Sun, Dec 31, 2017 - Page 16 News List

Japanese economy could get a boost next year from bitcoin trade: Nomura

Bloomberg

Bitcoin is about to boost the world’s third-largest economy, Nomura Holdings Inc analysts said.

The digital coin’s 1,500 percent rally this year has left cryptocrazed Japanese investors likely sitting on hefty gains that Nomura thinks will spur consumer spending.

“Rises in asset values often result in a rise in consumer spending, too, known as the wealth effect,” the team, led by Yoshiyuki Suimon, wrote on Friday.

“We estimate the wealth effect from unrealized gains on bitcoin trading by Japanese investors since the start of fiscal year 2017 and estimate a potential boost to consumer spending of ¥23.2 [billion] to ¥96.0 billion [US$206 million to US$852 million],” Suimon wrote.

The note said that trading volume in the bitcoin market is about 40 percent yen, which is larger than even the US dollar’s share.

Bitcoin has fallen about 25 percent since closing in on US$20,000 on Dec. 18, when CME Group Inc introduced its futures contract.

While bitcoin’s debut on regulated derivatives exchanges in Chicago was thought to have given it a new mainstream channel for investors to tap, so far trading volume has been limited. The digital currency traded at about US$14,500 in New York on Friday afternoon.

The South Korean government has been among the loudest voices of concern about a possible speculative bubble in the largest cryptocurrency.

The nation is something of a bellwether for global demand, with South Koreans paying premiums of about 20 percent over prevailing international rates as of Friday.

Still, Nomura is confident that the share of investors who have benefited is much larger than those who might have lost money due to the recent decline.

“Moreover, the fact that the rise in bitcoin prices was concentrated in 2017 fourth quarter could result in the wealth effect materializing 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,” Nomura said.

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