After bitcoin gained immense attention in March and April of this year global trading volume spiked alongside BTC exchange rates, before both subsequently fell and eventually leveled off. Different regions of the globe have adopted bitcoin at their own pace, but lately we’ve seen a reemergence of interest from bitcoin’s supposed birthplace: Japan.
Despite being the suspected home of bitcoin’s founder and the world’s preeminent bitcoin exchange, Japan ranks 38th in total bitcoin client downloads while JPY has averaged just 0.6% of global bitcoin trading volume over the past 18 months. Concurrently, Japan’s government has built one of the highest Debt-to-GDP ratios in the world (approximately 240%) amid a flailing economy and volatile currency – the result of which may well be greater bitcoin adoption.
The Japanese Yen is the only currency with substantial bitcoin exchange volume to see an increase in trading so far in June. The increase has been substantial, with the 30-day moving average volume increasing 27% between June 1 and June 18 while all other currencies saw a decrease in trading volume over the same period. The chart below offers a more detailed view of the dramatic difference in trends so far this month between JPY and peer currencies.
Japan’s aging population, pervasive nationalism and historically strong currency may be the root cause of the low adoption rate of a technological, non-state issued currency, but recent events may be set to change that, as we’re already starting to see. Abenomics, the stimulus-oriented economic policy outlined by Japanese Prime Minister Shinzo Abe, has faced significant headwinds over the past few weeks and is leading many to question it’s potential to save the debt-laden island nation.
On April 4 of this year, Japan announced the third leg of Abenomics, a $1.4 trillion dollar stimulus package to be rolled out over the next two years. While offering a glimmer of hope to the citizens of Japan with quick gains in the Nikkei and Yen inflation as desired, the announcement only fueled the worldwide concern around central banks’ easy money policies, which helped drive bitcoin up to the record highs witnessed on April 9.
The initial realization that Abenomics may already be failing just two months later is being reflected across Japanese financial assets. The Nikkei gained 25% in the weeks following the initial announcement, but has since fallen to close trading yesterday just 5% above the level before the April 4 announcement. At the same time, waning confidence in the government’s ability to service its tremendous debt has driven up borrowing costs, with 10-year Japanese government bond yields doubling since April 4.
For bitcoin to see lower trading volume in JPY when the BoJ’s policies appear to be working and greater trading volume when the BoJ’s policies show signs of weakness only further solidifies the notion that bitcoin is growing into a distinct, worldwide alternative asset class directed at dissatisfaction with central planners.
It is probably too early to declare Abenomics a failure, and certainly too early to assume widespread bitcoin adoption in Japan, but as history has proven – when governments fail their citizens, those citizens tend to seek alternatives.