Bitcoin Wealth Effect Could Amplify Japan’s GDP by 0.3%
The rise in Bitcoin value will enable a boost of 0.3 percent to the Japanese GDP, according to analysts at major financial firm Nomura Holdings Inc. The price rise in the popular token has created a “wealth effect” that could encourage consumer spending, and which in turn will reflect on the wider Japanese economy.
In a recent note to clients, Nomura analysts Yoshiyuki Suimon and Kazuki Miyamoto wrote: “Rises in asset values often result in consumer spending, too, known as the wealth effect,”. Japan’s gross domestic product (GDP) could witness faster growth due to Bitcoins dramatic performance over last 12 months.
Bitcoin Gains to Increase Consumer Spending
According to the Japanese investment giant, unexpected gains from bitcoin in 2017 could actually increase domestic spending. During the holiday weekend, the bitcoin market cap traded in JPY surged to ¥5.1 trillion ($4.52 billion USD).
“We estimate the wealth effect from unrealized gain on bitcoin trading by Japanese investors since the start of fiscal year 2017, and estimate a potential boost to consumer spending of 23.2-96.0 billion yen,” said Suimon.
Since bitcoin gains came during the fourth quarter of 2017, consumer spending is presumed to escalate after the start of 2018. The Nomura analysts continued:
“Moreover, the fact that rise in bitcoin prices was concentrated in 2017 fourth quarter could result in the wealth effect mainstreaming in 2018 first quarter, and if that is the case, we estimate a potential boost to real GDP growth on an annualized quarter over quarter basis of up to about 0.3 percentage points.”
Japanese yen trading accounts for almost 40 percent of the total global bitcoin trade, higher than the US dollar share of the market. As per Nomura, about 1 million Japanese people own approximately 3.7 million BTC tokens among them.
Legal Recognition a Big Factor in 2017
Japan, world’s third-largest economy, has become a major center in the digital asset market due to the Japanese government’s supportive policies towards cryptocurrencies. The favorable regulatory environment in the country has encouraged more people to invest in bitcoin and other digital assets.
As far as the wider economy is concerned, Japan has achieved seven successive growth quarters — something it had not attained in over 10 years.
Since the Japanese government recognized digital currencies as a legal form of payment last year, it has succeeded China as a major trading center. Several merchants in the country already accept payments in bitcoin. In September 2017, 11 local crypto exchanges received licenses to operate from Japan’s financial regulator the FSA.
Bitcoin Profits to Give Japan More Consumer Spending and Jobs
Japan may not only benefit from the “wealth effect” that came from a rise in digital asset prices, but also from jobs created in the cryptocurrency and blockchain industry. As more companies embrace the technology, they may expect to see follow-on effects.
Bitcoin is still a small market when compared to the traditional financial world. It rallied to the $20,000 mark per token in December before dropping back to the $13,000 – $14,000 range.
Cryptocurrencies’ overall market cap is more than half a trillion dollars, which is huge in terms of how immature the market is. But it’s comparatively little against the dominance of fiat currencies. 2018 could be the year that decides if the industry’s role will continue to grow, or remain niche.
Will Japan witness more GDP growth via bitcoin gains in 2018? Tell us what you think.
Images via Nomura, Pixabay