional clients’ overseas investments.

This partnership not only expands State Street’s AUC in Japan by about 50%, pushing its market share in foreign asset custody to around a third of an estimated US$5 trillion market, but also establishes a template that could reshape asset servicing in Asia-Pacific.

Strategic alignment

In an interview with The Asset, Hiroshi Kobayashi, senior vice president and Japan country head at State Street, views the deal as a testament to mutual trust and strategic alignment. “Being able to partner with Mizuho FG and being entrusted with their clients for their overseas asset servicing activity is a very big testament for us, on the trust that they are placing in us,” he says.

Kobayashi emphasizes the complementary nature of the two organizations’ global custody portfolios, noting minimal overlap and opportunities to provide State Street ancillary services to Mizuho FG’s clients, such as agency lending.

The deal comes amid the broader trend of rising foreign investment outflows from Japan, driven by pension reforms and initiatives like the Nippon Individual Savings Account ( Nisa ) programme, which encourages a shift from savings to investing.

Introduced in 2014, Nisa is an individual savings account intended to help residents save money with tax-exempt benefits. At present, traditional ( non-Nisa ) savings accounts in Japan are subject to 20% tax on the interest earnings.

Nisa, modelled after the Individual Savings Account in the United Kingdom, seeks to encourage more people to save for retirement by using investments instead of simple cash accumulation.

Highlighting this structural shift, Kobayashi says: “There's been a slow trend of increasing overseas investment in Japan with its new theme of savings to investing, and a good portion of that is going to continue to flow into foreign investment.”

Leading industry position

This mirrors the dynamics in Asia-Pacific, where assets under management ( AUM ) are projected to grow significantly in the coming years.

According to data from PwC, the asset and wealth management ( AWM ) industry in Asia-Pacific is projected to grow to US$29.6 trillion by 2025, driven by a compound annual growth rate ( CAGR ) of approximately 8.7% from 2017, signifying the region’s strong growth and leading position in the global AWM industry.

However, the asset servicing sector faces mounting pressures from regulatory changes, technological investments in areas like artificial intelligence ( AI ) and cybersecurity, and the need for scale in a “platform business”.

Underscoring the challenges for domestic players, Kobayashi says: “The investment servicing business is a platform business. The amount of investment required obviously is continuing to rise. And you do need a certain amount of volume and scale to be able to continue to invest.”

For Mizuho, one of Japan's top three financial groups, the decision to divest non-core global custody operations allows it to focus on its domestic strengths while partnering with a specialist like State Street.

“For Mizuho, they made a strategic decision to focus on their core business and to try and partner for some of their non-core but very important services for their key clients,” Kobayashi explains.

And such partnerships may proliferate: “This probably is not like a one-off, but maybe something that will continue in Japan.”  

Partnership for efficiency

Extending this to the APAC region, where markets like China, India, and Australia grapple with similar scale issues, global custodians could partner with regional banks to handle cross-border complexities.

However, success hinges on blending global platforms with local nuances. Japan’s high service expectations, for instance, require Japanese-speaking teams and regulatory acumen, areas where State Street excels with its 35-year presence and 500-plus staff in the country.

As boundaries between domestic, regional, and global custodians blur, the State Street-Mizuho deal illustrates a pragmatic path forward: leveraging partnerships for efficiency without sacrificing client trust.

In a consolidating APAC landscape, this could foster more resilient, innovative asset servicing ecosystems, ultimately benefiting investors amid ongoing economic shifts.