The rise in the value of bitcoin could be adding 0.3%
to Japanese GDP growth, according to Nomura.
Bitcoin trades are disproportionately transacted in
yen, and about 1 million Japanese people hold about 3.7 million
The “wealth effect” will boost consumer
“The scale of this increase in assets can hardly be
ignored,” the two analysts say.
More evidence that the cryptocurrency world is having a
greater effect on the real world economy.
The rise in the value of bitcoin could be adding 0.3% to Japanese
GDP growth, according to Nomura analysts Yoshiyuki Suimon and
In a recent note to clients, they argued that the “wealth effect”
on Japanese bitcoin holders is likely to spur consumer spending
that will have a measurable effect on GDP.
The note is interesting because analysts and economists have
largely assumed that bitcoin is both too small in market
capitalisation, and too unconnected to other financial
to affect the real-world economy. The total market cap of all
cryptocurrencies on December 31, 2017, was $560 billion, according to
only three of the top 500 online retailers accept bitcoin as
However, traditional financial institutions have recently begun
introducing their clients to the cryptocurrency world. Cboe, CME
Group and Goldman Sachs have all made moves to clear bitcoin
futures and other derivatives. Goldman is also opening a crypto
trading desk. And users on crypto exchanges like
Bitfinex and Tokyo-based bitFlyer are making leveraged bets on
As bitcoin’s value has flirted with $20,000, many people who
bought it prior to the beginning of 2017 are now feeling much,
much richer. “The scale of this increase in assets can hardly be
ignored,” the two analysts say.
In economics, the “wealth effect” is the measurable increase in
economic activity that occurs when asset prices rise, making
consumers feel richer, and boosting their spending. This
phenomenon was pronounced in the run-up to the 2008 credit
crisis, when soaring property prices made homeowners feel
wealthier than they ever thought they would be. With their houses
gaining in value, those consumers splashed out with their spare
cash — juicing the economy as a whole.
Bitcoin is popular in Japan — 40% of all trades are in yen, more
than the US dollar share. About 1 million Japanese people hold
about 3.7 million bitcoin, Nomura estimates. Suimon and Miyamoto
calculate that the wealth effect of those holdings could trigger
¥96 billion ($851 million) of extra consumption.
The market cap of bitcoin traded in yen had increased to roughly
¥5.1 trillion ($4.52 billion) by Christmas Day, Nomura said. That
would give Japanese holders a rise in asset value of ¥3.2
trillion ($3 billion) over the year:
“Generally speaking, rises in asset values often result in a rise
in consumer spending too, known as the wealth effect. In this
report, we estimate the wealth effect from unrealized gains on
Bitcoin trading by Japanese investors since the start of FY17,
and estimate a potential boost to consumer spending of
… Moreover, the fact that the rise in Bitcoin prices was
concentrated in 2017 Q4 could result in the wealth effect
materializing in 2018 Q1, and if that is the case, we estimate a
potential boost to real GDP growth on an annualized q-q basis of
up to about 0.3ppt (¥96.0bn / ¥130trn × 4).”
The basis of their calculation comes from a range of historical
studies of the wealth effect of asset rises on Japanese economy.
What the pair don’t say — but their data implies — is that if the
rising price of bitcoin can add to GDP growth it can also take it
away again, should the cryptocurrency market crash.
Blockchain – Crypto – Currency infomation