TOKYO -- Shoko Chukin Bank plans to connect Japanese small and midsize enterprises with artificial intelligence startups in the U.S., including portfolio companies of a Silicon Valley-based venture capital firm tied to the bank.

The Japanese lender recently invested $20 million in Sozo Ventures, its first backing of an overseas VC firm and its largest single investment to date.

Sozo's track record includes early stage investment in companies such as Twitter and online meeting service Zoom Communications. The firm's strengths lie in an ability to identify promising AI and software startups and a robust network.

The bank's plan is to introduce Japanese SMEs that have little contact with U.S. companies to Sozo portfolio companies. The bank expects this to lead to collaboration in which Japanese manufacturers are contracted to make products that use AI and other software developed by U.S. startups.

"Compared to places like China and Europe that come with geopolitical risks, interest is growing in Japan's reliable manufacturing," said Shinji Makiura, a senior managing executive officer at Shoko Chukin.

The bank will also create opportunities for executives from Japanese SMEs to spend time at Silicon Valley companies learning about cutting-edge technologies and management methods.

In March, Shoko Chukin laid out a long-term business plan, under which it aims to build an SME economic sphere using its nationwide network of 120,000 corporate customers, expanding into new businesses outside its main area of lending.

A major part of that plan is serving as a bridge between overseas investors and companies and Japanese SMEs. The Sozo investment was part of that strategy. Shoko Chukin has also formed an alliance with investment bank Stormharbour Japan, through which it is working to connect Japanese companies and overseas institutional investors.

Shoko Chukin is also expanding support to include addressing management challenges at SMEs.

In April, the bank set up its first business succession fund, which supports stability during management transitions by holding stock bought from owner-executives. At the end of July, the fund acquired all shares of a precision sheet metal processor as its first project. The fund also sends in management personnel to aid in leadership transitions.

Shoko Chukin is also considering establishing an asset management subsidiary to help SMEs liquidate real estate to secure growth capital.

When the bank was a public lender with the government holding shares, it was difficult to expand beyond lending through outside investments or partnerships. Since being privatized in June 2025, the bank has been able to engage in business such as temporary staffing, fintech and advertising, while also more easily pursuing deeper partnerships with individual companies.

Now, Shoko Chukin is taking further steps toward being able to take on more risk through capital structure changes.

In the early stages of the privatization process, there was little demand for the bank's stock when released by the government, leaving around 90%, or 900 million shares, with the bank itself.

The bank plans to sell around 60% of the former government shares, amounting to roughly 550 million shares worth 91.2 billion yen ($576 million) to private owners next month. This will propel its privatization further, while the bank retains a portion of government capital as a safety measure.

After buying back former government shares, the bank's Common Equity Tier 1 ratio -- a measure of its core capital against assets -- fell to 9.30% in March 2026 from 11.15% in March 2024. The planned sale of treasury shares to private buyers is expected to restore that ratio to 10% earlier than the initial March 2028 target, which will give the bank more freedom.

Buyers for those shares are around 3,100 SMEs and SME cooperatives. The bank said one wholesaler wants to buy shares because it approves of creating an SME economic sphere and equity support. The dividend yield of around 3% also seems to be a draw.